UP RERA Tightens Escrow Compliance for Real Estate Developers
The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has implemented a stringent three-account banking framework for all registered housing projects. Under these new guidelines, developers are mandated to manage project finances through three distinct accounts: a Collection Account, a Separate (Escrow) Account, and a Transaction Account. This measure aims to enforce complete transparency and prevent developers from diverting homebuyer funds to unrelated projects or corporate expenses.
The core of the regulation requires that 70% of all funds collected from homebuyers be automatically transferred daily from the Collection Account into the Separate (Escrow) Account. These funds are legally reserved and can only be used for land acquisition and actual construction costs of that specific project. Withdrawals from the escrow account are strictly controlled and require joint certification from the project’s architect, engineer, and a chartered accountant, certifying that the withdrawal is proportional to the stage of physical construction.
Strict Banking Restrictions and Enforcement
To prevent unauthorized access or manipulation, UP RERA has instructed banks not to issue cheque books, debit cards, net banking facilities, or any lien operations on the Collection and Separate accounts. Furthermore, project accounts cannot be activated based on preliminary project approval alone; final RERA approval is mandatory. In the event of project registration expiry or developer default, banks are authorized to freeze the accounts immediately, with reactivation permitted only upon direct clearance from RERA.
