Are you planning to buy a property in Bangalore and are curious about the Real Estate Regulatory Authority (RERA) and the concept of real estate escrow accounts? If you are living in Prestige Park Grove or considering buying a property there, you must be aware of RERA and how it protects homebuyers. In this article, we will discuss the RERA act, its importance, and the concept of real estate escrow accounts.
Introduction to RERA
The Real Estate Regulatory Authority (RERA) was introduced by the Indian Government in 2016. Its main aim is to protect the interests of homebuyers and ensure transparency in the real estate sector. RERA applies to both commercial and residential projects that are larger than 500 square meters or have more than eight apartments. It is mandatory for all real estate developers and agents to register with RERA before they launch any project.
Importance of RERA
Before RERA, the Indian real estate sector was known for its lack of transparency, delayed possession, and unscrupulous practices by developers. With the introduction of RERA, homebuyers now have a platform to register complaints and get their grievances addressed. RERA has brought in more accountability in the real estate sector, and developers are now more cautious while launching and completing their projects.
Key features of RERA
RERA has several key features that make it unique and effective. Some of these features are:
- Compulsory registration for developers and agents with RERA
- Disclosure of all project details on RERA’s website
- Depositing 70% of the project funds in an Escrow account
- Timely completion of the project
- Strict penalties for delays and fraud
- Clear definition of carpet area and super built-up area
- Standardization of agreements and sale deeds
The concept of Escrow accounts in Real Estate
Escrow accounts are a crucial part of the real estate sector. They are essentially temporary holding accounts where funds are held until the completion of a project. The funds in the Escrow account are managed by a neutral third party until all the conditions of the agreement are met. In the case of real estate, Escrow accounts are used to safeguard the interests of homebuyers and ensure that their money is used for the intended purpose.
How does an Escrow account work?
An Escrow account works as follows:
- The developer opens an Escrow account with a bank.
- The homebuyer deposits the payment for the property in the Escrow account.
- The funds in the Escrow account are released to the developer only after the completion of the project and obtaining the necessary approvals.
Benefits of using Escrow accounts in Real Estate
Using Escrow accounts has several benefits for both homebuyers and developers. Some of these benefits are:
- Transparency in transactions
- Assurance that the money is being used for the intended purpose
- Protection of homebuyer’s funds in case of developer bankruptcy
- Reduced risk of delays and fraud
RERA and Escrow accounts in Bangalore Real Estate Market
The Bangalore real estate market has seen a significant boost in recent years, with several new projects being launched. With the introduction of RERA, the real estate sector in Bangalore has become more transparent and accountable. As per RERA guidelines, developers in Bangalore are required to deposit 70% of the project funds in an Escrow account, which ensures that the funds are used only for the intended purpose.
Understanding the role of RERA in Escrow accounts
RERA plays a crucial role in the management of Escrow accounts in the real estate sector. It ensures that the funds deposited in the Escrow account are being used for the intended purpose and that the project is completed within the stipulated timeframe. RERA also regulates the withdrawal of funds from the Escrow account and ensures that the withdrawals are made only after obtaining the necessary approvals.
Conclusion
As a homebuyer in Bangalore, it is important to understand the concept of Escrow accounts and the role of RERA in managing them. When buying a property, make sure to check if the developer has registered with RERA and if they have deposited the funds in an Escrow account. This will ensure that your funds are protected and that the project is completed within the stipulated timeframe.
