The Maharashtra Real Estate Regulatory Authority (MahaRERA) has issued notices to some developers after it found that more than 1,700 projects in the state had their designated bank accounts linked with more than one project, in violation of rules.
Every project registered with the regulator must have a separate designated bank account, according to provisions of the Real Estate (Regulation & Development) Act, 2016. The rules are aimed at ensuring that funds meant for a project are not diverted elsewhere.
Also read: MahaRERA issues notices to 19,000 real estate projects in 20 days over non-compliance
Following an independent investigation, it was found that there are 1,781 cases of the same designated bank account details updated in multiple projects, MahaRERA said in a statement on March 2. Notices have been issued in the case of 45 projects and additional notices will be sent in the coming days.
Also read: MahaRERA to inspect construction sites for financial wrongdoings, over 300 large projects on radar
In the notices, the regulator has asked why the same bank account details have been linked to multiple projects. It also sought details of the total units in each project, units sold, receipts, and withdrawals from the bank account.
“Post review of the reply of show cause notice, along with supporting documentation as requested above, hearings are being held and appropriate actions as deemed fit are taken by the Authority,” it said.
The linking of designated bank accounts with multiple projects has raised concerns over the possibility of diversion of funds.
“The MahaRERA should probe the angle of siphoning of funds where there is transferring of funds from one project to another. This is a violation of RERA Act and could be a financial fraud,” said Nilesh Gala, a practicing lawyer with MahaRERA.
Also read: 75 to 80 percent of ongoing real estate projects do not upload status reports: MahaRERA
The regulator should consider setting up a mechanism to ensure that each project has a dedicated account and that the funds are not used for other projects, said Suhail Ahmed Khilji, a lawyer dealing in property matters in Mumbai. One account for various projects defeats the whole purpose and object of the act, which is to ensure that funds are not misused
“Such violations by the developer would be liable to consequences under the Act,” Khilji said.
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