Comply with the requirements for authorising realtors to withdraw monies from the Rera accounts - Fin min to banks

The Ministry of Finance Order

The ministry of finance has ordered all public sector banks to comply with the Real Estate (Regulation and Development) Act, 2016, while permitting developers to withdraw cash from Rera accounts.

Legal Action Threat

The decision comes a week after H-Rera chairman Arun Kumar threatened legal action against banks for enabling developers to withdraw monies from regulator accounts without following guidelines.

Non-Compliance Notice

Under secretary of ministry of finance Subhashchandra Amin wrote to banks that, as informed by the Haryana Rera chief, developers are not complying with provisions such as submitting certificates of chartered accountants, engineers, and architects before withdrawing funds from Rera accounts, and banks are allowing withdrawals without ensuring compliance, which violates Section 4 (2)(1) (d) of Rera Act.

Monitoring and Penalties

Amin said the HRera head has written to the ministry of housing and urban affairs (MoHUA) to ask the department for financial services (DFS) to advise all banks.

Kumar ordered banks to closely monitor cash withdrawals to prevent legal action and warn developers that they might be fined up to 5% of the project cost for misusing homebuyer funds.

Compliance Requirements

According to the Act, 70% of homebuyers' payments for every real estate project must be put in a separate bank account and utilised solely for land and construction.

The developer may withdraw funds from this account to pay project costs in accordance to the percentage of completion following engineer, architect, and chartered accountant certification.

Penalties and Notifications

Developers were also warned of penalties by the agency. Non-compliance with Section 4 of the Rera Act may result in a penalty of up to 5% of the project cost. You may notify everybody affected and warn them to properly monitor withdrawals to prevent legal action for such failures, the authorities advised banks.

Rera Requirements

Rera requires developers to open a project master account (where the entire amount realised from homebuyers is deposited), Rera-compliant account (where 70% of the amount collected from homebuyers is deposited), and promoters' free project account (where the remaining 30% is deposited).