The RERA (Real Estate (Regulation and Development) Act, 2016) specifies provisions for maintaining a project-specific bank account under the “70:30 rule.” This ensures accountability and financial discipline for real estate projects. Here’s a summary of the relevant provisions. Under the RERA framework, the requirement for maintaining financial discipline are implemented using specific types of bank accounts: Separate Bank Account, Collection Bank Account, and Transaction Bank Account. Here’s how these terms apply in the context:
1. Separate Bank Account (Escrow Account)
- This is the mandated account where 70% of the collections from homebuyers must be deposited.
- The funds in this account can only be used for the construction costs and land costs of the specific real estate project.
- Withdrawals from this account require certification from an engineer, architect, and chartered accountant.
- Purpose: Ensures that funds collected for a particular project are utilized solely for that project.
2. Collection Bank Account
- This account is used by the promoter to receive payments from allottees or buyers.
- All payments, including booking amounts, installments, and other charges, are deposited into this account initially.
- After depositing the funds, 70% of the total collection is transferred to the Separate Bank Account, while the remaining 30% may be retained in the collection account or transferred to the transaction account as per need.
3. Transaction Bank Account
- This account is used by the promoter for operational and administrative expenses unrelated to the construction and land cost of the specific project.
- Examples include salaries, marketing expenses, and overheads that do not directly contribute to the physical development of the project.
- The remaining 30% of the collections may be moved here after the required deposit into the Separate Bank Account.
Example Workflow:
- Collection Bank Account:
- A buyer pays ₹1 crore as an installment. The amount is first credited to the collection account.
- Separate Bank Account:
- From the ₹1 crore, 70% (₹70 lakh) is transferred to the escrow/separate bank account for construction and land costs.
- Transaction Bank Account:
- The remaining 30% (₹30 lakh) may be moved to the transaction account for other project-related expenses like marketing or administrative costs.
Purpose and Compliance:
This structure ensures:
- Transparency: Allottees’ funds are traceable and used appropriately.
- Accountability: Promoters cannot divert funds to unrelated projects.
- Regulatory Compliance: Regular audits and certifications confirm proper utilization of funds.
If any misuse or deviation is identified, it can be reported to the RERA authority, leading to penalties or suspension of the project.