UP RERA bars builders from using homebuyers' money for assured return schemes

Uttar Pradesh Real Estate Regulatory Authority has barred builders from using homebuyers' money for ''assured return'' schemes and made it mandatory for all registered projects to operate through three separate bank accounts, officials said on Thursday. The new framework, aimed at tightening financial discipline and preventing diversion of project funds, was discussed at a meeting convened by UP RERA with bankers and financial institutions. Uttar Pradesh Real Estate Regulatory Authority (UP RERA) Chairman Sanjay Bhoosreddy chaired the meeting, which was attended by senior officials of nationalised banks, financial institutions and the State Level Bankers' Committee. Officials said under the revised banking regulations and project account guidelines issued on May 11, every RERA-registered project will now be required to maintain three separate accounts -- a collection account, a separate account and a transaction account. At least 70 per cent of the amount received from homebuyers will have to be automatically transferred daily into the separate account, which can be used only for land and construction-related expenses, officials said. UP RERA also introduced a ''three-certificate system'' for withdrawals from the separate account. Any withdrawal will require certifications from an architect, an engineer and a chartered accountant, it said. Banks were directed not to provide lien facilities, cheque books, debit cards or transaction-based net banking services on project accounts. Officials said no project account can become operational merely on ''in-principle approval'' from the authority. Operations in a new account will be permitted only after UP RERA grants final approval. The authority also prohibited banks, NBFCs and investors from placing any lien on collection or separate accounts, saying the funds deposited in them are meant solely for project development and protection of homebuyers' interests. In another significant move, UP RERA capped the admissible interest expenditure on loans taken from NBFCs at the level of SBI's marginal cost of lending rate (MCLR), aimed at preventing misuse of project funds through inflated interest liabilities. Promoters will also have to upload quarterly disclosures related to project finance, including details of loans and other funding sources, on the UP RERA portal through affidavits. The authority directed banks to immediately freeze collection and separate accounts of projects whose registration has expired or been cancelled. Such accounts can be reactivated only after permission from UP RERA or extension of project registration. The authority also introduced a standard operating procedure (SOP) for the closure of separate accounts. Officials said such accounts can now be closed only after completion of the project, prior approval from the authority and transfer of common areas to the Residents' Welfare Association or Association of Allottees. Addressing the meeting, Bhoosreddy said transparency, accountability and protection of homebuyers' interests remained UP RERA's top priority. He said banks have a crucial role in preventing misuse of project funds and ensuring the timely completion of real estate projects. (This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)