Understanding RERA Compliance Requirements for Real Estate Projects

Importance of RERA Compliance After Real Estate Project Registration

The Real Estate (Regulation and Development) Act, 2016 (RERA), mandates that all real estate projects must be registered before a Promoter can advertise, market, book, or sell any flats or plots. Section 4 specifies that the application for registration must include particular details and documentation, while Section 5 focuses on the process for granting registration.

Key Compliance Requirements Under RERA

1. Declaration and Affidavit
   According to Section 4(2)(l), Promoters must file a Declaration supported by an Affidavit, which is signed by the Promoter or an authorized representative. This document must include:

   • A timeline for project completion.
   • A commitment that 70% of the funds received from allottees will be used exclusively for construction and land costs. Note that penalties and procedures may vary by state.

2. Bank Account Requirements

   • Promoters are required to establish a separate bank account to deposit 70% of the amounts collected from allottees.
   • Withdrawals from this account must be exclusively for project costs and should align with the percentage of completion confirmed by engineers, architects, and chartered accountants.

3. Financial Audits
   Every project must be audited within six months after the end of the financial year. The auditor's report should include:

   • The total funds collected in the prior year.
   • Confirmation that funds were utilized correctly and that withdrawals corresponded to the project’s completion status.

4. Quarterly Updates
   Promoters are obligated to provide quarterly updates to the Regulatory Authority about the project. The format and deadlines for these updates may differ by state.

Summary of Mandatory Compliances

Promoters must meet the following compliance requirements for their real estate projects:

• Open a specific bank account for project funds.
• Deposit 70% of the amounts collected from allottees into this account.
• Withdraw funds based on the percentage of project completion, as validated by qualified professionals.
• Submit quarterly updates in compliance with the Regulatory Authority's guidelines within the specified timeframe.
• File an annual audit report within six months after the end of the financial year.
• Report project completion as needed.

Consequences of Non-Compliance

Registration of a real estate project is a mandatory requirement for Promoters. Failure to meet these obligations can lead to penalties enforced by the Real Estate Authority. Non-compliance may result in significant consequences, including:

• The Real Estate Regulatory Authority of Karnataka has imposed cumulative delay fees for late filings of updates, which increase on a monthly basis.
• The Real Estate Regulatory Authority of Gujarat recently froze the bank accounts of 1,000 Promoters who neglected to submit quarterly updates, annual audits, or completion reports, underscoring the seriousness of non-compliance.

Conclusion

Understanding and complying with the provisions of Section 4 is essential for Promoters after project registration. Timely fulfillment of these obligations is critical in avoiding violations of RERA provisions, thereby avoiding potential penalties or actions by the Regulatory Authority. Adhering to RERA principles ensures efficient project execution and fosters trust among stakeholders in the real estate industry.