Mumbai: MAHARERA Proposes 3 Bank Account System To Safeguard Home Buyers' Interests; Check Details Here

Discipline in the financial affairs of housing projects is crucial to safeguard the interests of home buyers. Therefore, Maharashtra Real Estate Regulatory Authority (MahaRERA) has issued draft guidelines proposing maintaining three bank accounts - 'Collection Account', 'Separate Account', and 'Transaction Account' - in the same scheduled bank to ensure compliance, efficiency, transparency, accountability, and appropriate utilisation.

Dedicated Bank Accounts

Collection Account' for all funds received from customers

Separate Account' for 70% of project, land and construction expenses,

Transaction Account' for the balance 30% of the developer's funds

Allocation Of Funds: Understanding The 3 Accounts

'Collection Account' will be meant to maintain all revenue from the allottees from time-to-time and any other charges excluding all taxes and statutory duties. While 'Separate Account" will be where 70% of the revenue realised from the project will be transferred to from the Collection Account. This amount will be solely utilised to cover land and construction cost as stated in the laws, loan interest, refunds as well as compensation of upto 70% to the buyer. The third account - 'Transaction Account, will have up to 30% of the revenue received in the Collection Account. This will be to meet expenditures other than land and construction costs such as cancellation of any booking wherein the developer will be able to withdraw minimum 30% of the amount required to be paid to the allottees. Even the penalties on the promoter can be paid from the Transaction Account.

It will be bank's obligation to ensure fund's withdrawal does not happen from the Collection Account using traditional banking methods but only using auto-sweep facility.

Developer and Project Naming Protocol

These accounts are to be registered in the developer's and project's names, for example, "ABC Ltd. Collection Account for XYZ". Banks while doing due diligence for opening and operating a project’s account or financing a real estate project will have to verify every parameter available on the MahaRERA's website.

Approval For Fund Withdrawal & Account Closure

At the time of project's completion, it will be made mandatory for the developer to obtain authority's approval to enable withdrawal of funds from Separate Account and its closure. Additionally, all transactions must cease upon project completion unless extended by MahaRERA, with bank account changes also requiring prior authorisation. In an eventuality of any MahaRERA orders for freezing or defreezing of any accounts, the banks will have to immediately comply the same. Banks will also have to stop withdrawals and transfers from the accounts upon lapse of project's registration i.e. on the project's completion date unless certificate of extension is produced by the promoter.

Requirements For Bank Accounts

MahaRERA's proposal doesn't stop there. The bank accounts maintained will have to be free from all encumbrances and should not be escrow account and free from lien, loans, and third-party control i.e. lender or bank or financial institution and cannot be attached by any other government authority unless a direction is issued by MahaRERA. 

Given the impact on real estate stakeholders, the latest discussion paper on the subject is available on MahaRERA's website and suggestions, views and objections from all the stakeholders until April 15, to be sent on finance.suggestions2024@gmail.com.

Enhancing Financial Accountability

So far, the developers make payments and transfers from the same bank account of where they collect revenue from the flat purchasers. This makes maintaining financial discipline challenging and complicating oversight.

As per the discussion paper, the promoter it will be mandatory for the developer to furnish details of the Collection Account in the allotment letter and in the agreement for sale as well as any other communication with the homebuyers to receive payments towards the booking made.

Developers To Disclose Mortgage Details

Furthermore, developers are required to disclose mortgage details and provide updated completion certificates certified by project accountants with Unique Document Identification Number (UDIN) numbers to prevent future complications.

Role Of Scheduled Banks In Ensuring Smooth Transactions

To ensure smooth transactions, MahaRERA has proposed unambiguous framework for the scheduled banks. Such banks will be obligated to notify MahaRERA and developers post-account opening and disburse funds from the Separate Account only upon certification from project architects, accountants, and engineers. Additionally, banks are entrusted with the responsibility of safeguarding these accounts against system interference, bearing full liability for any breaches. These stringent regulations aim to instill financial discipline, transparency, and accountability in the real estate sector, ultimately protecting the interests of homebuyers and fostering trust in housing projects.

MahaRERA's Commitment To Systematic Fund Utilisation Policies, Explains Chairman

"In the pursuit of timely housing project completion and bolstering transparency and accountability within the sector, MahaRERA's discussion paper on Collection, Separate, and Transaction accounts seeks to have a systematic policy framework on utilisation of funds, thereby guaranteeing their targeted allocation and distribution. The final decision on implementing the guidelines, which are framed keeping customer interests at the forefront, will be taken after a thorough review and consideration of all suggestions, objections and views received. MahaRERA's commitment is to elevate real estate sector's credibility and fostering greater customer satisfaction." said MahaRERA Chairman Ajoy Mehta