To protect homebuyers and reduce project delays, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) has mandated that developers requesting project registration extensions beyond one year must deposit an additional 20% of the funds collected from allottees into the specified project account.
This directive is issued under Section 7(3) of the RERA Act, 2016, which empowers the TNRERA to impose additional conditions in the interest of homebuyers instead of outright canceling project registrations. Officials indicate that this measure aims to ensure that the funds collected from buyers are allocated for construction purposes and not misappropriated for other uses.
TNRERA has noted that numerous project delays are associated with inadequate funds in the project escrow account, where it is already required that 70% of collections be deposited. Consequently, if a project extension exceeds one year, the promoter is now required to deposit an additional 20% of buyer collections into the account. Nevertheless, small and mid-sized builders have expressed their concerns.
We utilize our own capital to construct initial units prior to any bookings. Buyers typically commit only after observing tangible progress, stated S Ramprabhu, chairman of the DTCP committee at the Builders Association of India. “Requiring an additional 20% deposit when we have not yet collected substantial amounts from buyers could negatively impact our cash flow.
G Mohan, former president of the Chennai Southern Builders Association, remarked, If the delay is caused by natural events such as rain or flooding, TNRERA should provide exemptions for the builder.”
