The Haryana Real Estate Regulatory Authority (HRERA) has, in order to monitor the usage of funds by promoters and curb diversion, tightened the noose on the promoters by issuing new directions – Haryana Real Estate Regulatory Authority, Gurugram Bank Accounts for the Registered Projects Directions, 2019. These directions lay down many firsts by HRERA in the area of evolving real estate laws.
Waterfall mechanism: While the Real Estate (Regulation and Development) Act, 2016, has under section 4(2)(1)(D) made it compulsory for 70% of the amounts realized for a real estate project from the allottees to be deposited in a separate account, the directions passed by HRERA specifically provide for the waterfall mechanism with respect to receivables.
Under the directions, promoters are mandatorily required to open and maintain a project’s master account, a RERA compliant separate account (RERA account) and a promoter’s free project account.
Promoters should deposit the entire amount realized from the allottees in the master account from time to time. Out of the total receivables deposited in the master account, at the end of each business day, 70% of the receivables should be transferred to the RERA account and the remaining 30% of the receivables should be transferred to the free account. In case the estimated cost of a project is higher than the estimated amount of total receivables, the directions mandate that 100% of the amounts lying in the master account should be transferred to the RERA account, as long as such a situation exists. This new condition is stricter than what is envisaged in the act.
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