In a major move aimed at curbing fund misappropriation and improving fund transparency in real estate project execution, the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has mandated that all promoters disclose the use of funds collected from homebuyers. The new directive, announced on Friday, follows multiple complaints that promoters were diverting money away from designated project accounts.
Mandatory Fund Segregation: Collection, Separate, and Transaction Accounts
As per the Real Estate (Regulation and Development) Act, 2016, every developer must deposit 70% of the total amount collected from allottees into a dedicated “separate account”, strictly to be used for construction and project-related expenses. The remaining 30% is permitted for other expenditures.
To ensure stricter compliance, UP RERA now requires promoters to register and disclose details of three project-specific bank accounts on its official portal:
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Collection Account (where homebuyer payments are initially received)
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Separate Account (70% of the collection, used for construction only)
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Transaction Account (30% of the collection, used for other project expenses)
Daily Auto-Transfer Mechanism by Banks
In a further step to ensure accountability, UP RERA has directed all banks to auto-transfer 70% of the daily collections to the ‘separate’ account and the remaining 30% to the ‘transaction’ account. This measure ensures that developers cannot reroute the funds before depositing them in the appropriate accounts.
Withdrawals from the ‘separate account’ are strictly regulated and permitted only in proportion to the actual progress of the construction. These withdrawals require certifications from an engineer, architect, and a chartered accountant to validate that the amount corresponds with the work completed.
Violations and Legal Action
UP RERA Chairperson Sanjay R. Bhoosreddy revealed that several cases have been detected where developers failed to deposit buyer funds into the designated ‘collection’ account, instead routing them to unauthorized accounts for non-project purposes.
“We are taking separate legal action in such cases,” Bhoosreddy stated, emphasizing that such violations constitute misuse of public funds and breach of RERA provisions.
Public Access to Project Financial Data
To increase transparency, UP RERA has now made the ‘collection account’ details of all live projects publicly accessible on its website under the section titled ‘Details of Collection Account (Live Projects)’. This allows potential and existing buyers to cross-check account information before making payments.
Advice to Homebuyers and Promoters
Bhoosreddy urged both homebuyers and promoters to verify all project-related information through the UP RERA portal before engaging in any transaction. Buyers are advised to make payments only to the official ‘collection’ account, which is now monitored and verified by RERA.
He reiterated, “Legal action will be initiated against any promoter violating these guidelines, especially those diverting funds to unauthorized accounts.”
With these steps, UP RERA aims to restore trust in the real estate sector by ensuring that homebuyer investments are protected and directed solely toward timely project completion.
