BENGALURU: To prevent builders from diverting funds raised through loans for residential projects, the Karnataka Real Estate Regulatory Authority (K-RERA) recently made it mandatory for promoters to deposit money only into RERA-designated bank accounts. The move will reassure home buyers that the resources for the project are utilised properly by builders, said officials. RERA has issued an order to all real estate promoters, regional managers of all banks and the president of the Karnataka State Chartered Accountants Association in this regard.
The order stated that reports by chartered accountants revealed that many promoters were borrowing money from financial institutions, banks or other sources by mortgaging projects as well as apartments/units in the projects. “In a few instances, the money borrowed by mortgaging project land and units are not utilised for the purpose of the project,” it said.
A senior RERA official said promoters mobilise funds for a project in advance from buyers also and then borrow from banks too, sometimes raising double the resources. “This is diverted into other projects carried out by the promoter,” he said.
The directive stated that the promoter will deposit the entire amount borrowed for the purpose into the designated account of the project and the money so deposited will be utilised and withdrawn only for the purpose of development of the respective project. The RERA account details are available in the K-RERA website for each registered RERA project.
The money can be withdrawn only with the consent of the chartered accountant, architect and engineer of the project and the details of the money utilised need to be updated with the authority on a quarterly basis, the official said. In an order on November 6, 2019, Real Estate Regulatory Authority had made it compulsory for buyers to deposit 70% of money collected from buyers into the designated account. The order has also specified a deadline of October 19 for promoters who had borrowed money for projects, but not utilised it to deposit it into the RERA designated account.
Welcoming the move, Dhananjaya Padmanabhachar, convenor, Karnataka Home Buyers Forum, told The New Indian Express, “It is good to see RERA Karnataka trying to bring in more transparency by ensuring promoters deposit the mortgaged money into designated account and utilise it for development.” However, he questioned why promoters were allowed to mortgage property after executing sale agreements. “The property never gets transferred to the association of allottees as mandatory under Section 17 of RERA. In future, buyers will have to suffer and fight legally for their properties,” he pointed out.