In a first, the Madhya Pradesh government has given some respite to the crisis-hit real estate sector of the state by changing the existing stringent RERA rules on funds. The government has made a major amendment in the MP Real Estate (Regulation & Development) Rules, 2017, has diluted the veto on using funds in on-going projects, and thereby handing a lifeline to the floundering real estate industry.
Effective throughout the country since May 1, 2017, RERA mandates builders to deposit 70% of funds collected (minus the money already spent on land and construction) in a separate account. Withdrawals from the account are allowed only in proportion to the extent of work completed, and only if it is certified by an engineer, architect, and chartered accountant. Also, there’s to be an audit every six months.
Known as the ‘progress link formula’, this rule was a key feature of RERA, designed in order to minimize the diversion of funds. However, most builders felt choked under this law. The state government finally provided some respite to the real estate developers by easing the provision through a notice that the rule will not be applicable to builders “until they recover the money they have invested in the on-going project.”
The Amendment order reads, “…after rule 5 (of RERA 2016), the following provisions shall be added, namely: Provided that for the purpose of calculation in the case of ongoing projects the requirement to maintain 70% of the amount realized for real estate projects in a separate account shall become operative after the cost incurred on the date of registration if fully realized.”
Issued by the deputy secretary of MP urban development and housing department CS Sadhav, the notice cites exercise of powers conferred by Section 84 of RERA, 2016 (1E of 2016), allowing amendment in MP Real Estate (Regulation & Development) Rules, 2017.
The latest amendment in RERA by the MP government has left real estate developers in a state of joy since the new rules support their work module better. “We had been requesting the state government for an amendment because of the problems builders were facing. This is going to help investors and builders alike,” said Liladhar Maheshwari, Chairman of Indore CREDAI.
Welcoming the move, Nitin Agrawal, MD of Swadesh Builders Bhopal and Vice Chairman of Bhopal CREDAI, said, “We really appreciate the step taken by the government. The industry was suffering under the previous laws. This (amendment) is a great respite to builders as well as to the investors. The developers, on their part, now need to support this initiative by complying with the rules.”
He added, “RERA is a boon for Tier-II and Tier-III cities where unfair practices in the realty sector stunted the growth of realty and infrastructure. The Act has created an entry barrier for non-serious players. This is a period of change that will benefit the serious ones. In the coming years, a lot of good players and good projects will be in the market.