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• UP RERA has barred developers from using homebuyers’ funds in assured return schemes.
• All RERA-registered projects must now operate through three dedicated bank accounts.
• At least 70% of homebuyers’ money will be routed daily into a separate account for construction use.
• Withdrawals will require certification from an architect, engineer, and chartered accountant.
• The regulator aims to strengthen transparency and prevent diversion of project funds.
The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has restricted builders from using homebuyers’ money for assured return schemes and has made it mandatory for all registered real estate projects to operate through a structured three-account banking system. Advertisement
The decision follows a meeting held in Lucknow in the past week between UP RERA, bankers, financial institutions, and senior officials of the State Level Bankers’ Committee, where concerns around fund misuse and project delays were reviewed.
UP RERA Chairman Sanjay Bhoosreddy chaired the meeting, which was attended by representatives from nationalised banks and financial institutions. The discussions focused on improving financial discipline in real estate projects across Uttar Pradesh.
As per the revised guidelines issued in the past week, every RERA-registered project will now be required to maintain three separate accounts collection account, separate account, and transaction account. At least 70% of the amount collected from homebuyers must be transferred daily into the separate account, which can only be used for land acquisition and construction-related expenses.
To strengthen oversight, UP RERA has introduced a three-level certification system for withdrawals. Any withdrawal from the separate account will now require approvals from an architect, an engineer, and a chartered accountant.
The authority has also directed banks not to provide lien facilities, cheque books, debit cards, or net banking services for transaction-based use of project accounts. It has further stated that no project account can become operational only on in-principle approval, and final approval from UP RERA will be required.
In addition, banks, NBFCs, and investors have been prohibited from placing any lien on collection or separate accounts. UP RERA has clarified that these funds are strictly reserved for project development and protection of homebuyers’ interests.
The regulator has also capped interest expenses on loans taken from NBFCs at the level of the State Bank of India’s marginal cost of lending rate (MCLR), aiming to control inflated financing costs in projects.
Developers, or promoters, will now be required to submit quarterly disclosures on project finances, including details of loans and funding sources, through affidavits uploaded on the UP RERA portal.
UP RERA has also instructed banks to immediately freeze accounts of projects whose registration has expired or been cancelled. These accounts can only be reactivated after regulatory approval or extension of registration.
A standard operating procedure has also been introduced for closing project accounts. Such accounts can only be closed after project completion, regulatory approval, and transfer of common areas to the residents’ welfare association or association of allottees.
UP RERA had earlier strengthened its regulatory framework under the Real Estate (Regulation and Development) Act, 2016, to improve transparency in housing projects and reduce delays. The latest banking reforms further tighten fund management controls to ensure stricter compliance by developers.
Source PTI
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