UP RERA Guidelines on Project Bank Account Changes – What Developers Must Know

The separate bank account for a real estate project is a key regulatory requirement for ensuring the proper management of funds raised from allottees. Under the Maintenance of Separate Bank Account Directions 2020, part of the Real Estate (Regulation and Development) Act, 2016, promoters are obligated to maintain a separate bank account for each project in order to promote financial transparency. This account must be disclosed on the Uttar Pradesh Real Estate Regulatory Authority (UP RERA) website at the time of project registration. Changing this account under normal circumstances is not permissible; however, there are specific cases where the Uttar Pradesh Authority may allow such changes.

Significance of the Separate Bank Account for Projects in Uttar Pradesh

For real estate projects in Uttar Pradesh, the separate bank account is an essential tool for ensuring that the funds raised from homebuyers are utilized solely for the development of the project. This regulation applies to all projects registered under UP RERA and is designed to safeguard the interests of allottees by ensuring the proper and intended use of the funds.

The details of the separate account are disclosed on the UP RERA website during the registration process. This disclosure helps maintain financial transparency, allowing allottees to verify that the funds they contribute are appropriately managed. Changing this account can disrupt this transparency and therefore, is allowed only under specific circumstances laid out by the Real Estate Rules.

Conditions under Which the Separate Bank Account Can Be Changed in Uttar Pradesh

The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has outlined several conditions where a change in the project’s separate bank account may be allowed. These conditions ensure that changes are in the best interests of the project and its allottees, without compromising the integrity of the financial management.

1. Non-declaration of Separate Account at the Time of Registration

If the promoter did not declare a separate account at the time of the project’s registration with UP RERA, the Authority may approve the opening of a separate account at a later stage to comply with the regulations.

2. Common Bank Account for Multiple Projects

If the account declared by the promoter is being used for multiple projects, UP RERA may allow the promoter to open individual separate accounts for each project. This ensures that funds for each project are kept distinct and are properly used.

3. General Collection Account

If the account disclosed is a general collection account (not specific to the project), UP RERA will permit the opening of a dedicated account for the project. This ensures that the funds are properly segregated and used only for the development of the registered project.

4. Bank Account Located Outside Uttar Pradesh

If the account is located outside the district or state where the project is being developed, the promoter may be allowed to change the account to a bank located within Uttar Pradesh. This condition is designed to facilitate the smooth operation of the project’s financial activities.

5. Loan Conditions

If the promoter is availing of a loan for the construction of the project and the lender bank requires that the account be opened with it, UP RERA may allow the change. However, the new bank account must not be subject to any lien or charge from the lender. Any violation of this provision may result in penalties or revocation of the project’s registration.

6. RBI Restrictions

In case the Reserve Bank of India (RBI) places restrictions on the operation of the bank account, UP RERA may approve a change to the account if the promoter can prove that the change is necessary.

7. Other Valid Reasons

The Authority may also allow the change if the promoter presents any other valid reason, not foreseen by the guidelines, but deemed reasonable and justifiable by the Authority.

Application Process for Changing the Separate Bank Account in Uttar Pradesh

To change the separate bank account of a project registered under UP RERA, the promoter must follow a formal application process. The following steps and documentation are required:

1. Application for Change (Form RA-3)

The promoter must submit a detailed application in Form RA-3, outlining the reason for the request to change the bank account. The application must be clear and supported by relevant documentation to justify the need for the change.

2. Certificate of Account Balance (Form RA-4)

A certificate issued by the bank holding the existing account, stating the current balance of the account, must be submitted. This helps UP RERA verify the financial status of the project before approving the change.

3. Proposed Account Details

The promoter must provide a copy of the bank statement or passbook of the new account where the separate project funds will be transferred. This helps UP RERA confirm that the new account meets the regulatory standards for a dedicated project account.

4. Annual Audit Report

The promoter must submit an annual audit report of the project to give UP RERA an overview of the project’s financial status. This ensures that the change will not disrupt the financial stability of the project.

5. Notarized Affidavit (Form RA-1)

A notarized affidavit in Form RA-1 must be submitted, confirming that the promoter is complying with all regulations and that the change is in the best interest of the project and its allottees.

6. Fund Transfer Compliance Letter (Form RA-5)

The promoter must submit a fund transfer compliance letter, confirming that all funds from the existing account have been transferred to the new account. The letter should also include Form RA-6, a certificate from the bank confirming the transfer.

7. Notification to Allottees

The promoter must provide proof that all allottees have been informed about the change in the separate bank account. This ensures transparency and keeps the stakeholders informed about the project’s financial changes.

Penalties for Non-Compliance

Failure to comply with the regulations regarding the separate bank account can result in severe penalties. Promoters who violate the rules may face a penalty of up to 5% of the project’s total cost. Moreover, UP RERA may revoke the project’s registration under Section 7 of the Real Estate (Regulation and Development) Act, 2016.

Conclusion

For real estate projects in Uttar Pradesh, maintaining a separate bank account is crucial for financial transparency and proper project management. Changes to this account are permitted only under specific circumstances as outlined by UP RERA. Promoters must follow the proper procedure and provide comprehensive documentation when requesting a change to ensure compliance with the regulations. By adhering to these requirements, promoters can help ensure the smooth operation of their projects while protecting the interests of all stakeholders involved.