The Union Finance Ministry’s Department of Financial Services (DFS) has instructed all public sector banks to ensure builders’ compliance with RERA norms regarding the withdrawal of funds from escrow accounts designated for construction purposes, according to officials familiar with the situation.
This directive follows a recommendation from the Haryana Real Estate Regulatory Authority (HARERA) to the DFS secretary, urging all banks to ensure adherence to RERA norms when allowing withdrawals from RERA accounts by real estate project promoters.
In accordance with RERA norms, developers are required to deposit 70 percent of the funds collected from homebuyers into an escrow account, earmarked exclusively for project construction. Officials note that withdrawals from such accounts are permissible only upon obtaining certificates from architects, engineers, and chartered accountants. In a letter to banks dated March 8, the DFS cited concerns raised by the Haryana RERA chairman, highlighting instances where promoters withdrew funds from RERA accounts without complying with the Act’s provisions. The letter emphasized that banks facilitating such withdrawals without ensuring compliance were in clear violation of the RERA Act.
The H-RERA chairman has urged the Ministry of Housing and Urban Affairs (MoHUA) to intervene and instruct all banks handling RERA accounts to adhere to the Act’s provisions. “All banks are urged to ensure compliance with the RERA Act regarding withdrawals from RERA accounts,” the DFS reiterated in its communication.
Furthermore, officials at Haryana RERA expressed concern over numerous instances where promoters diverted funds from RERA accounts for purposes other than project construction. This misuse resulted in the unwarranted delay of genuine real estate projects due to insufficient funds, causing inconvenience to allottees.
