CERTIFICATION UNDER RERA visvis ROLE AND RESPONSIBILITY OF

CERTIFICATION UNDER RERA vis-à-vis ROLE AND RESPONSIBILITY OF A CHARTERED ACCOUNTANT

CONTENTS Purpose of RERA Registrants under RERA Registration under RERA Designated Account under RERA CA Certificate for Withdrawal of funds Important Terms under RERA, Rules, Regulations, etc Utilisation of Withdrawal Issues Pertaining to Certification CA Certificate Form-3 CA Certificate Form 5 Co-Promoters under RERA Design of Accounting and MIS

PURPOSE OF RERA Ensure Accountability Infuse Transparency Ensure Fair-play Reduce Frauds & Delays; Introduce Professionalism Pan India Standardization

PURPOSE OF RERA Symmetry of Information Imposing Responsibilities on Promoter Imposing Responsibilities on Allottees Establish Regulatory Mechanism Establish Fast- track Dispute Resolution Mechanism; Promote Good Governance in the Sector

REGISTRANTS UNDER RERA PROMOTER CO-PROMOTER REAL ESTATE AGENT

REGISTRATION UNDER RERA Registration not required when: Land area below 500 sq. mt. or; Less than 8 Apartments Completion Certificate received before commencement of RERA (1 st May 2017) Renovation or Repair or Re. Development Project; not involving marketing, advertising, selling or new allotment

DESIGNATED BANK ACCOUNT A Separate Bank Account for RERA Compliance An Account opened in a Scheduled Bank

DESIGNATED BANK ACCOUNT 100 (from allottee) 30 (non-RERA account) 70 (RERA project account) Trf. to project operating account

CA CERTIFICATE FOR WITHDRAWAL OF FUNDS Certification Required for Withdrawal: Certification for Withdrawal On Every Withdrawal Architect Form 1 Chartered Engineer Form 2 Chartered Accountant Form 3

IMPORTANT TERMS UNDER RERA (ACT) Real estate project means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be, for the purpose of selling all or some of the said apartments or plots or building, as the case may be, and includes the common areas, the development works, all improvements and structures thereon, and all easement, rights and appurtenances belonging thereto

IMPORTANT TERMS UNDER RERA (ACT) Development – means carrying out the development of immovable property, engineering or other operations in, over or under the land or the making of any material change in any immovable property or land includes redevelopment

IMPORTANT TERMS UNDER RERA (ACT) Development Works means the external development works and internal development works on immovable property

IMPORTANT TERMS UNDER RERA (ACT) External Development Works includes roads and road systems landscaping, water supply, sewerage and drainage systems, electricity supply transformer, sub-station, solid waste management and disposal or any other work which may have to be executed in the periphery of, or outside, a project for its benefit, as may be provided under the local laws

IMPORTANT TERMS UNDER RERA (ACT) Internal development works means roads, footpaths, water supply, sewers, drains, parks, tree planting, street lighting, provision for community buildings and for treatment and disposal of sewage and sullage water, solid waste management and disposal, water conservation, energy management, fire protection and fire safety requirements, social infrastructure such as educational health and other public amenities or any other work in a project for its benefit, as per sanctioned plans

IMPORTANT TERMS UNDER RERA (ACT) Estimated cost of real estate project means the total cost involved in developing the real estate project and includes the land cost, taxes, cess, development and other charges

IMPORTANT TERMS UNDER RERA (Maha. RERA) The land cost shall include, (i) The costs incurred by the Promoter for acquisition of ownership and title of the land parcels proposed for the real estate project, including its lease charges, which shall also include overhead cost, marketing cost, legal cost and supervision cost; (ii) Premium payable to obtain development or redevelopment rights; (iii) Amount paid for acquisition of TDR; (iv) Premium for grant of FSI, including additional FSI (if any), fungible FSI; and any other instruments permissible under the Development Control Regulations;

IMPORTANT TERMS UNDER RERA (Maha. RERA) The land cost shall include, (v) Consideration payable to the outgoing developer to relinquish the ownership and title rights over such land parcels; (vi) Amounts payable to State Government or Competent Authority or any other Statutory Authority of the State or Central Government, towards Stamp Duty, transfer charges, registration fees etc. ; and (vii) ASR linked premiums payable by any Promoter as per requirement of any Law, rules or regulations for obtaining right for redevelopment of lands owned by Public Authorities;

IMPORTANT TERMS UNDER RERA (Maha. RERA) Land Cost: Where the promoter, due to inheritance, gift or otherwise, is not required to incur any cost towards acquisition of ownership and title of the land parcels proposed for the real estate project, the cost of land shall be reckoned on basis of the value of the land as ascertained from the ASR prepared under the provisions of the Maharashtra Stamp Act, relevant on the date of registration of the real estate project

IMPORTANT TERMS UNDER RERA (Maha. RERA) The cost of construction shall include all such costs, incurred by the Promoter, towards the on-site and off-site expenditure for the development of the Real Estate project including payment of Taxes, Fees, Charges, Premiums, Interest etc. to any Competent Authority or Statutory Authority of the Central or State Government under any laws or rules or regulations of the time being in force including Principal sum and interest, paid or payable to any financial institutions including scheduled banks or nonbanking financial companies etc. or money-lenders (under the Maharashtra Money-Lending Regulation Act, 2014) for the Real Estate Project,

IMPORTANT TERMS UNDER RERA (Maha. RERA) The cost of construction shall not include the sum which the promoter has raised and incurred by way of loan obtained from such banks, non-banking finance companies or money-lenders, for the purpose of purchase of land for the project or for obtaining the development rights over such land.

UTILISATION OF WITHDRAWAL Land Cost of Construction • Cost for Land Acquisition • Cost of Construction (including legal charges, certified by Chartered lease, overhead, Engineer marketing, supervision, • On-site and Off-site interest) Expenditure for • Premium payable for DEVELOPMENT Redevelopment or (including taxes, fees, Development Rights premiums, charges to any • Cost for TDR Acquisition Competent State of • Premium for grant of FSI Central Authority) • Interest on Finance from financial institutions

WHILE REGISTERING AN ONGOING OR NEW PROJECT A promoter shall file a declaration supported by an affidavit – Deposit of seventy per cent of the amounts to be realised in a separate account To use the same for the land cost of construction and the only Withdrawal from the account only in proportion to the percentage of completion of the project After it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project:

WHILE REGISTERING AN ONGOING OR NEW PROJECT Disclose land cost, cost of construction and estimated cost of real estate project A certificate from a practising Chartered Accountant for the estimated balance cost to complete the project A certificate from a practicing Chartered Accountant, certifying the balance amount of receivables from the apartments / flats / premises sold or allotted and in respect of which agreement have been executed and estimated amount of receivables in respect of unsold apartments / flats / premises calculated at the prevailing ASR rate on the date of certificate

WHILE REGISTERING AN ONGOING OR NEW PROJECT Where occupancy or completion certificate has not been received; 70% of the amount to be realized from the allottees shall be deposited in RERA bank account Provided further that, in the event where the estimated balance receivables of the ongoing project is less than the estimated balance cost of completion of the project, then 100% of the amount to be realized from the allottees shall be deposited in the said separate account

ISSUES PERTAINING TO CERTIFICATION The Act is silent on Off-site costs, while Rules use the words “on-site and off-site” The form for certificate of withdrawal – Form no 3 – does not have any place for “off-site expenses” From the Annual Report of Kolte Patil Developers Ltd. 2015 -16 - There is a separate schedule for “Construction costs” - It includes land cost, material, labour, contracting costs, personnel expenses and other construction expenses but does not include Salaries, marketing expenses, office and administration expenses The insistence of the Act and Rules is on Land Construction Cost

ISSUES PERTAINING TO CERTIFICATION Particulars Amount Rs. crores Cost of construction/development, land, plots and development rights Cost of land/ development rights Consumption of material Contract cost, labour and other charges 63. 88 33. 79 32. 60 Other construction expense Personnel cost 23. 41 15. 02

INCLUDED / EXCLUDED EXPENSES

INCLUDED / EXCLUDED EXPENSES

INCLUDED / EXCLUDED EXPENSES I Estimated allied, administrative and overhead charges contd… 2 Estimated cost of functions / ceremonies a Land breaking / Launching Ceremony (e. g. invitations, pandal, Pooja, Reffreshments, ceremonial securirty gaurds, ceremonial signages) b Vijayadashmi Pooja (e. g. invitations, pandal, Pooja, refreshments, ceremonial securirty gaurds, ceremonial signages) Handing-over ceremony (e. g. invitations, pandal, refreshments, d ceremonial securirty gaurds, ceremonial signages, documentation part) 50, 000 0. 14% 25, 000 c Diwali (e. g. greetings, gifts, refreshments) 0. 07% 1, 17, 500 0. 33% 50, 000 0. 141%

INCLUDED / EXCLUDED EXPENSES

INCLUDED / EXCLUDED EXPENSES

INCLUDED / EXCLUDED EXPENSES

INCLUDED / EXCLUDED EXPENSES

INCLUDED / EXCLUDED EXPENSES

CA CERTIFICATE (FORM – 3)

CA CERTIFICATE (FORM – 5)

CO-PROMOTERS UNDER RERA Landowner and Investor Partners to be termed as Co-Promoters Sale proceeds given to such Co-Promoters not to be considered as Cost of the Project and not to be withdrawn from RERA Bank Account Liabilities of Co-Promoters can be restricted to arrangement/agreement with the promoter However, for Withdrawal from Designated Bank Account, they shall be at par with the Promoter Co-Promoter in Land Sharing will have to open Separate Bank Account

CO-PROMOTERS UNDER RERA In the light of Office Order re Co-promoter and FAQ it is clear that the Co-promoters are covered by the provisions in respect of : Withdrawal certificate and Annual report on statement of accounts Since these are the requirements of the RERA Act – section 4

HOW TO GEAR UP FOR WITHDRAWAL CERTIFICATE Frequency of withdrawal certificate Planning and discipline is required Involvement of an Architect, an Engineer and a CA every time. So co-ordination is a must Inspection of records in the office and measurements at site every time Restructuring of accounting and MIS is required

DESIGN OF ACCOUNTING AND MIS Revenue, expenses, assets and liability accounts should be re-structured per RERA registration no. All supporting documents should bear RERA phase registration no or allocation thereof in case the cost is to be apportioned Obtaining invoices from suppliers and contractors and recording the same in the books ASAP is very important for cost certification. Payment of advances without recording invoices won’t help Data should be generated per RERA registration no. on cumulative basis – YTD basis which will ease the process of certification

DESIGN OF ACCOUNTING AND MIS Section 44 AD of the Income Tax Act allows presumptive profits of individuals / HUFS / Partnerships (not LLPs and Companies). Promoters currently covered under this section will now have to maintain books of account as per RERA provisions FY 2018 -19 may bring in % completion method of accounting for promoters through ICDS.

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