{"id":12046,"date":"2020-07-02T18:17:19","date_gmt":"2020-07-02T12:47:19","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=12046"},"modified":"2020-07-02T18:32:48","modified_gmt":"2020-07-02T13:02:48","slug":"permissible-expenses-can-be-charged-to-rera-account","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/","title":{"rendered":"Guide on Permissible expenses can be charged to RERA Account"},"content":{"rendered":"\n<p class=\"has-drop-cap\">According to <strong>section 4(2) (I) D),<\/strong> every Promoter requires to open RERA account\nin a scheduled bank in order to cover the cost of construction and land cost of\nthe project. The withdrawal from this RERA accounts must be in accordance with\nacts, rules, and regulations as may be prescribed. Only certain expenses can be\ncharged from a designated bank account.<\/p>\n\n\n\n<p>In the macro sense, only a cost of land and a cost of on-site construction can be charged to the designated account. The basic principle behind this is only actual out-flows can be charged from the account, not notional values or any future payments. Marketing or Advertising costs and the loan repayment or interest payments to the financial institutions are not permissible to be charged <strong><em>against 70% of the designated bank account<\/em><\/strong>. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/#Details_on_Expenses_which_can_be_charged_to_RERA_account\" >Details on Expenses which can be charged to RERA account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/#Promoters_promise_to_customers\" >Promoter&#8217;s promise to customers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/#Impact_of_a_separate_account\" >Impact of a separate account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/#Not_an_escrow_but_a_separate\" >Not an escrow but a separate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/#Withdrawals_from_the_separate_account\" >Withdrawals from the separate account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/permissible-expenses-can-be-charged-to-rera-account\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Details_on_Expenses_which_can_be_charged_to_RERA_account\"><\/span>Details on Expenses which can be charged to RERA account<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"661\" height=\"201\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-10.png\" alt=\"RERA account\" class=\"wp-image-12047\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-10.png 661w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-10-300x91.png 300w\" sizes=\"(max-width: 661px) 100vw, 661px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Land<\/h3>\n\n\n\n<p>The actual amount paid for land at the time\nof purchase (not current notional value, even though this can be used for\nfixing the price of apartments). If the land is ancestral or is received as\ninheritance or gift, then the permissible charge to the designated bank account\nwill be nil. In case when a landowner is someone other than the Promoter,\namounts paid to an owner of the land are permissible. <\/p>\n\n\n\n<p>If payments are made in two installments, then the charge to the designated bank account can be made as to when the payments are actually made. Stamp duty, <a href=\"https:\/\/corpbiz.io\/rera-registration\"><strong>RERA Registration<\/strong><\/a> costs, and legal fees actually paid for such transactions must also be charged. Amount paid for diversion, or additional FAR is permissible.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Fees<\/h3>\n\n\n\n<p>Fees paid to the Statutory Authority to\nobtain project approval or registration (such as fees paid to RERA, Town &amp;\nCountry Planning Department, Municipal\/Local Authority, or Panchayat) can be\ncharged to the account. Fees that are paid to Architect or Structural Engineer\nor Technical Consultant are permissible but provided these must be specifically\nfor this project. These experts must not be salaried employees of the Promoter.\nOnly that fees which are directly attributable to the project are permissible.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">On-site Construction<\/h3>\n\n\n\n<p>Only those payments which are directly\nrelated to construction are permissible. Such as the cost of bringing water and\nelectricity to a project site is permissible. The depreciation cost of\nmachinery and equipment as used on the project site. The hire and maintenance\ncharges for the same are also permissible. <\/p>\n\n\n\n<p>The consumables, such as diesel, three\nlubricants, etc. and electricity to run the equipment is also permissible. The\ncost of material actually purchased and the cost of project-related labor\nactually paid (excluding the cost of salaries of employees in the company) are\npermissible to be charged to a designated bank account. <\/p>\n\n\n\n<p>Hence, the above expenses are allowed from the <strong>RERA<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Real_Estate_(Regulation_and_Development)_Act,_2016\"><strong>[1]<\/strong><\/a><\/sup> account. Expenses other than mentioned will not be charged from the RERA bank account.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Promoters_promise_to_customers\"><\/span>Promoter&#8217;s promise to customers<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every Promoter must have to make an\napplication to the Regulatory Authority for the registration of a real estate\nproject in the state. The Promoter, in addition to several other necessary\ndocuments, must have to submit the declaration, which is supported by an affidavit.\nIt states that 70 % of the amount realized for the real estate project from the\nbuyers time to time, must be deposited in a separate RERA account that is to be\nmaintained by a scheduled bank to cover a cost of construction and a land cost\nmust be used only for that purpose.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact_of_a_separate_account\"><\/span>Impact of a separate account <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To some extent, maintenance of a separate RERA account is important as the withdrawals from which will be easily tracked. Thus it leads to raise better fund management and presumably no diversion of the funds. A developer can now be forced to use the project accruals for the development of the same project.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/fees-levied-by-rera-punjab-on-agents-and-promoters\/\">\nFees levied by RERA Punjab on agents and promoters\n<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Not_an_escrow_but_a_separate\"><\/span>Not an escrow but a separate <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The RERA Act says that the account has to\nbe self-maintained and must not an escrow account. It requires the approval of\nthe Authority for withdrawal. According to the RERA Act, the Promoter has to\nmaintain a <strong>&#8216;separate RERA account&#8217;<\/strong>\nfor every project undertaken wherein 70 % of the money received from the buyers\nmust be deposited in that account. Such funds can be used for the purposes of\nconstruction and land cost, and that fund can be maintained with any scheduled\nbank. In RERA, escrow and separate bank accounts do not mean one and the same\nthing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Withdrawals_from_the_separate_account\"><\/span>Withdrawals from the separate account<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The withdrawal from the separate RERA\naccount must have to be in proportion to the percentage of completion of the\nproject. It must be certified by an architect, an engineer, and a chartered\naccountant that certain withdrawal is made in proportion to a percentage of\ncompletion of the project. It is necessary if there is transparency, and\ntransactions in such separate RERA account are made accessible to customers of\na project online, if not to public at large.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The cost of land and a cost of on-site construction can be charged to the designated bank account. The principle behind this is that only the actual out-flows must be charged to the account, not notional values or future payments. In the real estate sector, the diversion of funds by the builders into different projects or for buying new land was not good. It resulted on failure in the timely completion of projects for lack of funds and a delay in possession of homes, even after paying the money on time by the buyers.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/aprera-notification-on-late-quarterly-compliance-filing\/\">\nAPRERA Notification on Late Quarterly Compliance Filing\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to section 4(2) (I) D), every Promoter requires to open RERA account in a scheduled bank in order to cover the cost of construction and land cost of the project. The withdrawal from this RERA accounts must be in accordance with acts, rules, and regulations as may be prescribed. Only certain expenses can be [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":12049,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[182],"tags":[723],"acf":{"service_id":"102"},"authorName":"Soumya Bajpai","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/01\/0.jpg","authorDescription":"Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.","postViews":12848,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/12046"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=12046"}],"version-history":[{"count":6,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/12046\/revisions"}],"predecessor-version":[{"id":12055,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/12046\/revisions\/12055"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/12049"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=12046"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=12046"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=12046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}