Noticing the extreme need for some transparency and discipline in the real estate business in India, the Real Estate (Regulation and Development) Act of 2016 was passed. Among the first things that need to be complied with according to the Real Estate Act of 2016 is the Form-7 report for each ongoing realty project.
The significance of Form-7 is immense as it helps to ensure that the funds received from purchasing homeowners are utilized only for the same project for which the funds have been gathered. This relates to financial discipline and actual developments, and it becomes possible to track projects as they develop through real-time monitoring by officials from RERA. For the promoter, it becomes an obligation rather than an option if they need to file an accurate Form-7.
Understanding What Form-7 Is Under RERA?
Form-7 is an annual audit report that must be certified by a Chartered Accountant and submitted to the respective State RERA Authority. The report provides a verified snapshot of the project’s financial health and construction status for a given financial year.
Through this form, the promoter must demonstrate that collections from allottees have been deposited in the designated RERA project bank account and that withdrawals from this account are proportionate to the actual progress of construction. The CA certifies whether the promoter has complied with the escrow norms prescribed under RERA and whether funds have been utilised solely for the registered project.
In simple terms, Form-7 answers one crucial question for the regulator: Has the promoter used homebuyers’ money responsibly and exactly as promised?
Why Form-7 Is Fundamental to RERA Compliance?
Form-7 is far more than an administrative filing. It is one of the strongest tools available to RERA authorities to prevent financial misuse and project delays. By mandating annual third-party certification, RERA ensures that promoters remain financially accountable throughout the lifecycle of a project.
The relevance of Form-7 is that it has the capacity to:
- Ensure the application of transparency in the handling of project funds.
- Prevent diversion of funds for other projects or personal use
- Shield home buyers against financial mismanagement
- Allow Early Detection of Delays and Cash Flow Risks
- Enhance trust between promoters, buyers, and regulatory bodies
Owing to its significance, Form-7 is thoroughly checked, and any minor discrepancies might lead to notifications from the Authority.
Who is obliged to file Form-7?
Every promoter with a RERA-registered project has to file Form-7 every financial year till the project gets its completion certificate. This requirement applies equally to residential and commercial projects.
The liability extends to builders, developers, joint venture entities, and the landowners who are co-promoters. The important point to note here is that Form-7 needs to be filed separately for each registered project, even if one promoter undertakes multiple projects.
What Information Does Form-7 Contain?
Form-7 is a comprehensive certification covering both financial and physical progress. While the format may vary slightly across states, the core disclosures remain consistent.
Project Funds and Collections
The Chartered Accountant certifies the total amount collected from allottees, along with any loans or advances received specifically for the project. The report also confirms details of the designated RERA project bank account and verifies compliance with the mandatory requirement that 70% of collections be deposited into this account.
Use of Project Funds
The report clearly points out the expenditure made on the project funds. It outlines construction costs, land costs, cost of payment to contractors and consultants, procurement of materials, and other related expenses pertaining to the project. Any expense, which does not specifically relate to the project, needs to be excluded, while deviations must be disclosed.
Certified Percentage of Completion
This section is often the most sensitive and closely examined. The CA certifies the percentage of completion declared by the promoter after correlating it with actual site progress. This certification must align with the architect’s and engineer’s certificates and with the withdrawals made from the RERA bank account. Any mismatch can raise red flags.
Revelation of Deviations
If there has been some irregularity, excess withdrawal, and non-compliance throughout the financial year, it is essential that this be stated clearly in the report. This is one of the ways that help counter regulatory issues.
Timeline for Filing Form-7
Form-7 is filed annually after the end of the financial year. In most states, the due date is 30th September, although timelines may vary slightly depending on the State RERA Authority.
Each ongoing registered project requires a separate filing. Delays beyond the prescribed date can immediately attract penalties, making timely submission critical.
Consequences of Not Filing Form-7
Non-filing of Form-7 or filing an incorrect report attracts severe legal and financial consequences. The RERA authorities have the power to impose daily penalties for delays in filing and monetary fines extending up to a certain percentage of the total cost of the project.
Also, in severe cases, freezing of the project bank account; suspension or canceling of the project's RERA registration and blocking of future project registrations by the promoter could be followed. Further, these are inevitably followed by legal consequences under the relevant sections of the RERA Act, which most certainly affect his reputation and the ability to operate.
Documents needed to file Form-7
The promoters need to ensure that proper records are maintained throughout the year to ensure seamless filing. The basic documents which are usually required are the RERA registration certificates, project bank statements, financial ledgers, architect and engineer progress certificates, expense invoices, and sales and collection records. Good documentation that is updated regularly and kept clean will reduce most of the risks of discrepancies at the time of certification.
Why Professional Help Makes the Difference for filling Form-7?
The filling of Form-7 needs synchronization between the finance department, site engineers, architects, and Chartered Accountants. The slightest discrepancy while matching the numbers will trigger notices or fines.
Expert RERA compliance services ensure a smooth process for promoters to deal with data properly, coordinate the certification process, check the use of funds, and at the same time ensure synchronization between physical and financial withdrawal processes related to project development.
Form-7 is the backbone of a transparent financial system under RERA. It is a safeguard for homebuyers and a disciplining factor for real estate projects to be developed in a legal manner. For real estate developers, Form-7 is a crucial document that needs to be considered a priority requirement for smooth project execution. The timely and correct filling of Form-7 is not only about regulatory requirements, but it is also about earning trust in the real estate space.
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