The Uttar Pradesh Real Estate Regulatory Authority (UPRERA) has identified some flaws in the maintenance of an escrow account which are provisioned under the Real Estate (Regulation and Development) Act (RERA). The authority has found that some developers in the State are not maintaining the ratio of 70:30.
The Uttar Pradesh Real Estate Regulatory Authority (UPRERA) announced that the prevailing method of keeping a collection account by builders to get all deposits before transferring the mandatory 70% of the money into escrow accounts is unauthorized. Following this, the realtors usually move the remaining 30% of the money into a third account managed by them for purposes other than construction.
As per the RERA norms, developers are mandated to maintain 70% of the overall collected amount from the buyers in an escrow account. The fund will be utilized for the construction purposes only. The money left after utilizing 70% of the money should be allowed to be withdrawn for a purpose other than construction.
The authority has issued proper commands to all the zonal heads and branch managers to follow the orders. The authority has also decided to verify all the project which are related to accounts managed among various banks. Rajive Kumar-Chairman of UPRERA, has stated that chartered accountants from RERA will be paying a visit to the concerned branches in this regard. The authority further claimed that there cannot be any levy on the separate project account, the bank cannot redeem the amount that the promoter concerned with this account.
The bank can have a lien on the account to which the promoter transports 30% of the accumulated amount. The bank is not supposed to declare that in case of loan for the project the promoter should open an account with it and collect all the money from the allottees in this account. The bank is also not supposed to insist on the promoter to transfer the balance amount from the existing project account to new account.
As per the authority, “This practice is allegedly wrong. The promoters have to receive all the amount in the Escrow Account and only the money left after utilizing 70 % of the money for construction and land cost should be allowed to be withdrawn for the intention other than construction and land cost. It is re-emphasized that this 70:30% ratio need to be maintained from the initiation stage of the project.”
The above observation was made in a meeting held by UP-RERA officials with chief general managers and general managers of all the public and private banks. The authority has issued suitable directions to all the zonal heads and branch managers to comply with the RERA orders.
UP-RERA has also decided to verify all the projects accounts maintained with various banks. Rajive Kumar-chairman, UP-RERA, said that “The CA of RERA will be visiting the concerned branches in this regard.
The authority further said that there cannot be any charge or lien on the separate project account, the bank cannot recover the amount or instalment due from the promoter from this account. The bank can have lien on the account to which the promoter transfers 30% of the collected money.
The bank cannot insist that in case of loan for the project the promoter should open an account with it and receive all the money from the allottees in this account. Abrar Ahmed- secretary of UP-RERA said that nor can be the bank insist on the promoter to transfer the balance money from the existing project account to new account.