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In a move to enhance transparency and protect the interests of home buyers and lenders, the Karnataka Real Estate Regulatory Authority (KRERA) recently issued a crucial notification. The notification, dated July 19, mandates real estate promoters, banks, and other stakeholders to deposit the money borrowed by mortgaging housing project land into a designated RERA project account. The borrowed funds must be utilized exclusively for the development of the same housing project, ensuring accountability and preventing misuse.
The decision comes after the KRERA observed instances where real estate project promoters were obtaining loans from banks and financial institutions by mortgaging the project land and apartments/units. However, concerns arose when it was discovered that some promoters were not fully utilizing the borrowed amount for the intended purpose of land and construction. This practice raised alarms about transparency and the potential risks it posed to both home buyers (allottees) and lenders.
To address these issues, the KRERA issued the notification as a measure to protect all stakeholders involved. It now requires promoters to deposit the borrowed amount into the designated RERA project account and withdraw or use it solely for the development of the respective project. This move aims to bring greater accountability and trust in the real estate sector.
The notification also emphasizes the importance of periodic reporting and auditing by a chartered accountant to ensure compliance. Annually, promoters must submit Form 4 (Chartered Accountant Certificate) and Form 7 (Audit accounts of the project) to provide a clear and accurate picture of the funds' utilization and project progress.
To further enhance transparency, the KRERA directed promoters to bifurcate and allocate the borrowed amount to different phases of the project. This ensures that funds are appropriately allocated and utilized for the various stages of construction. Quarterly updates, accompanied by bank statements or Chartered Accountant Certificates, are now mandatory if borrowing money phase-wise for the registered project.
The notification has received positive feedback from home buyers, who view it as a much-needed safeguard for their investments. They appreciate the KRERA's efforts to ensure that promoters genuinely utilize the borrowed funds for project development, assuring timely completion of housing projects.
Overall, the KRERA's notification marks a positive step towards ensuring transparency, accountability, and timely completion of housing projects in Karnataka's real estate market. By enforcing the proper utilization of borrowed funds and maintaining designated RERA accounts, the authority aims to instil confidence in home buyers and lenders alike, fostering a more trustworthy and stable real estate environment.
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