FAQ's on "Financial Management under RERA" answered by RERA Experts

                             

Q 1.) Does marketing and branding costs not include in the cost of the project?  

Ans. - Sec 2 (v) of the RERA Act 2016 defined “Estimated cost of real estate project” means the total the cost involved in developing the real estate project and includes the land cost, taxes, cess, development, and other charges. 

The estimated cost of real estate project = Land Cost + development Cost

Development cost = Construction Cost + Other Costs

Further respective RERA Rules has defined - The cost of construction shall include all such costs, incurred by the promoter towards on-site and off-site expenditure for the development of the real estate project including payment of Taxes, Fees, charges, premiums, interests, etc., to any competent authority, or statutory authority of the Central or State Government, including interest, paid or payable to any Financial Institutions including scheduled banks or non – banking financial companies etc.

By Reading of definitions, it is understood that the Estimated cost of a real estate project is the Cost for the development of the Project. Generally, Sales and marketing costs related to Sales Expenses. Hence Sales and marketing costs shall not be included to arrive at the Estimated cost of the real estate project and also shall not be considered as incurred while the issuance of CA certificate for withdrawal of funds from the project Bank Account-based on a percentage of completion of the project.

 

Q 2.) How to take the cost of land in case of dagpa (Joint Development) ?    

Ans. - RERA Act does not differentiate between whether the weather project is developed on own land or a third party (landowner). RERA Act mandates the registration of the Real Estate Project and not the promoter share in the Real Estate Project. 

The State rules has defined the Cost of Land - the costs incurred by the promoter for acquisition of ownership and title of the land parcels for the real estate project as an outright purchase lease etc., or the Guidance Value in accordance with section 45-B of the Karnataka Stamp Act 1957 relevant on the date of registration of the real estate project whichever is higher.

Hence promoters shall consider the Cost of Land - higher of purchase price or Guidance value as on date of application for grant of RERA Registration irrespective of own land or joint development.

 

Q 3.) Will Income Tax be a part of the cost of the project?   

Ans. Since this is not a tax paid for the development of the project, but it is paid as a result of the profit derived on development of the real estate project.

 

Q 4.) What is the purpose of mentioning the cost belonging to the owner when it is a Joint Development Agreement?      

Ans. - RERA Act does not differentiate between whether the project is developed on own land or third party land (land owner). RERA Act mandates the registration of the Real Estate Project and not the promoter share in the Real Estate Project.  Hence, cost of the land for the purpose of registration of Real Estate Project shall be mentioned in the application for grant of registration.  

In case of JDA, both the Promoter and LandOwner are deemed to be promoters and jointly liable to comply with the requirements under RERA and most of the Authorities have issued circular clarifying this and require a single designated Bank Account to be opened and 70 % of the money collected to be deposited into the same account.

 

Q 5.) Do landowners require separate registration Under RERA?         

Ans. - Project shall be registered as 1 (Developer + landowner) share. RERA Act mandates the registration of the Real Estate Project and not the promoter share in the Real Estate Project. 

 

Q 6.) Is it possible to change the estimated cost of construction later on once registration is done?          

    

Ans. - To change the estimated cost Promoter shall make an application, giving an explanation as to the reason for the change in the cost along with supporting documents substantiating such change in the estimated cost of construction.

 

Q 7.) Can we get a Certificate Formats?      

   

Ans. - Certificate formats are available to be downloaded on the website of all Authorities. 

 

Q.8.) How to show sold units in commercial units whereas the plan is for the entire floor. later sold at small units on the floor? 

Ans. Generally, the Number of units or inventory in the project shall be declared in the application for grant of registration along with the Carpet Area in Square meter. Square meters could be the measurement of sold and unsold in commercial projects if the promoter does not have a standard number of units.

 

Q 9.)  The reader of the certificate is the Statutory authority?        

Ans. - The certificates are presently only available for the Authority's scrutiny, however, it may become available to the public soon and is amenable to an Allottee under RTI.  

 

Q 10.)  Is there any time limit for Post Registration compliance?   

Ans. - The Post-registration update would have to be completed before the first Quarterly update, otherwise the Quarterly update can not be done. There are not as such guidelines for Post Registration, however, we recommend as soon as you obtain the registration. 

 

Q 11.) - A flat is sold at 60 Lacs. However, the promoter has agreed to pay EMIs for 1 year amounting to 4.8 Lacs. What is the amount to be reported in RERA as sales?  

Ans. - Amount realized from the allottee is Rs.60 Lacs in terms of the agreement. hence the same shall be mentioned in the certificate. EMI paid is as expenses to the promoter and not related to the consideration towards the unit. 

 

Q 12.) - My RERA application was approved on 31.03.2021, Should I file for the quarter from January to March 2021? 

Ans. - Yes, as the approval date falls within the quarter date. Quarterly filing for March 2021 is applicable (for Karnataka projects).

 

Q 13.) - Is there any way to change the architect, engineer or contractor details once the registration is done under RERA?            

    

 Ans. – Promoters need to inform the RERA Authority in order to change the architect, engineer, or contractor details and also obtain NOC from the previous professional. The format of the Engineer Certificate notified by the Authority has mentioned that the promoter shall not change the engineer without taking approval of the Authority.

 

Q 14.) - The due date for Q4 quarterly updates is 15 days from the end of the quarter. The due date for the Annual report is 6 months from the end of the financial year. So, Is it mandatory to upload the annual report with the Q4 quarterly updates or can it be done anytime before 30 September?                

Ans. – Please refer to State Rules for due dates for Quarterly updates. Most of the States direct to file 15 days from the end of each quarter and 30th Sep for Annual accounts. 

 

Q. 15) - RERA completion date for my project was 10/6/2019, but the project is still not completed by the builder. Can the landowner revoke the Joint Development Agreement with the builder and complete the remaining work by collecting the amount from flat holders? Can we complete the cost of the remaining work through the balance with flat holders?       

Ans. - If the Project has been registered under RERA by the Promoter, The Landowner would have to seek for Transfer of the Project under Section 15 because Landowner can not simply be taken over.

          

Q. 16.) - Whether the process is smooth and cost-efficient. After transfer can the landowner do the registration of flats which were earlier booked by the builder in his share? 

sAns. - In our Experience, each real estate project has unique challenges to address. If the landowner along with the allottees is able to gather the consent for the scheme of the takeover, it would be faster and cost-effective.

 

Q. 17.) - How to change the cost of the estimated cost of the project? 

Ans - File a separate application along with an explanation and representation before the Authority for such correction in estimated cost of real estate project. 

 

Q. 18.) - How to show sold units in commercial units, whereas the plan is for the entire floor. Later sold at small units in the floor in Quantity updates?

Ans. – You can mention sold by the Carpet Area. 

 

Q. 19.) - The agreement is for Rs. 1 crore, the allottee has paid Rs. 50 lakhs (Rs. 49.5 lakhs to promotor and Rs. 50,000 towards TDS). In this case, what will be the amount collected from the allottee, whether it should be Rs. 49.5 lakhs or Rs. 50 lakhs?    

                               

Ans. -  Rs. 50 lacs as TDS is credited in favour of Builder.  

 

Q. 20.) - Can the landlord & developer be able to have multiple RERA accounts for their share?

Ans. – RERA Act mandates project-specific bank accounts. Only 1 bank is allowed as a project-designated bank. There can not be different/multiple bank accounts for builders and LO. Refer notification or circulars issued by the RERA Authorities. 

 

Q 21.) Architect certificate is issued as per the format, it does not have an overall percentage of completion of the project, what percentage to be mentioned in CA Certificate?

Ans – Please insist the architect to mention over all % of completion of the development of the project. Otherwise, the promoter shall provide it. CA should mention the fact of % of completion as per Architect in his certificate while issuing the certificate for withdrawal of funds in accordance with Sec 4(2)(L)(D) of the Act.  

 

Q. 22.) Do we have to open a collection account; 70% &30% or only a designated account is enough for plots project?   

                 

Ans. - Act says bank account in a scheduled bank account - even 1 bank account is sufficient - Many banks have come out with separate products for the RERA project having 3 different accounts (Master Collection Account + 70 % Account + 30% Account). For the purpose of RERA, promoters shall provide a 70 % Account during Registration. 

 

Q. 23.) Whose percentage to be considered for withdrawal from the bank. Architect, Engineer, or CA? 

Ans. - Architects issue the % of Completion of development of the Project. Based on the Architects certificate, CA calculates the amount eligible for withdrawal of funds from the project Designated Bank Account.

 

                                                   RERA Consultants LLP, 

                                  Contact Us: 9535578604/ 8296807004

                                                                                                                                                           

                   

Customer Queries answered by RERA Professionals

 

                                    Customer Queries Answered by RERA Professionals 

 Question 1 - If Closure/Completion under K RERA is already filed in July 2019, do we need to file again with a new module now?

Answer - K RERA has published the list of projects under Services, Applications Applied for completion. As of now there is no specific circular or communication from Karnataka RERA Authorities on submission of additional documents, details, professional certificates stating 100 % completion, Affidavits etc. In case of any specific or general communication to upload the details in the New module, then the project promoters shall update the same.

 

Question 2 - We have filed quarterly updates after filing all quarters and summaries.  Door number was issued by the local authority.  Can we consider it as a completion receipt since our project is fully completed but yet to be occupied? and as per our local authority (panchayath) we have enough clearance for registration of allottees which is door number, RR number, fire clearances. and all required other NOC?

Answer - Sec 11(4)(b) of the RERA Act mandates - obtaining Completion/Occupancy Certificate is mandatory along with completion of all development works.

Extract of the RERA Act is as follows - Sec 11(4)(b) - be responsible to obtain the completion certificate or the occupancy certificate, or both, as applicable, from the relevant competent authority as per local laws or other laws for the time being in force and to make it available to the allottees individually or to the association of allottees, as the case may be.

 

Question 3 - Is it possible to get a second extension?

Answer - Yes, possible. However, one should understand with respect to the project requirement after understanding the scheme of development of the Real Estate Project. The second-year extension may require additional information, documentation, consent allottees etc.

Sec 6 of the RERA Act states - The registration granted under section 5 may be extended by the Authority on an application made by the promoter due to force majeure, in such form and on payment of such fee as may be specified by regulations made by the Authority.

Provided that the Authority may in reasonable circumstances, without default on the part of the promoter, based on the facts of each case, and for reasons to be recorded in writing, extend the registration granted to a project for such time as it considers necessary, which shall, in aggregate, not exceed a period of one year.

 

Question 4 – Our project is physically completed and OC obtained. Association is also formed.  All approvals are obtained.  But while filing quarterly updates, we couldn’t reach 100% complete.  Now is it necessary that we file for extension again just so that we can file 100 percent in the quarterly updates & get the summary.

Answer - Sec 11 (1) of the RERA Act and Rule 15 (1) (D) mandates that the project promoters shall file the quarterly updates till completion of all development works in the project and to obtain necessary approvals, permissions, NOC’s in relation to the real estate project. In your query, you did mention that you could not achieve 100 % in the quarterly updates, hence you need the project Extension in accordance with sec 6 of the RERA Act.

As mentioned, unless 100 % is mentioned in Quarterly Updates, you cannot file summary reports and file completion.

 

Question 5 - How the association is formed? Can we mention UDS in the ATS? It makes builder life easy.

Answer – Yes, at present you can mention UDS in ATS, however reserving liberty to call upon Allottee to convey the same to the Association of Allottees to make sure you are able to comply with Section 17 of RERA Act.

Section 17 of the RERA Act - Transfer of title

(1) The promoter shall execute a registered conveyance deed in favor of the allottee along with the undivided proportionate title in the common areas to the association of the allottees or the competent authority, as the case may be, and hand over the physical possession of the plot, apartment of building, as the case may be, to the allottees and the common areas to the association of the allottees or the competent authority, as the case may be, in a real estate project, and the other title documents pertaining thereto within specified period as per sanctioned plans as provided under the local laws

Provided that, in the absence of any local law, conveyance deed in favour of the allottee or the association of the allottees or the competent authority, as the case may be, under this section shall be carried out by the promoter within three months from date of issue of occupancy certificate.

(2) After obtaining the occupancy certificate and handing over physical possession to the allottees in terms of sub-section (1), it shall be the responsibility of the promoter to hand- over the necessary documents and plans, including common areas, to the association of the allottees or the competent authority, as the case may be, as per the local laws

Provided that, in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, the association of the allottees or the competent authority, as the case may be, within thirty days after obtaining the occupancy certificate.

 

Question 6 – How many days required for RERA Registration Number for the project?

Answer – Once submitted, application along with prescribed fees, the Authority verify and issue the registration certificates within 30 days from the date of application in accordance with Sec 5 of the Act.

 

Question 7 - I have not applied for Registration, what are the consequences and precautions till I apply for registration?

Answer – Consequences of not registering the project under RERA–

1) Penalty as per Section 59 (1) & (2) of the Real Estate (Regulation and Development) Act, 2016 applicable

 

a.            Pulldown all your advertisements / Hoardings

b.            Temporarily stop marketing through website

c.             Shall not advertise in any media – newspaper, TV, FM, SMS, Mail etc

d.            Shall not sell any project to customers

e.            Shall not collect money from Allottees

2) Effectively promoter can carry out only construction / development activities related to project.

 

Question 8 - When will I get Login and password for RERA Website to upload the project details?

Answer - Once Registration is complete and approved by Real Estate Regulatory Authority, Login and Password will be provided. Information, documents, details shall be filled and uploaded as per Rule 15 to Karnataka RERD Rules.

 

Question 9 - Can I use the Marketing materials printed earlier?

Answer – Yes, you can use as long as it complies y with Provisions of RERD Act, all such marketing materials should have the RERA Registration number. Marketing Material includes News Paper Advertisement, Public Hoarding, Websites, Classifieds, Brochures, SMS, pamphlets etc.

 

Question 10 - Mention of registration number in project / company Website is mandatory?

Answer - Yes, it is mandatory to mention the RERA registration number on each project/website. However, till you receive the RERA Registration Number, start displaying the RERA Application number with a note there on.

 

Question 11 - Can I allow my Agent to market my Real Estate Project?

Answer - Ask your Real Estate Agent to provide the RERA Agent Registration Number, You check online at rera.karnataka.gov.in before you allow him to market the project.

 

Question 12 - What are the consequences of Real Estate Agent non registration?

Answer - Agent without registration cannot facilitate the sale or purchase of any real estate project.

If any real estate agent fails to comply with or contravenes the provisions of section 9 (registration) or section 10 (functions), he shall be liable to a penalty of ten thousand rupees for every day during which such default continues, which may cumulatively extend up to 5% of unit.

 

Question 13 - Can I deposit money to any other bank account other than RERA Designated Project Account?

Answer - No, Minimum 70% of the money realized from the allottees shall be deposited into RERA Designated Bank account of the project. Read Sec 4(2)(L)(D) of the Act.

 

Question 14 - How do I withdraw money from RERA Designated Project Account?

Answer - Money shall be withdrawn based on Architect, Engineer and CA Certificates in accordance with Sec 4(2)(L)(D) of the Act. For Subsequent withdrawal, in excess of these certificate values, every withdrawal should be supported by Architect, Engineer and CA Certificates to certify percentage of the completion.

 

Question 15 - Can I avail loan against this project Account?

Answer - No, account should be free and no lien etc.

 

Question 16 - Should I obtain the certificate from same Architect, Engineer and CA Certificates every time for withdrawal?

Answer - Preferably yes, otherwise every time the professionals will end up with doing the same work/duplicating of work/more time to issue certificates etc.

 

Question 17 - Should I handover these certificates to banker to withdraw the money from project Account?

Answer - Not required unless banker insists on this. It is more of self-regulation.

 

Question 18 - What to do with these certificates?

Answer - Authorities may insist to upload these certificates during quarterly filing. these certificates are relevant and required during the Annual Audit under RERA. Statutory Auditor / RERA Auditor shall verify these certificates while issuing Annual RERA Audit Report to certify that the withdrawals are in proportion to the percentage of completion of work. Hence retain the same with the finance/accounts department.

 

Question 19 - Can I use the funds withdrawn from Project Account other than for respective Project purposes?

Answer - No, money withdrawn shall be used only for that project purpose. (if money already spent by promoter for project purpose, to that extent it can be transferred and utilised).

 

Question 20 - I have taken Construction Finance (CF) from Financial Institution/Bank - Presently as per arrangement between Construction Finance (CF) from Financial Institution/Bank, should money be deposited to Escrow Account?

Answer - Once RERA Registration is received, 70 % of the money collected from Allottees should go to RERA designated Project Account. Money can be withdrawn from RERA designated Project Account as per Sec 4(2)(L)(D) of the Act and then same can be transferred to Escrow account.

 

Question 21 - Should I deposit money Collected towards GST/Taxes?

Answer - If your estimated cost of project includes GST/taxes, then it should be deposited, if not, can be collected and deposited in separate bank account. Such money collected towards GST / taxes shall be used only for payment of taxes of this project.

 

Question 22 – Usage of Allotment letter, Sale Agreement and Sale Deed post 31st July 2017?

Answer - Yes, Allotment letter, Sale Agreement and Sale Deed shall be in compliance with RERA Act (e.g., conveyance of Carpet Area etc). Contact your legal counsel/Advocate/ Consultants for RERA Complied Allotment letter, Sale Agreement and Sale Deed.

 

Question 23 - IF OC received in march 2019, Is quarterly update need for April to June 2019?

Answer - Quarterly updates are mandatory to submit till completion of development work in the Project. Mere receipt of occupancy certificate does not amount to completion of the project. In the state of Karnataka, Electricity connection would be given by ESCOM on furnishing of Occupancy Certificate. Promoters shall carefully arrive and declare the project is completed only on achieving 100 % development work in accordance with the Sanction plan, Brochures, Terms of Agreement entered with the allotees.

Read note on - https://taxguru.in/corporate-law/completion-project-rera.html

 

Question 24 - In one case, the plan was sanctioned during July 2018, project was approved during July 2019 and RERA permanent registration is valid from July 2019. Should the quarterly returns from July 2018 to June 2019 be filed?

Answer - Yes, Quarterly Updates for the entire period from the date of registration have to be filed. In your case even though the plan was approved in July 2018, however obtained RERA Registration from July 2019, hence Quarterly update starts from Sep 2019 quarter.

 

Question 25 - Is the COVID Extension of 6 months applicable irrespective of whether any clauses mentioned or not in the agreements?

Answer - COVID 19 extension of 6 months/9 months are applicable for the completion of development in the project. I.e., End date is extended without collection of additional fees by the Authority. However, for the purpose of allottees, all clauses in the agreement shall prevail and valid irrespective of COVID 19 extension by the RERA Authority.

 

Question 26 – We have received the BDA license letter in September 2020. We are awaiting approval of our project for which documents for registration have been submitted and application is in process. When do we need to file quarterly updates for our new project and for what period? As in the rules it says that quarterly updates are to be submitted from the date of approval.

Answer - Yes, Quarterly Updates for the entire period from the date of registration have to be filed. In your case even though the plan was approved in Sep 2020, RERA Registration is yet to obtain from the Authority. hence Quarterly updates start from the quarter of registration.

 

Question 27 - For plot development also whether formation of association is applicable?

Answer - Yes required and more so if there are any amenities like club house and other common amenities in the real estate project.

 

Question 28 - If the extension is also lapsed, how do we file Quarterly Updates?

Answer - Generally Quarterly updates module is enabled till the end date of registration. Once End is over, the promoter shall file an application for extension of registration. Once the Authority extends the end date of the project, Quarterly updates modules are also automatically enabled. So, promoters can file quarterly updates post obtaining the extension.

 

Question 29 - Can we form an Association without a deed of declaration and without obtaining the OC? Do we need to register under Karnataka Apartment Ownership Act 1972?

Answer - Sec 11(4) (‘e) of the RERA Act mandates the promoter to enable the formation of Association in accordance with the local laws.

Sec 11(4) (‘e) - enable the formation of an association or society or co-operative society, as the case may be, of the allottees, or a federation of the same, under the laws applicable

Provided that in the absence of local laws, the association of allottees, by whatever name called, shall be formed within a period of three months of the majority of allottees having booked their plot or apartment or building, as the case may be, in the project.

 

Contact RERA Consultants LLP for End to End Services Under RERA: 9535578604/ 8296807004

Log on to our Website: www.reraconsultants.in