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An investigation by Maharashtra Real Estate regulator Right (Maharera) has found that 1,781 projects have violated norms by linking their bank accounts with more than one project.
The Real Estate (Regulation and Development) Act, 2016, makes it mandatory for a project to have a single bank account under a registration number. It aims at proper completion of registered housing projects without any diversion of funds.
Taking cognizance of these irregularities, the regulator has so far issued show cause notices to 45 such projects and is in the process of sending notices to the remaining projects.
To avoid such irregularities in future, the regulator has made changes in its system. The updated system will prevent any attempt to link the designated account of one project with the bank account of another project.
Apart from this, the new system will not allow the developer to make changes in the mutual account. MahaRERA has issued a new order making prior approval mandatory for this change.
MahaRERA as a regulator has introduced these measures to bring financial discipline and transparency in the real estate sector to ensure protection of investment and interests of home buyers and also help in improving the credibility of the sector .
As per the Real Estate Act, the developer is required to maintain only one bank account with a RERA registration number. The money received in the respective project needs to be maintained in this account and used only for the work of that project. It is not permitted to be used for any other project or purpose as such diversion may have an adverse effect on the project.
The developer is also required to maintain 70% of the money received from the registration of that project in this account. The developer cannot withdraw money arbitrarily from this account.
While working on the project, withdrawal is not allowed from this account at each stage without certification regarding construction updates and required funds.
The regulator has unearthed this irregularity by studying the information submitted to MahaRERA by the developers themselves.
Through show cause notices, it has directed such developers to submit all details along with proof of total number of flats, bookings, money received, bank withdrawals in each project. After examining this information, the regulator will take appropriate action.
Last week, MahaRERA red-flagged 313 projects for discrepancies in their expenditure and actual project completion status and launched more intensive inspections. The regulator has appointed a financial audit firm to scrutinize the projects. It has already issued show cause notices to all these 313 projects and they are currently under investigation.
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