UPRERA has directed banks and promoters to follow certain guidelines for managing bank accounts of real estate projects. These guidelines are aimed at ensuring that the funds collected from allottees are used solely for the construction and development of projects, and to make the system more transparent.
The Uttar Pradesh Real Estate Regulatory Authority (UPRERA) has written a letter to the State Level Bank Committee (SLBC) to ensure that bank accounts of real estate projects are managed in accordance with the directions of the Reserve Bank of India (RBI) and the RERA Act.
UPRERA has directed banks and financial institutions to ensure that promoters provide it with the bank account details of real estate projects and open three types of accounts for all new projects:
- Collection Account
- Separate Account (Project Account)
- Expenditure Account
Promoters must give standing instructions to the banks to deduct 70% and 30% of the amount collected from the collection account and deposit them in the separate and expenditure accounts, respectively. Bank accounts will be operative only in the name of the main promoter, and banks will not provide debit cards, cheque books, or net banking facilities to promoters to ensure that the funds in the separate account are utilized solely for the construction and development of the project.
Banks and financial institutions must ensure the execution of these guidelines and send the information to UPRERA. Promoters must also upload the information on the UPRERA portal, www.up-rera.in.
UPRERA Chairman Sanjay Bhoosreddy said, “We have taken this initiative to ensure that the funds collected from allottees are used solely for the construction and development of projects, and to make the system of opening and managing bank accounts related to projects more transparent. The cooperation of both banks and promoters is essential to achieve due transparency in the banking system related to project accounts, and we are putting all efforts to ensure this.”
The collection account is used to collect payments from allottees. All payments received from allottees must be deposited into this account.
Separate Account (Project Account)
The separate account (project account) is used to store the funds collected from allottees. The funds in this account can only be used for the construction and development of the project.
The expenditure account is used to make payments for the construction and development of the project. All payments made towards the construction and development of the project must be made from this account.
The three accounts must be separate and distinct from each other. This ensures that the funds collected from allottees are used solely for the construction and development of the project, and that they are not diverted for any other purpose.
Here is an example of how the three accounts might be used:
- An allottee makes a payment of INR 100,000 to the developer.
- The developer deposits the INR 100,000 into the collection account.
- The developer then transfers INR 70,000 from the collection account to the separate account (project account).
- The developer then makes a payment of INR 50,000 to a contractor from the expenditure account.
The segregation of the three accounts helps to ensure transparency and accountability in the management of project funds. It also helps to protect the interests of allottees.