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UPRERA warns real estate promoters: Deposit homebuyer funds in designated accounts or face legal action
UPRERA has issued a stern warning to real estate developers, mandating that funds collected from homebuyers must be deposited in designated collection accounts.
In response to complaints that real estate promoters were not depositing funds from allottees into designated accounts, UPRERA has made public the collection account details for 937 under-construction projects registered with the authority. This move aims to inform homebuyers about the funds collected by promoters for these projects and the amount available for construction.
UPRERA stated that it has observed instances where promoters have failed to deposit funds received from allottees into the designated collection accounts. Instead, these funds were transferred to other accounts, potentially misused rather than being allocated for project development.
The real estate regulatory body also said that legal action will be taken against violators, particularly if homebuyers’ funds are deposited into unauthorised accounts. “This practice is a violation of RERA provisions and a punishable offense. U.P. RERA is taking separate legal action against such cases,” it said.
The account details have been posted on the UPRERA website to strengthen transparency in the real estate sector and ensure that there is no gap between the progress of a project and the money being spent on its construction, it said.
UPRERA said in a statement that it is mandatory for real estate developers to disclose Collection Account details for all active projects on the regulatory body’s portal. It said that homebuyers' payments must be deposited only in the project’s designated Collection Account and that misappropriation of funds by promoters will attract strict legal consequences.
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Details of collection accounts posted on the UPRERA website include the name of the promoter, project name, registration date, completion date, collection account number, bank name, IFSC code. It also includes details of the total number of projects by the promoter, complaints against the promoter, total complaints in respect of the particular under construction project, details of documents uploaded by the developer.
Under RERA, all developers are required to maintain an Escrow account
UP RERA has directed all banks to automatically transfer 70% of the funds received in the Collection Account to the Separate Account and 30% to the Transaction Account daily. The amount in the Separate Account is strictly meant for activities directly related to project completion. Money withdrawals from the Separate Account are permitted only in proportion to the completed project work, duly certified by an engineer, architect, and chartered accountant, UPRERA said in a statement.
As per the Real Estate (Regulation and Development) Act, 2016, promoters are mandated to keep 70% of the funds received for project development in the projects’ separate account and use them exclusively for project construction.
In line with the guidelines issued by U.P. RERA on 29.11.2023, every promoter must provide details of three project accounts, namely Collection, Separate and the Transaction Account on the U.P. RERA portal.
It is a legal requirement for promoters to deposit the funds received from allottees into the project’s Collection Account. Additionally, promoters must include details of the Project’s Collection Account in all promotional and advertising materials related to the project, the statement said.
Why was it necessary to publish the details of under-construction projects on the UPRERA portal?
UPRERA said in a statement that it has been observed in certain cases that promoters do not deposit the funds received from allottees into the designated Collection Account but instead transfer them to other accounts, thereby misusing the funds rather than utilizing them for project development. This practice is a violation of RERA provisions and a punishable offense. U.P. RERA is taking separate legal action against such cases.
“To enhance transparency and promote sector development, U.P. RERA has made the Collection Account details of all live RERA-registered projects available on the UP RERA portal under the "Details of Collection Account (Live Projects)" link,” it said.
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Sanjay R. Bhoosreddy, chairman, UPRERA has directed promoters and allottees to thoroughly check all project-related details on the U.P. RERA portal before investing and ensure that payments are made only to the designated Collection Account.
“This will prevent misuse of funds, ensure proper utilization for project development, and help in timely project completion,” he said.
Timely project completion not only enhances the credibility of promoters and fulfills the dream of homeownership for buyers but also strengthens the positive role of the real estate sector in the state's overall development, he said.
He said that strict legal action will be taken by RERA against any violation of these provisions, particularly if homebuyer funds are deposited into unauthorized accounts instead of the designated Collection Account.
Of the 937 under construction projects registered with UPRERA, majority are from Ghaziabad, Lucknow, Gautam Buddh Nagar, Lucknow, Agra and Mathura.
