After being pulled up by the Ministry of Housing and Urban Affairs, the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has decided to crack the whip against banks and developers for diversion of funds, and said it would initiate scrutiny of escrow accounts of the developers.
“The Centre in its recent communication has asked the UP RERA to be strict about the escrow account of developers as there were reports of developer not following the norm with the help of certain branches. The UP RERA had directed all commercial banks to strictly comply with escrow account provisions; however still many irregularities are being reported. The UP RERA will soon start scrutiny of all the accounts,” said a senior official from UP RERA. The regulator will soon hire CAs to scrutinise these accounts.
“The UP RERA has also decided to verify all the projects accounts maintained with different banks. The CAs of RERA will be visiting the concerned branches in this regard,” Rajive Kumar, chairman, UP RERA confirmed in a media interaction.
The regulator had held a meeting with chief general managers and general managers of all the public and private banks and had instructed them to ensure that RERA orders are being complied with.
According to the RERA guidelines, developers have to maintain 70:30 percent ratio of all the fund received, where 70 per cent has to be used for construction while rest 30 per cent has to be used for other purposes. However, developers are not following the process and banks are not paying due diligence. It has instructed banks that in case of loan for the project, banks can’t insist the promoter to open an account with them and receive money from the allottees in the account.