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After consulting with the Reserve Bank of India, some banks have decided not to give loans to projects which have not been listed under Real Estate Regulatory Authority (RERA), according to The Economic Times.
“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," a bank official was quoted as saying.
Banks now want additional collateral such as private properties of promoters as a guarantee while providing loans to real estate developers.
As per the RERA Act 2016, a real estate developer will be required by the law to maintain 70 percent of the money collected from homebuyers in a different account and 30 percent of the sale proceeds in a separate account, against the 100 percent earlier.
According to RERA, any important changes in the project can be made only after the permission of two-thirds of the buyers in a particular project.
"The spirit of RERA is to ensure that home buyers 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," said Jaxay Shah, president of realty developers' apex body The Confederation of Real Estate Developers’ Association of India (CREDAI), in the same report. "Speed is crucial here because homebuyers are waiting for possession and we cannot further our marketing or financing efforts until we get registered."
All sections of the RERA Act came into force from May 1 and the builders were given three months to register their ongoing projects under RERA.
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