UP RERA Introduces Stricter Banking Regulations for Real Estate Companies

NEW DELHI:

The Uttar Pradesh Real Estate Regulatory Act (UP-RERA) has taken steps to enhance transparency and fortify the banking system linked to real estate project bank accounts. A recent communication to the State Level Bank Committee (SLBC) emphasized the management of these accounts in line with the directives of the Reserve Bank of India (RBI) and the RERA Act.

At the heart of this initiative is the RERA Act 2016's section 4(2)(1)(D), which mandates a 70-30 percent distribution of funds in bank accounts tied to real estate projects. Reflecting this, UP-RERA, following RBI guidelines issued on December 14, 2020, rolled out a directive on December 24, 2020. This requires all real estate projects launched post-April 1, 2021, to maintain three distinct bank accounts.

Chairman of UP-RERA, Sanjay Bhoosreddy, articulated the body's commitment to this cause:

Further elaborating on the stipulations, UP-RERA has laid out clear directives for SLBC:

Real estate project bank accounts, when initiated, should have a standing instruction that permits the bank to split amounts automatically: 70% into a separate account and the remaining 30% into a transaction account.

These accounts should be exclusively in the primary promoter's name. Furthermore, to guarantee funds are used solely for the development and construction of the associated project, promoters won't have access to debit cards, cheque books, or net banking.

Upon meeting the aforementioned criteria, the respective bank branch will notify the U.P. RERA office, with the promoter subsequently updating this information on the official portal.

This bolstered procedure aims to establish rigorous oversight for real estate project bank accounts, ensuring unparalleled transparency. An additional layer of assurance is the stipulation for banks to match transactions from the separate project account with the construction's progress. This alignment has to garner endorsements from the project's engineer, architect, and chartered accountant. The overarching goal remains clear: to instate a robust, transparent banking system for the real estate sector that is both accountable and efficient.