For Bank Loan Approvals RERA Compliance Is a Must-Have For The Builders

Liyans.com
Aug 8, 2017 · 3 min read

Another projectile to hit the builders who are thinking of bridle the Real Estate Development and Regulatory Act (RERA); after consulting with the Reserve Bank of India, banks have come to a conclusive decision that there will be no loan extension for those projects that haven’t been registered with the RERA authority.

Referring to this new clause a bank official said, “We have to look for some security mechanism, and since RERA is designed to weed out fly-by-night operators, we have decided not to extend credit to projects not registered with it. Adhering to the regulations will safeguard our interests, it’s better to be safe now than regret later.”
Banks now on will implement collateral, including on personal properties of the developers as guarantees while disbursing loans to a few real estate developer. “We are very apprehensive because even if we disburse loans as prescribed under the law, the way it is designed, it does not protect our credit. If a loan turns bad, customers will be refunded but there’s no inherent protection for us under the law,” said a PSU bank official. “So, we are being extremely careful about lending to the sector.”

According to the new implemented real estate law a developer will have to deposit 70% of the collected amount from the homebuyers in a separate escrow account. Of this amount 30% can be used for the advertisement purpose of the sales proceeds. Earlier they used to channelize this money for the other project development purpose. With the legal binding of RERA implementation all these double dealings of the developers will finally put to an end.
“People, who are willing to buy property in Kolkata, are advised to invest in ready-to-move properties rather than the under constructions. It’s for the measurement of their better safety and security,”-said Mahesh Somani, West Bengal RERA and realty expert.

Mostly states have found sidelined the penalization clause, rather focused on the fines and interest charging, which certainly makes the priority of RERA secondary. No alteration in the undertaking can be done without receiving the say-so of two-thirds of homebuyers in that housing complex. RERA aims to improve accountability in the real estate sector. The deadline of RERA registration for the on-going projects, developers and realtors and for states their respective real estate norms notification went over on July 31, 2017. Again 6 states have fallen short to meet this zero hour. Maharashtra was the first state to notify RERA norms and to disclose the rules of MahaRERA. Until the midnight of the deadline, the regulator had received total 10,852 applications for project registration across Maharashtra, which amounted to 12,000 by far.

Under RERA supervision developers and realtors are bound to reveal their project-related information, government approval related documents, project-plan, project registration details, layout, floor-plan everything to a potential buyer. It’s mandatory to cross-check project registration details before coming into any agreement with the seller for enhanced buyer protection.

-LNN (Liyans News Network)

Liyans.com

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