IMPORTANCE OF CARRYING OUT THE COMPLIANCES UNDER RERA AFTER REGISTRATION OF A REAL ESTATE PROJECT.
The Real Estate (Regulation and Development) Act, 2016 ( RERA) , prescribes prior registration of a real estate project be obtained in order for a Promoter to advertise market, book, Sell the apartments or plots in a real estate project. The application that is to be filed under the Act is prescribed under Section 4 which provides the details that are to be given and the documents that are required to be filed in respect of the project for grant of registration under Section 5. Section 4(2) (l) prescribes that a Declaration supported by an Affidavit be filed which is to be signed by the Promoter or any authorised person of the Promoter setting out the time period within which the project would be completed and further stating that 70% of the amounts realized for the real estate project from the allottees from time to time to cover the cost of construction and the land cost and shall be used only for that purpose. The provisos to Section 4(2) (l) of RERA also prescribe that the Promoter can withdraw the amount from the separate account to cover the cost of the project in proportion to percentage of completion of the development works in the project and further that the Promoter can withdraw the amount from the separate account only after it is certified by an engineer, an architect and a chartered accountant in relation to the percentage of completion of the development works in the project.
From the above, it can be made out that primarily it is mandated that a separate project bank account be opened and 70% of the amounts realised from the real estate project from the allottees is deposited into such an account and the withdrawals of the amount from that separate account shall be to cover cost of the project and in proportion to the percentage of completion of development works in the project. It is further mandated that all such withdrawals be made only after it is certified by an engineer, an architect and chartered accountant in practice in proportion to the percentage of completion of the project.
It is also mandated that the accounts in relation to the particular real estate project registered under the Act shall be audited within 6 months after the end of every financial year and that the statement of accounts shall set out the total amount collected for a particular project during the previous financial year and further that the same have been utilised for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the development works in the project.
The Act further mandates that the Promoter of a real estate project registered under the Act carries out quarterly updates in respect of the RERA registered project under the Act and Rules as prescribed by the Regulatory Authority on a quarterly basis. The quarterly update is also a mandatory requirement and the Regulatory Authority of each State prescribes the manner in which these quarterly updates have to be filed and also prescribe the time when these quarterly updates have to be carried out.
In short, the following are the mandatory compliances of a real estate project-
- Opening of a separate Bank account for the project.
- Deposit of 70% of the money collected from the Allottees into the separate Bank account.
- Withdrawal of money from separate Bank account in proportion to percentage of completion as certified by Engineer, Architect and Chartered Accountant.
- Filing quarterly updates as prescribed and within the stipulated time.
- Filing Annual Audit Report of the project within 6 months from the end of financial years as prescribed.
- Reporting completion
The registration of a project is itself is a mandatory compliance to be carried out by the Promoter and thereafter all the aforesaid compliances are also mandatory and are all required to be complied in respect of the registered real estate project by the Promoter without fail and failure to do so, may lead to levy of penalties by the Real Estate Authority on the Promoter under the provisions of the Act.
The Real Estate Regulatory Authority of Karnataka under a circular dated 03.09.2020, has prescribed levy of delay filing fees of quarterly and annual updates which is cumulative in nature and increases month on month. According to this circular, in respect of a real estate project which is registered in 2018, at present the delay filing fee for quarterly updates, the delay fees is almost about Rs.9-00 lacs per quarter and for instance if there are 10 quarterly updates which have not been completed the total delay filing fees would be about ₹. 90.00 lakhs.
The Real Estate Regulatory Authority of Gujarat has recently passed an Order for freezing of the Bank accounts of 1000 promoters for non-compliance of the requirement of filing of the quarterly updates, Annnual Audits, submitting completion reports, not seeking extension of registration . https://timesofindia.indiatimes.com/city/ahmedabad/non-compliance-gujrera-freezes-1000-project-linked-bank-accounts/articleshow/111446435.cms
Since the compliances required to be carried out under Section 4 are mandatory in nature and it is the very object of the Act to ensure that the Promoters fulfill all the compliances in respect of the real estate projects that are promoted and developed by them, it is advisable that the Promoters of real estate projects primarily know the compliances under RERA which are required to be carried out once registration of real estate project is granted and thereafter fulfill all the compliances within the time prescribed under the Act, Rules and Regulations, so as to ensure that the same does not amount to violation of provision of RERA and levy of penalty or any other action being taken by the Regulatory Authority.
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