GUJRERA Issues New Guidelines to Protect Property Buyers

In a bid to protect property buyers from unscrupulous builders, the Gujarat Real Estate Regulatory Authority (GUJRERA) has issued directions to banks and financial institutions, asking them to ensure that entries about mortgaged properties are reflected in revenue records. Often, property owners have to suffer when unscrupulous builders fail to disclose facts about the project or about the mortgage status of a property.

As per the latest directions issued by GUJRERA, banks should not sanction loans on units where an agreement to sale or sale deed has already been executed. This measure is aimed at preventing multiple sales and ensuring that buyers are not left in the lurch due to fraudulent practices.

It should be noted that several homebuyers have filed petitions with RERA to protect their properties from banks that initiated recovery procedures after builders failed to repay the loan on the said property. This often happens when builders keep buyers in the dark about the mortgage on the property and get away with it because, in some cases, entries of mortgaged properties are not mutated in the revenue records. These latest directions are in addition to the previous ones issued in December last year.

Official sources said the object of these directions is to establish a mechanism for the operation and maintenance of a separate bank account for GUJRERA-registered projects and to safeguard consumer interests. It also aims to ensure compliance, promote transparency, accountability, and financial discipline. The authority has also directed banks to ensure that a project loan is not sanctioned for units where an agreement for sale or sale deed has already been executed in favor of the allottee by the promoter. It further said that banks should exercise due diligence while sanctioning the loan in projects where the promoter has already taken a loan from another bank, i.e., in case of pari passu charge on the project.

Banks shall ensure that the 'RERA Collection Bank Account (100%)' and 'RERA Retention Bank Account (70%)' for the project remain free from all encumbrances. These accounts shall not be designated as escrow accounts and must be free from loans or any third-party control, including by lenders, banks, or financial institutions. This measure is expected to enhance the transparency and accountability in the real estate sector, providing greater protection to homebuyers and investors.