Escrow Account India In Line With Real Estate Regulatory Act

By Author: Maruthi Kumar
Total Articles: 1
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India RERA – The Real Estate (Regulation and Development) Act, 2016 for Escrow Trust Account Management to safeguard the interest of stakeholders.
The Real Estate sector has seen an enormous growth and changes since the Indian economic growth picked up its pace since 2000’s. Further, India has seen a lot of migration from rural to urban center increasing enormously over the decade and the increase in disposable income has doubled thus giving a large scope of opportunity for the Real Estate Industry to grow abundantly.
The Lack of Systematic reform, institutionalization and fraudulent practices by few has propelled the Real Estate Industry to increased litigations and consumer dissatisfaction. The need and necessity for regulations and uniform guidelines was being felt by the industry which continued to be perceived negatively by consumers because of unscrupulous activities of a few.
Government of India has passed a – The Real Estate (Regulation and Development) Act, 2016 for a greater transparency in project execution for all commercial and Residential Projects and thus resolving all the issues concerned ...
... in Indian Real Estate from Project Completion, Dispute Resolution till Project Closure.
The Real Estate (Regulation and Development) Act 2016, safeguards and protects the interest of all stakeholders engaged in real estate project, be it – consumers, real estate developers, brokers, Capital Investors, Auditors etc through escrow trust bank account where in it acts as an trust account between all the stakeholders involved in the Project till the formal closure of the Project.
The Real Estate (Regulation and Development) Act, 2016, makes it essential for all Real estate Projects including Commercial and Residential to be covered under this Act. By this the Consumer and stakeholder’s interests have been protected and thus making the Project execution process smoothly through escrow account giving a better experience for all stakeholders involved in the project.

Understanding the gaps in manual Escrow management
 Escrow Account Law from RERA India now enforces the developers to submit mandatory land documents, approved architectural designs, trade license and approval letter from Master Developer. The trustee banks verify these documents for any discrepancies and permit the developer to open an escrow trust account.
 Now, the trustee banks are facing challenges in the escrow account in terms of its maintenance, payables & receivables, cash flow reconciliation, proper allocation of units, and escrow account integration with core banking.
 The age-old spreadsheet and paper methodology is messing up with the data extraction, validation and verification of huge volumes of unit’s creation under each project. As large number of units representing one project the banks must manually maintain individual accounts of investors against the purchased flat.
 Improper data formats and manual errors are generating huge exceptional cases and altering the final settlements of a developer.
 RERA India regulations are applied in the payables & receivables. Developers cannot use more than allocated escrow funds to their commercial campaigns and office maintenance. Here, the trustee banks may ignorantly disobey with the regulations, due to lack of regulation updates and manual errors. In addition, there are chances of untracked fund releases and tampering of funds by the developer.
In such scenario, banks must implement automated escrow account solutions to streamline their operations. Automation helps avoid fraudulence & exception cases. It simplifies the processes with high logic and minimal human intervention.
Some of the features of an escrow automated solution include
 Maintaining Role Based Access Control for all stakeholders by single guarantee account
 Funds are released only in accordance with implementing guidelines of the escrow trust account management
 Maintains complete database of the project in accordance to escrow system and refraining from age old-excel sheets
 Incorporating multi-stakeholders like developers, investors, brokers, financiers and vendor
 Records the agreement between developer, broker and an investor to reduce the fraudulence
 Monitors and manages deposits / payables & receivables
 Helps to adhere to RERA Indian law through in-built validators and alert messages
 Simplifies the process of project registration; escrow account of developer, retention account and sub account of investor
 Tracks the final settlement process
 Monitors and guarantees project completion
To conclude, banks can leverage automated escrow account services to establish unlimited sub-accounts, reduce re-keying errors, automate cash flow reconciliation and finally generate accurate reports. This, in turn, helps the banks in India to align their escrow accounts with the vision of RERA and of Ministry of Housing and Urban Poverty Alleviation.

Ascent Escrow ProMart© Management System

Ascent Escrow ProMart© is a comprehensive web based escrow management software, aligned with the ambitions and vision of Real Estate Regulators, its affiliated Banks, Property Developers and relevant Stakeholders.
Ascent Real Estate Escrow bank account is developed to specifically meet India’s rules and guidelines regarding the real estate. It will facilitate Bank’s Escrow Account Management services provided to its clients and simplify the operational process of project registration; escrow accounts opening at the developer level, retention account, as well as, sub-account opening at the investor level. It allows the Bank to validate that all required documents (pertained to Regulator or the Bank) are available before the Escrow account is opened and linked to a specific project by dual authority (maker-checker concept).