SMALL AMEND­MENT, BIG IM­PACT

HT Estates - - FRONT PAGE -

tions has said that in some ar­eas cost of land came to nearly 80% of the cost of the pro­ject. In spite of that the com­mi­tee fixed a limit of 50% or such higher per­cent­age as no­ti­fied by var­i­ous state gov­ern­ments in their rules to re­cover only con­struc­tion cost and not land cost.

“In some cases in which land cost adds to 80% of the cost of con­struc­tion, the developer will with­draw al­most the full amount from the es­crow ac­count to re­cover cost of land be­fore con­struc­tion work starts. This section has now be­come open to mis­use. De­vel­op­ers will show high land cost to with­draw as much as they can from the ac­count be­fore start­ing con­struc­tion,” says Ra­jeev Ran­jan Pandey, a Delhi High Court lawyer. He also adds that many prom­i­nent de­vel­op­ers are sit­ting on land parcels they bought 20 to 30 years ago at very cheap rates. “How­ever, th­ese de­vel­op­ers will quote cur­rent mar­ket value of the land parcels to with­draw money from the es­crow ac­count.” Even the process of with­draw­ing money from an es­crow ac­count laid down in the bill is in favour of de­vel­op­ers.

“The RERB says t hat an en­gi­neer, an ar­chi­tect and char­tered ac­coun­tant in prac­tice will have to cer­tify that the with­drawal (from es­crow ac­count) is in pro­por­tion to the per­cent­age of the com­ple­tion of the pro­ject. It doesn’t say whether th­ese pro­fes­sion­als should work in­de­pen­dently or be em­ployed by the developer. pro­vi­sion, a developer will de­posit 70% of the amount col­lected from the al­lot­tees from time to time in a sep­a­rate ac­count to cover the cost of land and con­struc­tion

Ex­perts say that the amended pro­vi­sion gives free­dom to de­vel­op­ers to with­draw money to re­cover land cost even be­fore they start the con­struc­tion work in the pro­ject

If the land cost is 60% of the to­tal cost of the pro­ject, the developer can with­draw 60% of the money from the es­crow ac­count and only 10% will be left for con­struc­tion work.

FILE PHOTO

The process of with­draw­ing money from an es­crow ac­count as de­fined in the RERB is in favour of de­vel­op­ers.

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