In addition, in 2016, the Real Estate (Regulation and Development) Act requires all developers to have the receiver account checked by a certified accountant within six months of the end of each fiscal year. The closing of the accounts is only verified if it is signed by the same accountant. Article 4, paragraph 2, paragraph 1 of the Act stipulates that funds from the RERA account can only be used to cover construction costs and land acquisition costs for this project. This provision stipulates that funds from the RERA account are deducted from the developer after being certified in practice by an architect, engineer and accountant that the withdrawal is proportional to the percentage of project completion. (“proportionality clause”) “but it is a bit complicated because there are no guidelines set out under the RERA to calculate the percentage of project completion. Therefore, the proportionality clause is not the criterion for calculating the share. Since the country is a precondition for any development activity, the promoter should allocate the funds to a separate account for a specific purpose and withdrawals from that account are limited. Funds can only be withdrawn for a specific purpose. The word “escrow” comes from the french word ” escroue, which means paper or parchment; a third party has held until a transaction is completed. Fiduciary accounts are generally used during the real estate transaction for third-party funds such as payments on new bookings, deposits for a real estate rent in which the money is released when the tenant leaves the property, used vehicles buying, where funds are released once the guarantee is completed, and the provision of construction services in which funds are released when the work is completed in accordance with the proposal. Once limited to large-scale transactions such as mergers and acquisitions and cross-border transactions, RERA has now successfully introduced the concept of trust as a trusted mechanism in real estate in India.
A fiduciary account is subject to freezing or to a neutral third party, which is essentially a recognized bank or lender. In real estate, the developer can only access the money from a trust account for the purpose of building the project to which he belongs. However, the request to withdraw money must be certified by an engineer, an architect and an accountant to ensure that the real estate developer`s claims are justified. Since the estimated receivables are less than the estimated cost of completing the project, 100% of the amount to be realized will remain in a separate bank account. First of all rera mentioned in the law that a developer/contractor must open a “trust account” for each project they develop for the company. The remaining funds in the project account (10.5 -8) Some may argue that this deferral from a receiver account to a separate account is against the promoter. But we can`t say. The transparency of the sector is an extremely important aspect to consider and, since the amounts from separate accounts (the promoter`s current account in a planned bank) can only be achieved with the authority`s permission, it creates better regulation. On the other hand, a trust account is placed under the control of a third party, i.e. the bank and the account holder (the owner) enter into an agreement and appoint an agent for the account, essentially a bank or a licensed lender. For real estate projects, the banks themselves would be the trustees. This trustee or trust account manager acts as the undersigned authority that releases the funds in accordance with the terms of the agreement.
The main purpose and intent of this provision was to ensure that the project was not time-limited.
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