No loan to builders who are not registered under RERA

In consultation with Reserve bank of India, banks have decided not to extend loans to those projects which have not been registered under RERA. Banks have also sought for additional collateral, including on personal properties of promoters as guarantee while disbursing loans to real estate developers.

.As per the new law, Real Estate (Regulation and Development) Act, 2016 (RERA), a developer will have to maintain 70% money collected from homebuyers in a separate account which would leave them with only 30% of the sale proceeds to use for any other purpose, as opposed to 100% which was available earlier. The Act came into force on May 1, 2017, but very few builders have registered under the Act so far. The aim is to get builders register as RERA improves transparency in real estate sector and protect homebuyers interest, builders are expected to disclose project related information, including project plan, layout, and government approvals related information to prospective customers. Jaxay Shah, the President of The Confederation of Real Estate Developers' Association of India or CERDAI said, “ We have already directed all our members to register their projects under RERA and they have committed to do so.” The spirit of RERA is to ensure that the homebuyers do not suffer. While developers are applying for registration, the infrastructure at the authority's level needs to be beefed up to ensure processing of the same. Speed is crucial here because homebuyers are waiting for possession and we cannot further our marketing or financing efforts unless the builders get registered.