CHENNAI: To protect homebuyers and minimize project delays, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) has mandated that developers seeking project registration extensions beyond one year must deposit an additional 20% of the amounts collected from allottees into the designated project account.
This directive is issued under Section 7(3) of the RERA Act, 2016, allowing TNRERA to establish terms in favor of homebuyers rather than outright cancellation of project registrations. Officials state this measure ensures that funds collected from buyers are used for construction rather than diverted elsewhere.
TNRERA noted that many project delays are due to insufficient funds in the project escrow account, where 70% of collections are already required to be deposited. Now, if a project extension exceeds one year, the promoter must allocate an additional 20% of buyer collections into this account.
However, small and mid-sized builders have voiced concerns. “We use our own funds to build initial units before any bookings happen. Buyers typically commit after seeing physical progress,” stated S Ramprabhu, chairman of the DTCP committee at the Builders Association of India. “Requesting an extra 20% deposit when collections from buyers are low could disrupt our cash flow.” G Mohan, former president of the Chennai Southern Builders Association, added, “If delays are due to natural events like rain or floods, TNRERA should exempt builders from this requirement.”
