KRERA has made it compulsory for real estate promoters, banks, and other parties to deposit the money obtained by pledging the housing project land into the RERA project designated account. The borrowed amount must be used by the promoters to develop the same housing project, as per KRERA’s notification.
According to a notification dated July 19, the KRERA emphasized the submission of Form 4 (Chartered Accountant Certificate) and Form 7 (Audit accounts of the project) by a chartered accountant annually.
The notification highlighted that some real estate project promoters were borrowing money from banks and financial institutions by mortgaging the project land and apartments/units of the housing project.
KRERA stated in the notification, “In some cases, the money borrowed by mortgaging the project land and units is not utilized for the project. The details provided by the promoter and certificates reveal that the total amount realized from allottees and borrowed money is not fully utilized for land and construction.”
To protect the interests of promoters, projects, buyers (allottees), and lenders, the KRERA directed promoters to deposit the borrowed amount into the designated account of the project and use or withdraw it only for the respective project’s development.
The notification also stressed that promoters must bifurcate and allocate the amount to various phases and report it during quarterly updates, along with bank statements or Chartered Accountant Certificates, if borrowing money phase-wise for the registered project.
“The lenders, financial institutions, and bankers shall also ensure to disburse such loans only to the designated RERA account of the project. Such designated RERA account details are published and available on the KRERA website for each registered RERA project,’’ it stated.
Many home buyers have welcomed the KRERA notification and want it to enforce it for the welfare of home buyers.
“I welcome the KRERA notification. I am not sure whether the Bangalore Development Authority (BDA) is following this norm. I want the BDA to have a RERA designated account for the completion of all ongoing developmental works at Nadaprabhu Kempegowda Layout,’’ said N Sridhar, Nadaprabhu Kempegowda Layout Open Forum president.
Appreciating the KRERA for issuing the notification, Devaraju N, president, Krishnappa Garden Residents’ Welfare Association, has said that it will be a great help for home buyers. “The notification issued by the KRERA will benefit home buyers who are worried about the completion of housing projects where they bought flats,’’ said Devaraju.
However, Karnataka Home Buyers Forum Sanchalak Dhananjaya Padmanabhachar said that it is good to see RERA Karnataka is trying to bring in more transparency by ensuring promoters deposit the mortgaged money into designated accounts and promoters should utilize the money for the development of the project.
He said that as per Section 11 (4) (h) of RERA 2016, the promoters after they execute agreements for sale, cannot mortgage the property. “We are assuming the order of RERA is applicable before the promoter signs agreements with home buyers. We are seeing many builders mortgaging the property after they execute agreements for sale. The RERA Authority must clarify this to ensure home buyers interest is protected. The root cause why promoters continue to mortgage the property is because of the reason that the property never gets transferred to the association of allottees as per Section 17 of RERA,’’ he said.