The Tamil Nadu Real Estate Regulatory Authority (TNRERA) has introduced a new compliance measure to strengthen homebuyer protection and curb delays in real estate projects. Developers seeking project registration extensions exceeding one year must now deposit an additional 20% of the total collections from allottees into the designated project escrow account.
This move, issued under Section 7(3) of the Real Estate (Regulation and Development) Act, 2016, empowers the authority to impose extra conditions in the interest of homebuyers, rather than immediately canceling project registrations in cases of prolonged delays.
Objective Behind the Rule
TNRERA officials stated that the measure is designed to:
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Ensure adequate funds for construction and prevent diversion of homebuyers’ money.
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Reduce project delays caused by insufficient liquidity in the mandatory escrow account.
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Strengthen buyer confidence by guaranteeing that collected funds are reserved for project completion.
Under RERA, developers must already deposit 70% of homebuyer collections into an escrow account for construction and land costs. With the new rule, an extra 20% deposit is required if the project seeks an extension beyond one year, effectively increasing financial accountability.
Builders Raise Concerns
Small and mid-sized developers expressed cash flow concerns over the new directive:
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S. Ramprabhu, Chairman of DTCP Committee at Builders Association of India, said:
“We invest our own capital to complete initial construction before bookings begin. Requiring an additional 20% deposit when collections are low will strain our finances.” -
G. Mohan, former President of Chennai Southern Builders Association, urged for exemptions in cases of natural delays:
“If delays are caused by unavoidable factors like floods or heavy rains, TNRERA should consider relaxing the deposit requirement.”
Balancing Accountability and Flexibility
While developers seek relief for genuine delays, TNRERA’s initiative aligns with its mission to protect homebuyers and reduce the risk of stalled projects. By increasing financial discipline, the authority aims to minimize the risk of diversion of buyer funds, which is a common cause of delayed possession in the sector.
Industry experts note that the directive encourages timely completion of projects and ensures funds are available to meet construction milestones, ultimately boosting trust in Tamil Nadu’s real estate market.
