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THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA PUNE BRANCH OF WIRC Decoding Real Estate THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA PUNE BRANCH OF WIRC Decoding Real Estate (Regulation and Development) Act CA Jayesh Kariya 22 December 2017 1

Framework of RERA 2 Framework of RERA 2

Framework of RERA Section Provisions of the Act 1– 2 Scope and Definitions 3– Framework of RERA Section Provisions of the Act 1– 2 Scope and Definitions 3– 8 Registration of the Project 9 - 10 Registration of Agents and its Functions 11 – 18 Functions and duties of Promoters 19 Rights and Duties of Allottees 20 - 39 RERA Authority – Constitution, Administration, Functions, Powers, etc. 40 Recovery of Interest or Penalty or Compensation from Developer b the Authority as Land Revenues 43 – 58 RERA Tribunal - Constitution, Administration, Functions, Powers, etc. 59 – 72 Penalties and Offences 73 – 78 RERA Authority – Accounts, Finance, Audit and Reports 79 – 92 Miscellaneous Provisions: Bar of Jurisdiction, Power to make Rules & Regulations, Act to have overriding effect over other Acts, Repeal of MOFA 2012 3

Framework of MAHA RERA Sr Rules and Regulations 1 Maharashtra (Real Estate & Development) Framework of MAHA RERA Sr Rules and Regulations 1 Maharashtra (Real Estate & Development) (Registration of real estate projects, registration of agents, rates of interest and disclosure on website) Rules 2017 2 Maharashtra (Real Estate & Development) (Recovery of Interest, Penalty, Compensation, Fine payable, Forms of Complaint and Appeal, etc. ) Rules 2017 3 Maharashtra Real Estate Appellate Tribunal (Members, Officers and Employees) (Appointment and Service Conditions) Rules, 2017 4 Maharashtra Real Estate Regulatory Authority (Form of Annual Statement of Accounts and Annual Report) Rules, 2017 5 Maharashtra Real Estate Regulatory Authority , Chairperson, Members Officers and Other Employees (Appointment and Service Conditions) Rules, 2017 6 Maharashtra Real Estate Regulatory Authority (General) Regulations, 2017 Rights and Duties of Allottees: Formats of Certificates of Architects, Engineers, Chartered Accountants, Annual Audit report by Statutory Auditors, Power of Attorney for Representation and Application for Inspection/Obtaining Copies of Documents/Records 7 Maharashtra Real Estate Regulatory Authority (Recruitment and Conditions of Service of Employees) Regulations, 2017 8 Notifications and Orders by RERA Authority 4

Pivotal pil ars of the Act Compliance Customer centricity Accountability Transparency Financial discipline Real Pivotal pil ars of the Act Compliance Customer centricity Accountability Transparency Financial discipline Real Estate Act Improve the perception of the sector among various stakeholders Uniform regulatory environment COMMERCIAL and RESIDENTIAL projects including PLOTTED DEVELOPMENT Land under development MORE THAN 500 SQ MTS / NO. of UNITS exceed 8 Projects which do not have COMPLETION CERTIFICATE before commencement of ACT RENOVATION or REPAIR or REDEVELOPMENT projects not involving Marketing, Advertising, Selling & New Allotment NEED NOT BE REGISTERED 5

Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline Fiscal discipline wil play Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline Fiscal discipline wil play a critical role in project development and requires utmost importance Financial Discipline What it entails 70% of the funds collected from allottees needs to be deposited in the project account Withdrawals to cover construction and land cost Withdrawals to be in proportion to the % completion method Withdrawal to be certified by Engineer, Architect, and CA Promoter to compensate buyer for any false or incorrect statement with full refund of property cost with interest Provision for RERA to freeze project bank account upon noncompliance Project Accounts to be Audited / FY. Copy to be submitted to RERA Provision for stronger financial penalties for RERA noncompliances Interest on delay wil be same for customer and promoter 6

Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline Structured communication is required Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline Structured communication is required to furnish all project related information to the customers What it entails Consent from affected allottees for any major addition or alteration Consent of 2/3 rd allottees about any other addition or alteration No false statements or commitments in advertisement Quarterly updating of RERA website with details such as unsold inventory and pending approvals Transparency Number, type and carpet area of apartments No arbitrary cancellation of units by promoter Project completion time frame Informing allottees about any minor addition or alteration No launch or advertisement before registration with RERA Consent of 2/3 rd allottees for transferring majority rights to 3 rd party 7

Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline A PMO would be Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline A PMO would be required to track and monitor developments as per the defined project plan Accountability What it entails Quarterly update of project progress along with pending approvals on RERA website Every officer of a company, who was in charge or responsible wil be liable for the conduct of the company and deemed to be guilty Offence by an officer committed with the consent or connivance of any director, manager, secretary or other officer of the company, wil also be guilty 8

CRM would help to enhance customer centricity focus Compliance Customer centricity Accountability Transparency Financial CRM would help to enhance customer centricity focus Compliance Customer centricity Accountability Transparency Financial discipline Real Estate Act What it entails An increase in the quality of construction due to a defect liability period of five years. Consent from affected allottees for any major addition or alteration Informing allottees for any minor addition or alteration Customer centricity Increased assertion on the timely completion of projects and delivery to the consumer. Consent of 2/3 rd allottees for any other addition or alteration Sharing information project plan, layout, government approvals, land title status, sub contractors No false statements or commitments in advertisement Formation of RWA within specified time or 3 months after majority of units have been sold Unbiased interest on delays 9

Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline Registration of all projects Compliance Customer centricity Accountability Transparency Real Estate Act Financial discipline Registration of all projects & agents and a strong dispute management required What it entails Registration of agents/brokers with RERA Dispute resolution within 6 months at RERA and RERA appellate tribunals Mandatory registration of new and existing projects with RERA before launch Compliance Timely updating of RERA website Authenticated copy of all approvals, commencement certificate, sanctioned plan, layout plan, specification, plan of development work, proposed facilities, Proforma allotment letter, agreement for sale and conveyance deed to be given when applying for project registration with RERA Maximum 1 year extension in case of delay due to no fault of developer Developers to share details of projects launched in last 5 years with status and reason for delay with RERA Separate registration of different phases of a single projects Construction and land title insurance Annual audit of project accounts by a CA Conveyance deed for common area in favor of RWA Quarterly update of project progress on RERA website 10

Registration Process 11 Registration Process 11

RERA wil have power to scrutinize the application Additional powers of RERA § RERA RERA wil have power to scrutinize the application Additional powers of RERA § RERA may review the following documents submitted by a promoter: § Nature of rights and interests of the promoter to the land § Extent and location of area of land proposed to be developed § Layout of the project § Financial, technical and managerial capacity of the promoter to develop § Plan regarding the development works to be executed in the project § Conformity of development of the project with neighboring areas Requires clarity as managerial capacity is a subjective assessment Requires further clarity A second level scrutiny as the same is being done by local development authorities 12

Issues and nuances for First Time Registration • Definition of Project to be registered Issues and nuances for First Time Registration • Definition of Project to be registered – Single tower, Multiple towers etc. • Determination of Land Area allocable to the respective tower to be registered in case of a layout project. • Estimation of Project Cost – Various factors to be considered – Escalations, Contingencies, Future regulatory fees (eg. BMC fees) etc. • Allocation of cost already incurred to respective towers in case of layout project. • Allocation of cost on case of SRA project involving Rehab building and sale building. • Land owners and JDA partners to be considered as “Promoters”. • Society to be considered as a Promoter in case of a redevelopment project. • Ensure appropriate disclosures in agreement for sale as well as details to be uploaded at the time of registration to overcome penalty exposure. 13

Redressal Mechanism 14 Redressal Mechanism 14

Redressal mechanism Suo-motto investigation Promoter Or Allottee Call for details / information as maybe Redressal mechanism Suo-motto investigation Promoter Or Allottee Call for details / information as maybe required, call for attendance, etc and give opportunity for hearing 1 RER Authority /AO Or 2 RE Agent Any aggrieved person can file complaint 3 Issue order* RERA Appellate Tribunal** 4 Aggrieved person can file an appeal within 60 days from receipt of order 5 6 Issue order File a appeal before the High Court against the order of RERA Appellate Tribunal within 60 days from receipt of order High Court *for payment of compensation/ penalty basis complaint received or suo-moto investigation **Promoter aggrieved by the order of the Authority or of AO, the appeal before RERA Tribunal can be heard only after deposit of atleast 30% of the penalty or such higher % as may be determined or payment of interest and compensation to the Allottee, or both 15

Appellate Tribunal Important Aspects § Tribunal to pass the order within 60 days – Appellate Tribunal Important Aspects § Tribunal to pass the order within 60 days – record reasons for any delay in disposal of appeal § Tribunal not bound by the procedures under Code of Civil Procedure 1908 – can have its own procedures and shall be guided by principles of natural justice § Tribunal not bound by the rules of evidence under Indian Evidence Act, 1872 § Tribunal has same powers as are vested in Civil Court under the Code of Civil Procedures 1908 – examine documents, issue summons, examination on Oath, asking affidavits, issuing commissions for examination of documents/witness, reviewing decisions, etc. § All proceedings before Tribunal to be judicial proceedings under Indian Penal Code and tribunal shall be deemed to be a Civil Court for the purposes of Code of Criminal Procedure 1973 § Order passed by Tribunal to be executed as Decree of Civil Court § Allottee or Complainant cannot seek remedy both before the Tribunal and Civil Court – No Civil Court has jurisdiction to entertain any suit or proceedings in respect of any matter with the Authority or Tribunal § Appeal can be preferred against the order of Tribunal before HC within 60 days § Representations before Authority and Tribunal can be made by Company Officer or CA or CS or Cost Accountant or legal practitioner 16

Offences and Penalties 17 Offences and Penalties 17

Offences and Penalty Provision Promoter Agent Allottee Non-registration of project/agent with RERA and continue Offences and Penalty Provision Promoter Agent Allottee Non-registration of project/agent with RERA and continue to do so Up to 10% of the estimated project cost Penalty of INR 10, 000 per day during default tenure up to 5% of property cost False information while making an application to RERA Up to 5% of the estimated project cost Contravention of any provisions of the Act (other than stated above) Up to 5% of the estimated project cost Up to 5% of the property cost Non-compliance with the order of RERA Daily penalty up to 5% of the estimated project cost Daily penalty up to 5% of property cost Non-compliance with the order of the Appellate Tribunal Up to 10% of project cost Up to 10% of property cost 18

Prosecution and Compounding Important Aspects § Non compliance of penalty order by Promoter (for Prosecution and Compounding Important Aspects § Non compliance of penalty order by Promoter (for non-registration of Project) issued by the Authority entails imprisonment upto 3 years or further penalty of 10% of estimated cost or both § Non compliance with the order of the Appellate Tribunal by Promoter entails imprisonment upto 3 years or further penalty of 10% of estimated cost or both § Non compliance with the order of the Appellate Tribunal by Agent entails imprisonment upto 1 year or daily fine of 10% of estimated cost of apartment or plot of land § Non compliance with the order of the Appellate Tribunal by Allottee entails imprisonment upto 1 year or daily fine of 10% of estimated cost of apartment or plot of land § Imprisonment punishment could be compounded (before or after the institution of prosecution) can be compounded by the Court 19

Separate project account (70: 30 Rule) 20 Separate project account (70: 30 Rule) 20

Separate Project account (70: 30 Rule) Safeguarding consumer interest 70: 30 Rule § § Separate Project account (70: 30 Rule) Safeguarding consumer interest 70: 30 Rule § § Of the total collections, only 30% can be withdrawn without any restriction. § Withdrawals to be certified by CA, Engineer and Architect; Audit report by a practicing CA to be submitted to RERA annually. Rest of the amount (70%) can be withdrawn in stages in proportion to the percentage completion of the project (construction cost plus land cost). 70: 30 Formula § Total Cost incurred for the project / Estimated Cost of the project x 100 21 21

Applicability of the 70: 30 rule to the ongoing projects Applicable Prospectively 100% of Applicability of the 70: 30 rule to the ongoing projects Applicable Prospectively 100% of the Amount to be realized to be deposited § 70% of the amount to be realized from the allottees shall be deposited in such separate account § In the event where the estimated receivables of the ongoing project is less than the estimated 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 22

Applicability of the 70: 30 rule to the ongoing projects Sr. No. Particulars Estimated Applicability of the 70: 30 rule to the ongoing projects Sr. No. Particulars Estimated Cost (in crores) Amount Incurred (in crores) 1 Land Cost 1000 2 Construction Cost 600 200 3 Other Cost and Marketing Cost 200 100 4 Total Cost 1800 1300 5 Amount realized in separate bank account 1600 Maximum Amount that can be withdrawn- 1, 200 Crore 23

Applicability of the 70: 30 rule to the ongoing projects Sr. No. Particulars Estimated Applicability of the 70: 30 rule to the ongoing projects Sr. No. Particulars Estimated Cost (in crores) Amount Incurred (in crores) 1 Land Cost 1000 500 2 Construction Cost 600 200 3 Other Cost and Marketing Cost 150 50 4 Total Cost 1550 750 5 Amount realized in separate bank account 1000 Maximum Amount that can be withdrawn- 700 Crore 24

Withdrawals from Project Account Withdrawals from project account § Withdrawal from project accounts – Withdrawals from Project Account Withdrawals from project account § Withdrawal from project accounts – following documents are required for withdrawal from project account ü A certificate from Architect certifying the percentage of completion of construction work ü A certificate from the engineer for the actual cost incurred on the construction work ü A certificate from a CA for the cost incurred on construction cost and land cost ü The Chartered Accountant shall also certify the proportion of the cost incurred on construction and land cost to the total estimated cost of the project ü The total estimated cost of the project multiplied by such proportion shall determine the maximum amount which can be withdrawn by the promoter from the project account. § As per the Act, the land cost can be withdrawn only in proportion to construction cost even if it has been paid in full. 25 25

Project and Land Cost • The costs incurred by the Promoter for acquisition of Project and Land Cost • 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; • Premium payable to obtain development or redevelopment rights; • Amount paid for acquisition of TDR; • Premium for grant of FSI, including additional FSI (if any), fungible FSI; and any other instruments permissible under the Development Control Regulations; • Consideration payable to the outgoing developer to relinquish the ownership and title rights over such land parcels; • 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 26 26

Construction Cost Project and land cost Construction Cost § All such costs, incurred by Construction Cost Project and land cost Construction Cost § All such costs, incurred by the Promoter, towards the on-site and off-site expenditure for the development of the Real Estate project including: ü 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; ü Principal sum and interest, paid or payable to any financial institutions including scheduled banks or non-banking financial companies etc. or money-lenders (under the Maharashtra Money-Lending Regulation Act, 2014) for the Real Estate Project; ü Excludes loan obtained from 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. 27 27

Role of Chartered Accountant in Maha. RERA 28 Role of Chartered Accountant in Maha. RERA 28

Certificates to be issued by CAs § At the time of Registration of the Certificates to be issued by CAs § At the time of Registration of the Project by the Developer – Form 3 § At the time of withdrawals by the developers from a RERA Account – Form 3 § Statutory Audit Certificate on annual basis by a Statutory Auditors – Form 5 § Other Certificates Required § Certifying the cost of Rehabilitation Cost – Explanation IV to Rule 5 § Existing Projects – Separate Certificates for following aspects? § Receivables from sold Inventories § Verification of Balance unsold area § ASR value of unsold flats to be realised 29

Certification by a Chartered Accountant under RERA 30 Certification by a Chartered Accountant under RERA 30

CA’s Certificate- Form 3 • The CA’s certificate has to be issued in Form CA’s Certificate- Form 3 • The CA’s certificate has to be issued in Form 3 as prescribed per Maha. RERA regulations. • The Certificate contains the details (Both Estimated as well as Actual) ofØ Land Cost, Development Cost, Ø Total Estimated Cost and actual Cost incurred Ø Percentage completion of the work (as per Architects Certificate) Ø Percentage of Cost incurred to estimated costs Ø Withdrawable amount from the designated bank account after considering the amount already withdrawn til date. • For ongoing projects Ø Estimated Balance Cost Ø Balance amount of receivables from the sold apartments Ø Estimated amount of sales proceeds in respect of unsold Apartments based on ASR Rate (Ready Reckoner Rate) Ø Amount to be deposited in the bank account. • The CA has to attach his workings as per prescribed format as per Maha. RERA (i. e. Annexure A to Form 3). 31

Form 3 Chartered Accountants Certificate (on the Letter head) (FOR REGISTRATION OF A PROJECT Form 3 Chartered Accountants Certificate (on the Letter head) (FOR REGISTRATION OF A PROJECT AND SUBSEQUENT WITHDRAWAL OF MOn. EY) Cost of Real Estate Project Maha. RERA Registration Number Sr. No. Particulars A Land Cost a Amount Estimated Amount b Acquisition Cost of Land or Development Rights, XXXX lease Premium, lease rent, interest cost incurred or payable on Land Cost and legal cost Amount of Premium payable to obtain development rights, FSI, additional FSI, fungible area, and any other incentive under DCR from Local Authority or State Government or any Statutory Authority c Acquisition cost of TDR (if any) d 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 e Actual Amount Land Premium payable as per annual statement of rates (ASR) for redevelopment of land owned by public authorities 32

Sr. No. Particulars A Land Cost f[i] Amount Estimated construction cost of rehab building Sr. No. Particulars A Land Cost f[i] Amount Estimated construction cost of rehab building including site development and infrastructure for the same as certified by Engineer Estimated Amount Actual Cost of construction of rehab building incurred as per the books of accounts as verified by the CA f[ii] Cost towards clearance of land of all or any encumbrances including cost of removal of legal/illegal occupants, cost for providing temporary transit accommodation or rent in lieu of Transit Accommodation, overhead cost f[iii] Cost of ASR linked premium, fees, charges and security deposits or maintenance deposit, or any amount whatsoever payable to any authorities towards and in project of rehabilitation 37

B Development Cost/ Cost of Construction Estimated Amount a[i] Estimated Cost of Construction as B Development Cost/ Cost of Construction Estimated Amount a[i] Estimated Cost of Construction as certified by Engineer Actual Cost of construction incurred as per the books of accounts as verified by the CA a[ii] On-site expenditure for development of entire project excluding cost of construction as per a(i) above, i. e. salaries, consultants fees, site overheads, cost of services (including water, electricity, sewerage), cost of machineries and equipment including its hire and maintenance costs, consumables etc. All costs directly incurred to complete the construction of the buildings /wings of the project registered Actual Amount 39

B Development Cost/ Cost of Construction B Payment of Taxes, cess, fees, charges, premiums, B Development Cost/ Cost of Construction B Payment of Taxes, cess, fees, charges, premiums, interest etc to any statutory Authority C Principal sum and interest payable to financial institutions, scheduled banks, non-banking financial institution (NBFC) or money lenders on construction funding or money borrowed for construction Total Cost of Real Estate Project(A+B) Estimated Amount Actual Amount 0 0 Total Estimated Cost of the Real Estate Project [1(i) + 1(ii)] of Estimated Column Total Cost Incurred of the Real Estate Project [1(i) + 1(ii)] of Incurred Column % completion of Construction Work % (as per Project Architect’s Certificate) XX% 41

Additional Information for Ongoing Projects 1. Estimated Balance Cost to Complete the Real Estate Additional Information for Ongoing Projects 1. Estimated Balance Cost to Complete the Real Estate Project (Difference of Total Estimated Project cost less Cost incurred ) (calculated as per the Form IV) 2. Balance amount of receivables from sold apartments as per Annexure A to this certificate (as certified by Chartered Accountant as verified from the records and books of Accounts) 3. (i) Balance Unsold area (to be certified by Management and to be verified by CA from the records and books of accounts) (ii) Estimated amount of sales proceeds in respect of unsold apartments (calculated as per ASR multiplied to unsold area as on the date of certificate, to be calculated and certified by CA) as per Annexure A to this certificate 4. Estimated receivables of ongoing project- Sum of 2 + 3(ii) 5. Amount to be deposited in Designated Account – 70% or 100% • IF 4 is greater than 1, then 70 % of the balance receivables of ongoing project wil be deposited in designated Account • IF 4 is lesser than 1, then 100% of the balance receivables of ongoing project wil be deposited in designated Account % 46

Annexure A to Form 3 Statement for calculation of Receivables from the Sales of Annexure A to Form 3 Statement for calculation of Receivables from the Sales of the Ongoing Real Estate Project Sold Inventory Sr. No. Unit Carpet Consideration as Area (in per Agreement sq. mts. ) /Letter of Allotment Flat No. Received Amount Balance Receivable 47

Annexure A to Form 3 Unsold Inventory Valuation Ready Recknor Rate as on the Annexure A to Form 3 Unsold Inventory Valuation Ready Recknor Rate as on the date of Certificate of the Residential /commercial premises INR XXX per sm. Sr. No. Unit Consideration as per Read Reckoner Rate (ASR) Carpet Area (in sq. mts. ) Flat No. 48

Form 5 - Annual Report on Statement of Accounts • Form 5 is an Form 5 - Annual Report on Statement of Accounts • Form 5 is an annual report on the statement of accounts. • It has to be issued by the Chartered Accountant who is the Statutory Auditor of the Promoters company/ Firm) • It should be obtained within 6 months six months from the end of the fiscal year for every registered Project • It should be a report on the fund utilization and withdrawal by the promoter with respect to the project • Not a certificate by an audit and opinion • Not a full fledged Audit report of the Developer but of every Project • Required to be provided by all Promoters – whether incorporated entity or not • The Promoter should provide a Self- Declaration to the Bank confirming that the Statutory Auditors Certificate has been obtained and need to be submitted to their Bankers 50

Other Clarifications issued by Maha. RERA 51 Other Clarifications issued by Maha. RERA 51

Treatment of Cancellation Charges • Cancellation amounts if any to be paid by the Treatment of Cancellation Charges • Cancellation amounts if any to be paid by the Promoter to the Allottees on cancellation of Booking/ Allotment of the Apartment, should be treated as cost incurred for the Project and the Same can be withdrawn from the Separate Bank account to the extent of 70% of the amounts to be paid to the Allottees on cancellation of booking/allotment, since only 70% of the amounts realized from the Allottees would have been deposited in the separate bank account. • However, the Compensation / interest paid by the promoter to the Allottees should be treated as cost incurred for the project and hence the entire sum required to be paid by the way of compensation / interest to the allottees can be withdrawn from the Separate Bank account. - Maha. RERA Circular No. 7/2017 dated 4 July 2017 52

Fixed Deposits with Banks • The Separate Bank account opened in accordance with the Fixed Deposits with Banks • The Separate Bank account opened in accordance with the provisions of section 4(2)(1)(D) of RERA, shall be a no lien account and withdrawal from such separate bank account shall always be in accordance with the Provisions of RERA, Rules, Regulations and Circulars issued by Maha. RERA from time to time. • The Excess monies lying in the Separate Bank account can be put in a fixed deposit with the bank operating the separate bank account and which has to be a no lien Fixed Deposit and no loan can be obtained against or on such fixed deposit nor any charge can be created on such fixed deposit. “ • In case of Fixed Deposit being made from the monies lying in the separate bank account , then the Chartered Accountant shall verify that there is no lien or Charge on such fixed deposits. • The Promoter and/or Chartered accountant shall verify that there is no lien or Charge certificate in respect to such fixed deposit , from the bank once every three months - Maha. RERA Circular No. 7/2017 dated 4 July 2017 53

Fixed Deposits with Banks • In case of Fixed Deposit being made from the Fixed Deposits with Banks • In case of Fixed Deposit being made from the monies lying in the separate bank account , then the Chartered Accountant shall verify that there is no lien or Charge on such fixed deposits. • The Promoter and/or Chartered accountant shall verify that there is no lien or Charge certificate in respect to such fixed deposit , from the bank once every three months - Maha. RERA Circular No. 7/2017 dated 4 July 2017 54

Pass through Charges • The Promoter to Deposit the Pass through Charges (amount collected Pass through Charges • The Promoter to Deposit the Pass through Charges (amount collected for and on behalf of Legal Entity or Apex Body or any statutory Authority or Local body) should be deposited preferably in a designated bank account opened just for the purpose of depositing such Pass through Charges or in any other bank account of the promoter and should not be deposited in the separate bank account. • However, Promoter shall be required to give account of the monies collected as Pass through Charges to the legal Entity or Apex Body. - Maha. RERA Circular No. 7/2017 dated 4 July 2017 55

Open issues • Allocation of Land Cost in case of layout and large developments Open issues • Allocation of Land Cost in case of layout and large developments • Allocation of costs for common amenities and Infrastructure • Allocation of off-site costs to various projects • Which method of accounting to be followed – cash or mercantile? • Meaning of Incurred – to be applied prudently • Payment of fungible premium in case of layout and large developments • Allocation of costs in case of Parking Projects registered separately or shown as common areas • Allocation of cost of Public Parking in case of layout projects • Marketing cost of acquisition of land/projects – whether covered as land cost? • Circulars and Clarifications issued by RERA Authorities should be applied blindly? Wil it survive if beyond the Act and Rules? • Amount withdrawn to be utilized Only for the Project – Can it be utilized for purchase of land for other projects • Meaning of On-site and Off-site costs – not reflected in certificate 56

Disclosures and Disclaimers by CAs 57 Disclosures and Disclaimers by CAs 57

Disclosures and Disclaimers by CAs • Obtain Management Representations from the Promoters • Certificates Disclosures and Disclaimers by CAs • Obtain Management Representations from the Promoters • Certificates obtained from various professionals and agencies and relied upon • Assumptions and views taken on various aspects • Escalations considered • Basis of allocation of land cost in case of layout plans and large formats • Basis of allocation of Construction Costs in case of layout plans and large formats • Treatment given to specific clauses in respect of interest payments to Investors and Financial Institutions • Provision for Warranties and contingencies • Provision for Encumbrances • Provision for Disputed taxes, duties, cess , etc. 58

Disclosures and Disclaimers by CAs • Disclosure of financial terms of JDAs considered for Disclosures and Disclaimers by CAs • Disclosure of financial terms of JDAs considered for certification • ASR value has been considered based on third party certificates • NO monies borrowed against FDs created out of funds in RERA Account or lien created against such FDs • Certificates issued relying on the Provisions of the RERA Act, RERA Rules, Circulars/Clarifications/Orders/FAWs issued by Maha. RERA Authorities and judicial rulings, if any • Common Amenities and Infrastructure • Allocation of costs in relation to Common Amenities and Infrastructures • Contingent liabilities which are not considered • Any unusual or aggressive position taken while computing the costs to be certified • Accounts & documents reviewed, clarifications considered, • Not conducted an audit of accounts or detailed review of documents – disclose the process followed and principles applied 59

Joint Development Arrangements 60 Joint Development Arrangements 60

Joint Development Arrangements- Mechanism Upfront consideration Initial backlog Developer Increased project cost Tight Rise Joint Development Arrangements- Mechanism Upfront consideration Initial backlog Developer Increased project cost Tight Rise in cost liquidity of capital Enters into development agreement Land Owner Consolidation % share in revenue Revenue Sharing Models Development of Project Lease /sale of asset to earn income Upfront Payment of Consideration Or/ And Built- Up Area Or/ And Gross / Net Revenue 61

Clarification on Joint Development Arrangements • Promoter now includes any person(s) or organization(s) who, Clarification on Joint Development Arrangements • Promoter now includes any person(s) or organization(s) who, under any agreement or arrangement with the promoter of a Real Estate Project is allotted or entitled to a share of total revenue generated from sale of apartments or share of promoters shall be as per the agreement or arrangement with the Promoters, however for withdrawal from Designated Bank Account, they shall be at par with the Promoter of the Real Initial backlog Increased Tight Rise in cost Consolidation Estate Project. ” project cost liquidity of capital • Following implications would result on account of the above – ü The Investors and/or Land-owners, as the case may be, having an arrangement with the Developer wil also fall into the ambit of the 70: 30. ü Details of the Promoter to be provided at the time of registration with Maha. RERA and a copy of the agreement and arrangements should be uploaded on the website as well. ü Existing JDA arrangements (mainly with revenue share or profit share arrangement) wil need to be revisited. 62

Joint Development Arrangements- Open Issues • In case of Revenue Share arrangement Ø Whether Joint Development Arrangements- Open Issues • In case of Revenue Share arrangement Ø Whether a single RERA Account required OR two separate account required? Initial backlog Increased Tight Ø Whether separate CAproject cost obtained byliquidity Certificates to be the Promoter? Rise in cost of capital Consolidation Ø How to apply and compute POCM? Ø What would be the costs for the Promoter? • In case of Area Share arrangement Ø Whether separate CA Certificates to be obtained by the Promoter? Ø How to apply and compute POCM? Ø What would be the costs for the Promoter? • Whether this Clarification wil apply to Investors? • Whether this clarification applies to Construction Companies jointly developing projects and sharing revenues/areas? 63

Professional Opportunities for CAs under RERA 64 Professional Opportunities for CAs under RERA 64

Professional Opportunities for CAs under RERA • Tax and Regulatory Advisory Services in relation Professional Opportunities for CAs under RERA • Tax and Regulatory Advisory Services in relation to RERA; • Assistance in Registration of Ongoing and New Projects under RERA; • Assistance in ongoing compliances under RERA; • Certification in Form 3 and Form 5 respectively; • Assistance in providing submissions and clarifications in response to the notices received from RERA Authorities; • Representation Services before the RERA Authorities and the Tribunal. Lot of new opportunities thrown open by RERA for Chartered Accountants apart from issuance of certificates – a NEWERA of Practice for CAs 65

Impact of RERA 66 Impact of RERA 66

Possible impact on sector Initial backlog Increased project cost Tight liquidity Rise in cost Possible impact on sector Initial backlog Increased project cost Tight liquidity Rise in cost of capital Initially, a lot of work is to be done to get the existing and new project registered. Registration with RERA and insurance cost for construction and land title Land approval costs to be meted out of internal accruals as prelaunch concept may end. The cost of capital may go up as developers may now have to fund the land approval cost through equity. Details such as status of each project executed in last 5 years, promoter details, detailed execution plans etc. needs to be prepared. it may lead to a shift in equity financing from debt financing prevailing currently. With frequent delay in obtaining approvals, debt funding may not be an ideal route for developers. Consolidation With entry in the sector made difficult, the sector may witness consolidation Strong financial and execution capability is required to launch a project. The development model/agreement may gain prominence Increase in project launch time The project launch time may increase since a lot of time will involve in finalizing finer details before launching a project. Details such as complete drawings, utilities layout, etc. needs to be finalized before project starts. 67

Perceived benefits of RERA Industry Developer Buyer ü Governance and transparency ü Common and Perceived benefits of RERA Industry Developer Buyer ü Governance and transparency ü Common and best practices ü Significant buyers protection ü Project efficiency and robust project delivery ü Increase efficiency ü Quality products and timely delivery ü Standardization and quality ü Consolidation of sector ü Balanced agreements and treatment ü Enhance confidence of investors ü Corporate branding ü Transparency – sale based on carpet area ü Attract higher investments and PE funding ü Higher investment ü Safety of money and transparency on utilization ü Regulated Environment ü Increase in organized funding 68

Tax Impact of RERA § Possibility of AOP exposure in the case of JDAs Tax Impact of RERA § Possibility of AOP exposure in the case of JDAs considering that the land owner is also considered to be a promoter § Reorganising of JDA arrangement, especial y the revenue share arrangement § Tax treatment / allowability of expenditure done by a promoter during defect liability period § Tax treatment / allowability of fines, penalties and interest paid by the promoter § Treatment of expensed incurred on a project which is then taken over by the Authority in the case of lapse in registration or revocation of registration 69

HAPPY RERA Journey together …. The information contained herein is of a general nature HAPPY RERA Journey together …. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This document is meant for e-communications only 70