Introduction
The real estate sector is a critical component of any nation’s economic and social fabric. Despite its importance, the real estate industry often grapples with challenges related to transparency, accountability, and timely completion of projects. The Real Estate (Regulation and Development) Act, 2016 (RERA) was passed by the Indian government as a response to these issues. In line with this, various states, including Telangana, have established their Real Estate Regulatory Authorities (RERAs) to oversee the sector’s functioning and ensure adherence to RERA guidelines.
On 04.09.2023, the Telangana State Real Estate Regulatory Authority (TS RERA) in Hyderabad issued a circular bearing No. 989/TS RERA/2023 aiming to address specific complaints related to the misuse of funds by builders and delays in project completion. The complaints highlighted that some builders were diverting funds allocated for project construction to other purposes, ultimately hampering project progress and timely handover.
The circular focuses on key provisions of The Real Estate (Regulation & Development) Act, 2016, specifically Section 4(2)(I)(D) and Section 11(4)(g), to ensure that funds collected from allottees are used solely for the project’s intended purposes.
Key Objectives of the Circular:
The circular seeks to achieve the following objectives:
- Mandatory Deposit of Project Funds: Promoters are required to deposit the entire amount borrowed for project into a designated RERA account and the money so deposited shall be utilized and withdrawn for the purpose of development of the project. This ensures that the funds are utilized only for the intended purpose of project development.
- Phased Reporting and Apportionment: Promoters, registering projects in a phase-wise manner, must report and allocate borrowed amounts towards various project phases. This reporting is to be done during quarterly updates, accompanied by bank statements and Chartered Accountants’ Certificates.
- Lender Accountability: Lenders, bankers, and financial institutions are directed to disburse loans only to the designated RERA account for the respective project, ensuring funds are used for the intended project.
- Audits and Certifications: Promoters must conduct project account audits, certified by a chartered accountant using a prescribed Form 7 provided by TS RERA. This ensures financial transparency and compliance.
- Rectification for Existing Projects: For existing projects where borrowed funds were not entirely utilized for the project, promoters must deposit the unutilized portion into the designated RERA account within three months from the issuance date of this circular.
- Authority’s Enforcement: Under the Circular, the Authority has retained the right to request information and documents from promoters through official notices to ensure compliance with this circular.
Conclusion:
The issuance of TS RERA Circular No. 989/TS RERA/2023 on 04.09.2023 signifies the Telangana State Real Estate Regulatory Authority’s commitment to enhancing transparency, accountability, and timely completion of real estate projects. By ensuring the proper utilization of funds and adherence to RERA guidelines, the circular aims to restore faith among homebuyers and stakeholders in the real estate industry, ultimately fostering a healthier and more robust real estate sector in the state of Telangana.