Means of Finance / Source of Funds under Real Estate Regulation and Development Act (RERA) 2016

The Real Estate (Regulation and Development) Act 2016 (RERA) is a central law aimed at regulating and Development of the Indian real estate sector and safeguarding the interests of home buyers. The Act lays down strict norms for the promoters (builders and developers) to ensure transparency and accountability in their transactions with Allottees (customers and other stakeholders).

Real estate industry is considered as a capital-intensive industry as it requires significant investments of money in order purchasing land for the project, for obtaining approvals and NOC’s from the statutory authorities, construction of the building, making infrastructure, facilities, amenities development. The large initial costs may be for the acquisition of project land, approvals etc. These initial and large investments can make it challenging for new entrants to the industry to compete with established players who have more financial resources. Additionally, the long term nature of real estate investments and the uncertainty surrounding future market conditions can also make them riskier than other types of investments, further emphasizing the need for large amounts of capital. Additionally ,real estate projects have a long lifespan, so significant investments are often necessary to ensure profitability. The cost of real estate projects can be substantial, so businesses in this industry require substantial capital investments to finance for the completion of the project irrespective of the market demand or circumstances.

As we all aware, post implementation of RERA, every promoter shall declare the End date / completion date https:// taxguru.in/corporate-law/importance-date-completiondate-real-estate-regulation-development-act-2016.html of the project at the Application for grant of registration of RERA number. Promoter is allowed to market, enter into agreement etc., based on the end date / completion date of the Project. E.g., RERA registration certificate validity of a project is 31.12.2025, the promoter cannot mention the completion date/possession date in the Agreement of sale beyond 31.12.2025 unless the promoter obtains the extension as per the RERA Act 2016.

In order to achieve the completion of the development works of the project within the end date / committed date, the promoter shall have the sufficient funds / cash flow without hindrances, failing which the real estate project development and possession may be delayed. In order to achieve the completion of development as per the schedule of plan/time (as submitted during RERA registration) the RERA authorities may ask the promoter’s to submit the details of source of funds or means of finance along with the application for grant of RERA Registration.

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