RERA India is currently a buzzword in the real estate market. Rules on setting aside 70% of customer advances in an escrow account was reduced to 50% in the RERA bill 2016. Maharashtra housing regulator will soon be out. But the government now wants the escrow to be increased to 70%. This has invited much debate from developers who slammed government’s proposal.
It means that all the money a developer raises from the sale of the project has to go under escrow account and that money can be used only for the construction of the said project. From a home buyer point of view, all the money that was paid by you for a particular project which was used by developers for other purposes like paying salaries or debt, purchasing other land would now be stopped. But the proposal might increase the pressure on builders and this might lead to increase in the price of homes.
Developers in Maharashtra pointed out, it has to be purposeful and achievable, otherwise wrong means might be practiced to withdraw cash.
They should keep some control but 70% is far too high. It is not possible to buy a land, put the money in escrow and pay interests on it. It will on lock the cash and make builders more leveraged.
Prioritization of completion of project should be implemented to protect the interest of buyers. Builders must be serious and complete projects on time. What now needs to be seen will Maharashtra’s government proposal to raise escrow for better transparency will be implemented by RERA or not.