UP-RERA to ensure the management of bank accounts related to real estate projects

The Uttar Pradesh Real Estate Regulatory Act (UP-RERA) has written a letter to the State-Level Bank Committee (SLBC) to ensure that the management of bank accounts for real estate projects is done in accordance with the directives of the Reserve Bank of India (RBI) and RERA Act. This ensures that the banking system related to project bank accounts is more stringent and transparent. The RERA Act 2016's section 4(2)(1)(D) specifies requirements to adhere to the rule of 70-30% diversion of funds for bank accounts linked to real estate projects. In addition to this, UP-RERA also issued a directive on December 24, 2020, following the RBI's directions from December 14, 2020, stating that for all new real estate projects starting on April 1, 2021, it is mandatory for promoters to maintain three bank accounts.

Sanjay Bhoosreddy, Chairman, UP-RERA, said, "We have taken the initiative to ensure utilization of it solely in construction and make a transparent system of opening and management of bank accounts related to projects. Arrangements from banks and promoters will achieve due transparency in the banking system related to project accounts, and we are putting all efforts to ensure this". Apart from opening three bank accounts for all new real estate projects, UP-RERA has asked SLBC to issue directions to banks/ financial institutions.

In opening bank accounts for real estate projects, promoters will instruct the banks to deduct 70 and 30 percent, not more than this, of the amount automatically from the collection account and deposit them in separate transaction accounts, respectively. The Bank account will be operative only in the name of the leading promoter, and to ensure utilization of the amount of different accounts in the construction and development of the particular project, banks would not facilitate debit cards, checkbooks, and net banking facilities to the promoter. Ensuring this, the bank branch will send the information to the U.P. RERA office, and the promoter will upload it on the portal. This process will make stringent provisions for managing bank accounts related to real estate projects and create desired transparency. The banks have to ensure transactions from separate accounts of the project.