Skip to main content

Banks to shut out builders without RERA listing

Banks to shut out builders without RERA listing 
Builders who have been thinking of ways to beat the new Real Estate Regulation Act are fast running out of time as banks, in consultation with the Reserve Bank of India, have decided not to extend loans to those projects which have not been registered under RERA. 
"We have to look for some security mechanism, and since RERA is designed to weed out fly-by-night operators, we have decided not to extend credit to projects not registered with it," said a bank official who did not wish to be identified. "Adhering to the regulations will safeguard our interests, it's better to be safe now than regret later." 
Banks have also sought additional collateral, including on personal properties of promoters, as guarantees while disbursing loans to a few real estate developers. 
"We are very apprehensive because even if we disburse loans as prescribed under the law, the way it is designed, it does not protect our credit. If a loan turns bad, customers will be refunded but there’s no inherent protection for us under the law," said a PSU bank official. "So, we are being extremely careful about lending to the sector." 
Under the new law, Real Estate (Regulation and Development) Act, 2016 (RERA), a developer will have to maintain 70% money collected from home buyers in a separate account, which would leave them with only 30% of the sales proceeds to use for any other purpose, against 100% earlier. 
Despite the real estate industry body pushing developers to register under RERA, the turnout has been rather dismal so far. 
"We have already directed all our member developers to register their projects under RERA and they have committed to do so," said Jaxay Shah, president of realty developers' apex body The Confederation of Real Estate Developers’ Association of India, or CREDAI. 
"The spirit of RERA is to ensure that homebuyers shouldn't suffer. While developers are applying for registration, the infrastructure at the authority's level needs to be beefed up to ensure speedy processing of the same. Speed is crucial here because homebuyers are waiting for possession and we cannot further our marketing or financing efforts until we get registered," Shah explained.'
The government enacted RERA and all the sections of the Act have come into force with effect from May 1 this year, and the builders had three months to register their new and ongoing projects with their respective state RERAs. 
According to RERA, which aims to improve transparency in real estate sector and protect home buyers' interest, builders are expected to disclose project-related information, including project plan, layout and government approvals-related information to prospect customers. 
Any major changes in the project can only be done after receiving the consent of two-thirds of homebuyers in that project. To avoid diversion of funds, RERA mandates that developers should maintain 70% of the funds collected from buyers in a separate bank account in case of new projects. 
Maharashtra, apart from Punjab and Madhya Pradesh, was one of the first states to notify its rules under the Act and establish MahaRERA. Until the midnight of July 31 deadline, the regulator had received total 10,852 applications for registration of ongoing projects across Maharashtra, which has now crossed 12,000. 
The Economic Times, New Delhi, 08th August 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…