Karnataka RERA Bank Account means a separate bank account to be maintained by a promoter in the scheduled bank in the local branch where the project is going on. In-State of Karnataka, according to section 4(2) (I) (D) of Act covers the land cost of the project and the cost of construction. The promoter can change the RERA Bank Account from one bank to another Bank only with the prior permission of the Authority.
Karnataka RERA Bank Account change request
Promoter has to submit documents through the Authority’s web portal along with the application in the following forms:
- Application for change in Karnataka RERA Bank Account in Form 5 along with the applicable Affidavit as prescribed therein along with the Board Resolution from the concerned applicant (if the applicant is other than individual).
- Certificate of an account balance from a bank with an existing RERA Bank Account in Form 6.
- Account Statement and Copy of Passbook of account proposed as new RERA Bank Account.
- The Proposed Karnataka RERA Bank Account must be opened in the local bank branch, where the project is situated in the state of Karnataka.
The promoter is also required to submit a fund transfer compliance letter in Form 7 (Confirmation letter for change in RERA Bank Account) along with Form 8 (Certificate of fund transfer from a bank) with a new RERA Bank Account and Proof of previous RERA Bank Account closure.
Important aspects of the circular are enumerated to understand and implement
There are few important aspects of the circular are enumerated to understand and implement, which are as follows:-
Opening and Operating –
- Every project must have a separate bank account
- Such account must be opened in Scheduled Bank
- Bank Branch (Home Branch) must be at where the project is going on
- Such account must be No Lien Account
- Such account suffix a term RERA Bank Account in (project name) with the RERA Bank Account Holder
- Only one RERA Bank Account for each project (there shall be legal arrangements amongst the promoters viz., builder, landowners, etc. for operating such bank account)
- Such RERA Bank accounts must open and submit the details along with an application for grant of registration of the project
Deposits in Account –
- 70% of the amount collected or realized from the Allottees must deposit into designated RERA bank account only (other than Pass-through charges and Indirect Taxes)
- Where the cost required to spend is more than sales revenue, then 100 % of realization must be deposited
- Surplus amount in designated RERA bank account can be deposited in a Fixed Deposit (such FD must be No Lien or No charge Account)
Withdrawal from Account –
- Withdrawal from an account after it is certified by Architect, Engineer and Chartered Accountant in practice.
- Withdrawal is allowed in proportion to the percentage completion of the project.
- Amount withdrawn must be utilized for the purpose of completion of the same Real Estate Project.
- There is no End-use restriction on the amount withdrawn from the RERA Bank Account.
Read our article:Guide on RERA Registration for Real Estate Agents
Karnataka RERA Bank Account Modification
Section 4 of the RERA Act 2016[1] mandates every promoter to open and maintain the Project wise bank account in Scheduled Bank. The objective and intention of the RERA Act are to ensure the money collected from the allottees for the Specific project must be utilized for the specific project and to avoid any diversion or diversification of funds by the promoter for better opportunities.
On grant of registration of a project, designated bank account must be used to deposit the 70 % of the amount collected from the Allottee –
- Sec. 4 (2) (l) (D) that 70% of the amounts realized for the real estate project from the allottees as in time to time, must be deposited in a separate bank account. It is to be maintained in a scheduled bank to cover the cost of construction and the land cost. It must be used only for that purpose.
- Few of the authorities have printed the designated project bank account details in the RERA Registration Certificates so that the Allottees and housing loan companies shall release the funds to the respective project bank account.
Any deviation from the usage of the designate bank account, the promoter must obtain PRIOR approval of the Authority
- Online Application
- Documents / Certificates
Certificate from CA certifies that the promoter has withdrawn money
In compliance with Section 4(2) (l) (d) of an Act after application received, Authorities can call for a hearing, verification of documents, compliance, and on satisfaction, must be allowed to use the new bank account for the project.
In many circumstances, lenders or financial institutions insist the promoter deposit the money collected to a loan escrow bank account. We recommend all promoters to obtain the prior approval by filing a necessary application, documents, and requirements.
Non-compliance with the requirement and provisions of the Act may result in levying of penalty by the Authorities as per sec 61 if any promoter contravenes with any other provisions of this Act, other than that given under section 3 or section 4, or the rules and regulations thereunder. He must be liable to a penalty which can extend up to 5% of the estimated cost of a real estate project as determined by the Authority.
Conclusion
In order to protect Allottees and bring discipline amongst the Promoters, the utilization of funds must be proper. The Act mandates that 70% of the money collected from the allottees must be deposited in a separate Karnataka RERA bank account for a designated project bank account which is not escrow account.
However, many promoters, professionals pronounce it as escrow, and withdrawal of such money must be based on a percentage of completion of the development of a project. While filing an application for Grant of Registration of project Bank Account details are given to the Authority.
Read our article:Guidelines related to RERA Karnataka
