Banks that are operating under the RBI will now not provide home loans for the projects which are not registered with Real Estate Regulatory Authority (RERA). The banks have taken this decision to protect their interests in case the builder conducts any misdeed while doing the business.
This is one of the major steps taken by the banks to add security in financing the projects in the realty sector. As collateral, the banks will also keep the personal properties of the developers . This move will help in eliminating fly-by-night realtors from the sector and will persuade developers to register their projects with RERA, said Amrit Verma, a RERA expert.
The RERA also mandates the developers to deposit 70% of the funds received from the allottees in an escrow account and they can only use that 70% of the amount for project development.
Additionally, the developers can only withdraw funds from the escrow account after getting the approval from an architect, engineer or a chartered accountant.