Es­crow ac­counts have not worked in Haryana hous­ing

De­liv­er­ies de­layed even though 30% money for a pro­ject has to be de­posited in a sep­a­rate ac­count

HT Estates - - FRONT PAGE -

Though real es­tate ex­perts feel the pro­vi­sion of es­crow in the pro­posed real es­tate reg­u­la­tion bill will dis­ci­pline de­vel­op­ers and force them to use funds for a spe­cific pro­ject and com­plete it on time, a sim­i­lar pro­vi­sion in The Haryana De­vel­op­ment and Reg­u­la­tion of Ur­ban Ar­eas Act, 1975, has not en­abled timely de­liv­ery of apart­ments in Gur­gaon and Farid­abad.

Sec­tion 5 ( 1) of the said Act, which deals with ‘Cost of De­vel­op­ment Works’, states, “The col­o­nizer shall de­posit thirty per cen­tum of the amount re­leased, from time to time, by him, from the plot-hold­ers within a pe­riod of ten days of its re­al­iza­tion in a sep­a­rate ac­count to be main­tained in a sched­uled bank. This amount shall only be utilised by him to­wards meet­ing the cost of in­ter­nal de­vel­op­ment works in the colony. Af­ter the in­ter­nal de­vel­op­ment works of the colony have been com­pleted to the sat­is­fac­tion of the di­rec­tor, the col­o­nizer shall be at lib­erty to with­draw the bal­ance amount. The re­main­ing seventy per cen­tum of the said amount shall be deemed to have been re­tained by the col­o­nizer, in­ter-alia, to meet the cost of land and ex­ter­nal de­vel­op­ment works.”

The Act has not been en­forced prop­erly. “Ev­ery devel­oper gets an es­crow ac­count opened. And though he de­posits 30% of the to­tal money col­lected from home­buy­ers he can with­draw it with­out seek­ing per­mis­sions from any­one. How­ever, the Act states that the di­rec­tor of depart­ment of town and coun­try plan­ning can in­spect the de­vel­op­ers’ ac­count and scru­ti­nise his ex­penses to make sure that with­drawal from the es­crow ac­count is for the pur­pose for which it was cre­ated. This is where the prob­lem is as the gov­ern­ment agen­cies are not do­ing a good job,” says SK Sayal, man­ag­ing di­rec­tor, Bharti Realty.

Ac­cord­ing to sec­tion 6 (I) of the Act, which deals with ‘Au­dit­ing of ac­counts,’ the di­rec­tor, or any other of­fi­cer au­tho­rised by him shall be com­pe­tent to in­spect the ac­counts main­tained by the coloniser who shall pro­duce

terly re­port fo­cus­ing on cap­i­tal and rental price trends in the residential real es­tate mar­ket across seven ma­jor cities of In­dia.

“Though the mar­ket looks grim with un­sold residential in­ven­tory, there is an in­crease in of­fice space ab­sorp­tion by IT/ITeS and e-com­merce firms. This is ex­pected to keep the com­mer­cial and home rental mar­kets of Noida and Gur­gaon up­beat,” s ays Narasimha Jayaku­mar, chief busi­ness of­fi­cer, 99acres.com.

Other price trends in­clude Delhi wit­ness­ing a dip of 2% in April- June 2015 as com­pared to the pre­ced­ing quar­ter. Prop­erty prices in South Delhi grew in­signif­i­cantly, while that in North and West Delhi dropped by 5% and 8%, re­spec­tively. The Dwarka price graph de­clined by 4% and East Delhi saw a stag­nant trend. Mehrauli, sur­pris­ingly was the top grosser and saw a 7% rise in cap­i­tal val­ues in April-Jun 2015 as against the quar­ter end­ing March 2015. The up­mar­ket Greater Kailash I and II wit­nessed a rise of 6% and 4% re­spec­tively.

The rental mar­ket of Delhi saw an im­prove­ment due to im­prove­ment in in­fra­struc­ture and in­creased em­ploy­ment op­por­tu­ni­ties. Rental val­ues in the re­gion surged by an av­er­age of 5% in the last one year. East Delhi wit­nessed the high­est growth of 10% be­tween April-June 2014 and 2015, while val­ues in North Delhi stag­nated dur­ing the same pe­riod. East Delhi was fol­lowed by Dwarka with a spike of 6% in rental val­ues. South and West Delhi clocked an in­crease of 5% and 4% re­spec­tively. be­fore him all the rel­e­vant records re­quired for this pur­pose.

“The col­o­nizer shall get his ac­counts au­dited, af­ter the close of ev­ery fi­nan­cial year, by a char­tered ac­coun­tant and shall pro­duce a state­ment of ac­counts, duly cer­ti­fied and signed by such char­tered ac­coun­tant, in the man­ner pre­scribed,” sec­tion 6 (2) states.

Amit Jain, founder, Cen­tre for Re­search and Anal­y­sis of Real Es­tate in In­dia, an NGO work­ing on real es­tate is­sues, won­ders how the es­crow ac­count will be mon­i­tored. “If de­vel­op­ers are al­lowed to with­draw money from the es­crow ac­count with­out any­one’s per­mis­sion, then it’s very im­por­tant to have in place mea­sures for fre­quent and reg­u­lar au­dits of the ac­count. That’s why the Reg­u­la­tory Bill pro­poses that that the amount from the sep­a­rate ac­count shall only be with­drawn by the pro­moter af­ter it is cer­ti­fied by an engi­neer, an ar­chi­tect and a char­tered ac­coun­tant that the with­drawal is in com­pli­ance with the per­cent­age of com­ple­tion of the pro­ject.”

The bill also states that the pro­moter shall get his ac­counts au­dited within six months af­ter the close of ev­ery fi­nan­cial year by a char­tered ac­coun­tant and pub­lish on its web­site a state­ment of ac­counts duly cer­ti­fied and signed by the char­tered ac­coun­tant. It will also be ver­i­fied dur­ing the au­dit that the amount col­lected for a par­tic­u­lar pro­ject has been utilised for that pro­ject and the with­drawal has been in com­pli­ance with the per­cent­age of com­ple­tion of the pro­ject.

“If these pro­vi­sions are not im­ple­mented strictly, the pur­pose of es­crow ac­counts will be com­pletely de­feated,” says Jain.

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