Giving in to demands by consumer groups across the country, the Union government’s rules for the Real Estate (Regulation and Development) Act 2016 (RERA) mandate that even developers of ongoing projects have to deposit 70 per cent of the unused funds in a separate bank account to ensure that they use it only for completing the project.
The draft rules, while ensuring strict compliance for all new real estate projects, were earlier silent on this and many other aspects of ongoing projects that account for a majority of all real estate projects.
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The Ministry of Housing and Urban Poverty Alleviation notified the RERA rules for Union Territories on Monday with state governments expected to use it as a template and notify their own rules very soon.
The draft rules issued, around three months ago, had failed to clarify several major issues concerning ongoing projects. For instance in case of the rule that requires developers to deposit 70 per cent of the money collected from buyers, the draft rules would have allowed developers to deposit only 70 per cent of whatever money is collected once the act is notified. “In cases where developers had already collected a majority of the amount before the rules are notified, they could have gotten away by depositing 70 per cent of the receivables. Now with the change in rules, they will have to ensure that they have to keep aside 70 per cent of the money collected till date minus the amount already spent on the land and the project,” said Abhay Upadhyay, convenor of Fight for RERA, a group of pan-India home-buyers who have been pushing fine-tuning the RERA rules.
The rules provide for regular auditing so as to verify the claims made by builders regarding used funds. The draft rules were tweaked further following series of consultations held by Minister of State for Housing and Urban Poverty Alleviation Rao Inderjit Singh with consumer groups.
Ministry officials said that in case of ongoing projects, builders will now be required to submit their original sanctioned plans and all subsequent changes made thereafter as well as brochures and other printed advertising materials to the regulatory authority. “This is to keep a check on cases where builders have unilaterally altered their original plans so as to maximise their profits,” said officials.
RERA is to be brought into effect by setting up state level Real Estate Regulatory Authorities within one year of it being passed i.e. by April 30, 2017.