MUMBAI: The Maharashtra Real Estate Regulatory Authority (RERA) has notified the definition for co-promoter of real estate projects with an objective of controlling the risk of fund diversion. The regulator has also stipulated that each such co-promoter will have to maintain a separate bank account to deposit 70% of sale proceeds realised from homebuyers.
Every person or organisation, under any agreement or arrangement with the project promoter, is entitled to a share of total revenue or total area and will now be treated as copromoter of the project. This will include land owners, who usually enter into an agreement with the developer to jointly develop the project.
While the liabilities of such co-promoters will be proportionate to their agreement with the promoter, they will be at par with the promoter of the project for any withdrawals from the designated bank account.
“Co-promoter means and includes any person(s) or organisation(s) (and) who, under any agreement or arrangement with the promoter of a real estate project, is allotted or entit led to a share of total area developed in the real estate project.The liabilities of such co-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 estate project,“ the regulator said in its notification.
The regulator added the arrangement or agreement of co-promoters with the promoter should clearly detail the share of co-promoters and a copy of the said pact should be uploaded on the regulator’s portal at the time of registration of the project.
Co-promoters, whether individuals or organisations, should submit a declaration in form B of Maha-RERA (Regulation & Development) Rules, 2017.
In the backdrop of exorbitant land prices, developers are increasingly choosing joint development agreements and joint ventures in most property markets, including Mumbai and Pune. Under these, the developer enters into a pact with the land lord to jointly develop land parcels in exchange of an upfront payment and or a share in revenue of the constructed space in the completed project.
“However, in such scenarios, the sale proceeds to these individuals or organisations should not be considered as cost of the project and withdrawn from designated bank account merely by the virtue of this arrangement,“ the Maharashtra RERA’s notification said.
With this notification, for the purpose of withdrawal from the designated bank account, these individualsorganisations should be considered as promoters and therefore will be termed as co-promoters.
The government of India has enacted the Real Estate (Regulation & Development) Act 2016 and all the sections of the Act have come into force with effect from May 1, 2017. Maharashtra was one of the first to notify its rules under the Act and establish Maha RERA.