Banks liable if funds diverted from Rera accounts: H-Rera

H-Rera has ordered that banks will be held responsible if real estate project promoters withdraw funds from Rera accounts in violation of rules and divert them

The Haryana real estate regulatory authority (H-Rera) has directed that banks would be held liable if promoters of real estate projects withdraw funds from Rera accounts in violation of rules and divert them for other purposes, people familiar with the matter said.

The Haryana real estate regulatory authority (H-Rera) has directed that banks would be held liable if promoters of real estate projects withdraw funds from Rera accounts in violation of rules and divert them for other purposes (Photo by Parveen Kumar/Hindustan Times)

The order of February 10 said banks must ensure that developers submit certificates from the chartered accountant of the project, the project manager, and the engineer while withdrawing funds from Rera accounts to ensure the money deposited by buyers is not diverted.

According to Rera rules, the promoter of a project has to open three accounts for a project in a bank. These accounts are the project master account, where the entire amount realised from allottees of the project is deposited, the Rera-compliant separate account, where 70% of the amount is deposited to cover the cost of construction, and the promoter’s free account, where 30% of the money is deposited.

H-Rera Gurugram secretary in his letter issued to the lead bank manager, Gurugram, observed that developers were not complying with provisions of the Rera Act, 2016, with regard to the withdrawal of funds from Rera accounts, and that the banks were also lax in compliance.

“It is further brought to your notice that in case of non-compliance under Section 4 of the Rera Act 2016, a penalty of up to 5% of the cost of the project can be imposed and therefore you may bring to the notice of all concerned and advise them to strictly monitor the withdrawals from Rera account to avoid legal action for such lapse,” the order said.

Advocate Venket Rao, founder of Intygrat Law, a firm dealing in Rera cases, said it was important to monitor funds in Rera accounts to ensure funds are not diverted. “Before the Rera Act, these funds were diverted rampantly but with the Act in force, at least a mechanism is in place to ensure developers withdraw money only in proportion to completion of the project and for construction only. The banks and H-Rera must ensure...the money taken from allottees is used only for completing projects and not to create land banks,” he said.

Ashok Kumar, lead bank manager, Gurugram, said directions have been issued to all banks in the district to follow norms prescribed by the Rera Act. “It will be ensured that accounts are opened as per rules and withdrawal of funds happens after submission of certificates. We insist on this but monitoring will be more strict as the authority has raised this issue,” he said.