In a move to strengthen financial discipline and buyer protection, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) has issued a significant directive related to project registration extensions. As per the latest announcement, developers seeking an extension of more than one year for a registered real estate project will now be mandated to deposit an additional 20% of the total amount collected from homebuyers into the project’s designated escrow account.
Key Highlights of the New Escrow Requirement
1. Applies to Extensions Beyond One Year:
The rule is triggered only when a builder applies for an extension exceeding 12 months beyond the originally approved project completion date.
2. Escrow Top-Up of 20% Mandatory:
Builders must deposit 20% of the total buyer funds collected into the project-specific RERA escrow account as a pre-condition for approval of such extensions.
3. Buyer Protection & Fund Utilization Oversight:
The measure is aimed at ensuring project completion and preventing diversion of buyer money, especially in delayed or stalled projects. TNRERA will continue to monitor escrow usage strictly.
4. Compliance Enforcement:
Failure to comply will result in rejection of the extension request, and the project may face penalties or deregistration. TNRERA may also notify affected buyers.
5. Promotes Timely Completion:
The directive serves as a deterrent against indefinite project delays, compelling developers to stick to timelines or bear additional financial responsibility.
Regulatory Context
Under Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016, promoters must deposit 70% of the funds collected from buyers into a separate bank account to cover land and construction costs. TNRERA’s new 20% escrow top-up for delayed projects goes a step further, reinforcing transparency, accountability, and financial prudence.
