The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has introduced significant measures to strengthen financial transparency and discipline in real estate projects by conducting an awareness session for banks regarding revised rules for handling RERA project accounts.
The awareness meeting was organised at the regional office of Bank of Baroda in Gomtinagar, where officials explained the updated compliance framework applicable to banks maintaining accounts of RERA-registered projects.
These reforms are aimed at ensuring that homebuyers’ money is utilised only for construction and land-related expenses and to prevent diversion of project funds.
UP RERA’s New Three-Account System
One of the most important reforms introduced by UP RERA is the mandatory three-account structure for every RERA-registered real estate project.
The three accounts include:
- Collection Account
- Separate Account
- Transaction Account
Under the revised framework, all payments collected from homebuyers will first be deposited into the collection account.
Thereafter, 70% of the collections will automatically move into the separate account, which can be used strictly for:
- Construction expenses
- Land costs
- Project-related development expenditure
This mechanism is intended to ensure that builders do not divert buyer funds to unrelated projects or purposes.
Strict Withdrawal Conditions Introduced
UP RERA has made withdrawals from the separate account more stringent and transparent.
Any withdrawal from the account will now require certification from:
- An architect
- An engineer
- A chartered accountant
These professionals must certify that the withdrawal is proportionate to the percentage of project completion.
This requirement creates a financial audit trail and ensures accountability at every construction stage.
Restrictions on Banking Facilities
UP RERA has also directed banks to place restrictions on operational facilities connected with project accounts.
Banks have been instructed to:
- Restrict cheque book facilities
- Restrict debit cards
- Disable transaction-enabled internet banking
Further, banks cannot allow operations in newly opened project accounts until final regulatory approval is obtained.
These measures are intended to minimise unauthorised fund transfers and misuse of project money.
Lien Creation Prohibited on Project Accounts
A major safeguard introduced under the revised rules is the prohibition on creation of liens on project accounts.
This means:
- Banks cannot create charges or encumbrances on project accounts
- Project funds cannot be blocked or diverted for unrelated liabilities
This provision directly protects homebuyers’ money and ensures that project funds remain available for project completion.
Mandatory Quarterly Financial Disclosures
Developers will now be required to submit quarterly financial disclosures regarding:
- Collection of funds
- Utilisation of funds
- Project expenditure
- Balance available in project accounts
These disclosures are expected to improve transparency and help regulators monitor compliance more effectively.
Interest on NBFC Loans Linked to SBI-MCLR
UP RERA has also capped the interest applicable on loans obtained from Non-Banking Financial Companies (NBFCs).
The revised framework links the interest rate ceiling to the State Bank of India MCLR (Marginal Cost of Lending Rate) to prevent excessive financial burden on projects.
This move is expected to reduce financial stress and improve project completion timelines.
How These Reforms Benefit Homebuyers
The revised regulations are expected to provide multiple benefits to flat buyers, including:
- Better protection of buyer funds
- Reduced diversion of money to other projects
- Improved project completion timelines
- Greater transparency in project finances
- Stronger accountability of developers and banks
The reforms also strengthen confidence in the regulated real estate sector and align with the objectives of the Real Estate Regulatory Authority framework.
Conclusion
UP RERA’s revised banking and financial compliance system marks an important step toward improving transparency and accountability in the real estate sector. By introducing strict fund management rules, limiting unauthorised transactions, and ensuring certified withdrawals, the authority aims to safeguard homebuyers’ interests and reduce project delays caused by fund diversion.
The new framework places greater responsibility not only on developers but also on banks handling RERA project accounts, making the entire ecosystem more disciplined and transparent.
