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RERA Escrow Account In Real Estate
In today’s time, the only asset that transcends real estate is loyalty. Loyalty has become a gem nowadays due to the human nature of cheating and greed. It has become hard to trust anyone these days, and when it comes to money, even your loved ones are not trusted.
In a time where even close ones are not trusted in terms of money, how can you trust an outsider in a trade that includes a huge amount? This is where the escrow account comes in as your savior.
What is Escrow account?
An escrow account works like a third-party bank account where a buyer puts their money and only releases it when certain conditions are met, which were decided by the seller and buyer in a mutual agreement.
The account also ensures the rights of the seller; if a seller is sending goods costing lakhs or crores, the escrow account ensures that he gets paid as soon as the goods are delivered and accepted. So, everything goes smoothly without any dispute.
What is RERA Escrow account in real estate?
In real estate, the Real Estate Regulatory Authority (RERA) also uses this account to facilitate smooth transactions between developers and buyers. In this escrow account, the developer keeps all the money collected from buyers. But in RERA’s Escrow account, trade conditions are different; let’s understand it.
Rera Escrow Account Rules
• Developers are bound to keep at least 70% of the total collected money
• 30% of total funds can be used for miscellaneous expenses
• Escrow account money will only be used for construction purposes
• Developers need to maintain separate accounts for all projects
Certification is needed from an engineer, architect, and chartered accountant (CA) before withdrawing funds from the escrow account.
Difference Between Rera And Escrow Account
Many people get confused between RERA and escrow accounts. So, let me tell you, RERA is a regulatory body for real estate. It does not hold the authority to open escrow accounts. Still, it works as a mediator between buyers and developers to open an escrow account in a bank that provides this facility (as per RERA’s regulations).
RERA keeps an eye on escrow accounts, regularly validates everything as per the norms, and only allows money to be released if CA and Architects have given the required permission.
Is payment done to the builders through the RERA Escrow Account?
Yes, but partially. A real estate builder has access to all the money. Still, to avoid excess use of funds and to ensure the builder is using money only for construction purposes, the money is accessible by builders only if it is withdrawn for construction purposes that need certification from CA and Architects.
Rera Escrow Account Agreement Format
Different banks use different formats for RERA Escrow account agreements, but the clauses in the contract remain the same as RERA has directed to keep. So, formats may vary, but SBI uses the most appropriate format. For other banks, you can contact the concerned bank or search on Google.
SBI RERA Escrow Account Agreement Format
SBI Rera Escrow Account Agreement Format Pdf Download.
Conclusion
A RERA Escrow Account ensures that real estate transactions are secure and transparent. It holds the buyer’s money until the developer meets certain conditions, protecting both parties.
Developers can only access the funds for construction purposes, and approvals from engineers, architects, and chartered accountants are required for withdrawals. This system, under the supervision of RERA, helps prevent misuse of funds, ensuring that the project progresses as promised and that buyers’ investments are safe
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