presented by - taxguru.in · 2019-01-01 · rera audit –applicable to applicable to all promoters...

The Real Estate (Regulation and Development) Act, 2016

Presented by

Session

CA. Vinay T B.Com., LLBChartered Accountant Bengaluru

Mr E.Suhail AhmedB.A.L., LLBAdvocateBengaluru

Venu & Vinay, Chartered Accountants

Presentation Overview - Contents

1. Post Registration – Financial Management

a. Funds collected from Allotteesb. Utilisation of / withdrawal of funds c. Professional Certification

2. RERA Audit – Challenges and possible solutions

Q & A Session


Post Registration – Financial Management

a. Funds collected from Allotteesb. Utilisation of / withdrawal of funds c. Professional Certifications


Types of Certificates – CA’s

Sl No Certificate for Act / Rule Ref Certifying1 Ongoing Project – 1st

timeKarnataka RERD Rule-Rule 4(2)(c )

Extent of development carried out, pending – money collected from allottees, spent for project and balance with promoter

2 On every withdrawal from project Bank Account

RERD Act –

2nd proviso to sec 4(2)(l)(D)

Withdrawal of money from project bank account is in proportion to the % of completion of the project

3 Annual Audit under RERD Act

RERD Act –

3rd proviso to sec 4(2)(l)(D)

1. Amounts collected from Allottees for a particular project have been utilised for the same project and

1. the withdrawal has been in compliance with the proportion to the % of completion of the project


Why

Whom

When

Who

How

What


Legal Mandate of RERA Audit

Annual Audit under RERD Act

RERD Act –

3rd proviso to sec 4(2)(l)(D)

Amounts collected from Allottees for a particularproject have been utilised for the same projectand

the withdrawal has been in compliance with theproportion to the % of completion of the project

Why


RERA Audit – Applicable to

Applicable to All promoters of Real Estate Projects registered under RERA and notcompleted project :-

Questions – is it applicable if -

1. No money is collected from intending buyers

2. Development work has not been started - many reasons

3. Any treshhold limit – like turnover criteria / size of the project

4. Project is stopped / discontinued – NGT / litigation

5. Exclusions –

a. Projects not under RERA

Whom


RERA Audit – Due date for furnishing report

Accounts to be audited within six months after the end of financial

year

Accordingly 30th September is the due date

Questions :- is audit applicable if

1. Project registered with RERA post 31st March 2018 – yes / no

2. Project abandoned / filed under IBC

When


RERA Audit – who should issue report

Chartered Accountant in practice shall issue audit report

Questions :-

1. Who is CA -is it defined in the Act – yes

2. Can CA in employment audit / certify - no

3. Can internal auditor audit / certify - no

4. Can Tax Auditor certify– no

5. Can Statutory Auditor - yes

6. Can ? The Same CA, who issued periodical withdrawal certificate – yes / no

Who


RERA Audit – where to submit

1. Act and Rules silent about method of submission of the Audit Report and

Certificates

2. However authorities have made a provision to upload these reports online /

manual submissions

where


RERA Audit – how to start

Understand the scheme of the project first

How

Group –multiple entities

Entity –

multiple

Projects

Project -multiple

Phases / tower

RERA Project


RERA Audit – how to start

Understand the scheme of the project first – one cannot issue the RERA audit

certificate in isolate without understanding project details :-

1. Start with RERA Application and details available there on

2. Understand what is mentioned in RERA Application about the project

3. Note down financial aspects of project as per RERA Application

a. Ascertain on what basis the financial details are give /declared

i. Estimated Cost of the Project

a) Estimated Cost of Land

b) Estimated Cost of Development

ii. Amount collected from Allottees

iii. Amount Spent as on date of application

iv. Amount remaining with promoter, if any

How


RERA Audit – how to start ….continued

4. Note down project bank account declared in the RERA Application

5. Collect list of bank accounts maintained by promoter for a project

6. policy of promoter in managing the finance of a project –

a. Collection account and transfer viz., 30/70

b. Lender / JV / JD Escrow account ,if any

c. Passthrough charges bank account

d. GST / taxes bank account

How -2


RERA Audit – how to start ….continued

7. Collect professional certificates till 31st March 2018 obtained by the promoter

on every withdrawal (refer Sec 4(2)(l)(D) 2nd proviso) – A / C / E

8. First time certificate from professionals as per KA RERD Rules

a. Excess money collected if any

b. Deposit into project account with in 90 days from the date of application

9. Collect total money collected from allottees

a. Deposit of such money in 30 / 70

10. Withdrawal of such 70 % money from project bank account

a. Supported by A / C / E certificates

How -3


RERA Audit –start …. continued

11. If receivables in an ongoing project are less than the estimated cost of

balance construction, then the promoter shall deposit 100 per cent of the

amounts to be realised in the separate account

a. Check and ensure this information from application

b. Check 100 % collections are deposited (without taking 30 %)

Eg.,

a. funds required to complete the project – 10 Crores

b. Receivables as on 10-7-2017 are 8 Crores

c. 30 / 70 is not applicable as per proviso to KRERA Rule 4(5)

How -4


RERA Audit –start ….audit now

Consolidate all the information / documents received till 31st March 2018 in a

Excel to arrive at conclusion on :-

1. Amounts collected for a particular project have been utilised for the same

project

2. Withdrawals have been in proportion to the % of completion of the project

begin


RERA Audit – collected

1. Amounts collected for a particular project to be deposited in project bank -

a. From allottees only

b. If project loan / borrowing made, it should not be deposited into PB A/c

c. Reconcile the receipts from various sources

i. Agreements / demand sent

ii. 26 AS – 1 % deduction made by allottees

iii. GST filed (difficult as it has been filed Company wise)

iv. Bank account statements

Amount collected during the year for this project is Rs. ___________ and

amounts collected till date is Rs. __________ (since inception)

Question – RERD Act 2016 WEF 1-5-2017, however certificate has a mention

of during the year

process


RERA Audit – utilised

And have been utilised for the same project

a. Having drawn money for PB A/c, money has been utilised to make

payment to vendors, suppliers, expenses, establishment cost etc.,

b. Intent is not to divert the funds, having collected from allottees

Amount withdrawn during the year for this project is Rs. _____________ and

amount withdrawn till date is Rs. ________ (since inception)

collected till date and withdrawn TILL DATE means to review the details since

inception of the project -

• how to rely on the information

• means a duplication of review

• Additional work to promoter

process


RERA Audit – utilisation

Questions:- utilisation

1. Repayment of Loan – permitted if loan obtained is for this project

2. Payment of penalty or fines – no restrictions as such

3. Advance to suppliers – permitted – ensure such materials are supplied

4. GST / Indirect Tax payments – yes

5. Income Tax payments – NO – it is out of 30 %

6. Refund to clients – Yes

7. Payment to associate / related party / sister concern as advance – yes / no

process


RERA Audit – proportion and % of completion

Withdrawal has been in compliance with the proportion to the % of

completion of the project :-

a. Based on Architect and Engineer Certificate

b. Calculate % based on financial statements / books of accounts

c. Prudence to be followed (which ever is lower) + advance payments towards

supply of materials and services shall be considered

process


RERA Audit – Qualification / Non Compliance

Qualification / Non Compliance :-

1. collection from customers are deposited in other than 70 %RERA project

Bank Account

2. collection from customers in cash, not at all deposited into bank

3. amount withdrawn in excess of eligible amount

4. Withdrawn amount has not been utilised for the same project

5. Non maintenance of prescribed register / records / documents (like

professional certificates)

Report


RERA Audit – Challenges

1. Sufficient Knowledge of Act and Rules –Both promoter and professionals

2. Information filled during registration is erroneous – what stand will u take

3. Record / data / expenses maintenance

a. RERA Project wise

4. Allocation of common expenses RERA project-wise

a. Basis of allocation

b. Loan availed and interest apportionment to RERA project-wise

5. Reconciliation at various stages and different records

6. Clarity on the statute, being new to all

7. In case of single RERA registration – information from Landlord and

compliance there on under RERD (being a Co- Promoter)

Challenges


RERA Audit – unanswered questions

1. Certificate has a mention of YEAR – however RERD Act 2016 applicable

WEF 1-5-2017

2. Which format to issue Audit Report in KA

3. Who should certify – as few states have published the format of certificate

to be issued - STATUTORY AUDITOR of the promoter to issue certificate

in the absence of clarity

4. Where to submit – online or manual

avyakrta


RERA Audit – Best Practices

1. Don’t be biased on the information and report

2. Don’t be under the influence of Promoters

3. Don’t be casual on report / certification

4. Collect sufficient documents / information

5. If you don’t know, ask others

6. If you are not sure – report it

Certificates issued may become public documents and amenable under RTI

To Follow


Certificates – CA’s

1. Different states may prescribe different formats of certificates.2. Currently, the regulators in few states (MH, KA, AP, TN, GJ etc.,) have

prescribed the formats.3. This certificate shall be issued by a CA holding COP4. CA to collect project financial information from the promoter.5. Collect estimated cost of project, escalation if any and details there on6. CA to collect and consider all professional certificates issued from time to

time for withdrawal of project.

This certificate shall be submitted to authorities and is a public document. Itcould be made available for viewing at the portal of the regulators in therespective states. The comments in this note are purely a matter ofinterpretation and not binding on any regulatory authorities. Therefore, therecan be no assurance that the regulatory authorities will not take a positioncontrary to our comments or views.

RERA Audit Certificate – Form

Annual Report on Statement of Accounts(on the letter head of chartered accountants who is statutory auditor of the promoter’s

company/firm)

To,[NAME & ADDRESS OF PROMOTER]

SUBJECT: Report on Statement of Accounts on project fund utilization and withdrawal by [Promoter] for the period from ____ to ___with respect to project______ RERA Registration Number ________

1. This certificate is issued in accordance with the provisions of the Real Estate (Regulation and Development) Act, 2016 read along with the Real Estate (Regulation and Development)(Registration of Real Estate Projects, Registration of Real Estate Agents, Rates of Interest and Disclosures on Website) Rules, 2017 Karnataka.



2. I/We have obtained all necessary information and explanation from the Promoter/ Company, during the course of our audit, which in my/our opinion are necessary for the purpose of this certificate.

3. I/We hereby confirm that I/We have examined the prescribed registers, books and documents, and the relevant records of [Promoter] for the period ended ________ and hereby certify that:

i. M/s.____ (Promoter) have completed ________% of the project titled ______ RERA Registration No._____located at ____________.ii. Amount collected during the year for this project is Rs. ___________ and amounts collected till date is Rs. __________.iii. Amount withdrawn during the year for this project is Rs. _____________ and amount withdrawn till date is Rs. ________.



4. I/We certify that the [Name of Promoter] has utilized the amounts collected for___ project only for that project and the withdrawal from the designated bank account(s) of the said project has been in accordance with the proportion to the percentage of completion of the project.

(If not, please specify the amount withdrawn in excess of eligible amount or any other exceptions)

Signature and Stamp/Seal of the Signatory CA) Name of the Signatory: Place: Full Address: Date: Membership No.: Contact No. : E mail:

Documents

1. Accounting records – updated books of accounts2. Copy of application filed for registration of project under RERD Act3. Details of calculations considered to arrive at estimated cost of project. 4. All project related documents like land documents, sanctions, clearances, NOC’s 5. Amount incurred towards acquisition of land or TDR etc6. All bank statements of RERA project account and other bank accounts 7. Statement of customers, list of agreement of sales entered, advances received, balance

receivables etc8. Money collected from allottees, 70 % deposit made to RERA project bank account9. All government fees challahs for all clearances etc10. All development expenses bills, vouchers, invoices for both onsite and offsite expenditures11. Advance paid for supply of materials or services vouchers, references etc12. Certificates from Engineer, Architect and CA for withdrawal of money based on % of

completion of construction13. Project Loan or other loan statements14. Interest calculation / attribution towards the project.15. Indirect taxes / GST paid from time to time

Offences and Penalty – under RERA Act

RERA Provision Promoter Agent AllotteeNon-registration of project/agent with RERA and continue to do so

Up to 10% of project cost and imprisonment of 3 years for continuous default

Penalty of INR10,000 per day during defaulttenure up to 5% ofproperty cost

False information while making an application to RERA

Up to 5% of the estimated project cost

Non-compliancewith any provision ofthe Act


Up to 5% of the property cost

Non-compliance with the order of RERA


Up to 5% of costproperty cost

Up to 5% of costproperty cost

Non-compliance with the order of theAppellate Tribunal

Up to 10% of cost andimprisonment of up ofup to 3 years or both




080 - 23462003

[email protected]

www.reraconsultants.in

write to

[email protected]

mailto:[email protected]

mailto:[email protected]

RERA CONSULTANTS LLP No 13, Palace Cross Road, Bangalore

080 - [email protected]

www.reraconsultants.in

Services Offered –

End to End Services under RERA 1. Workshops and Trainings

2. Consultation on Structure of Project

3. Project and Agent Registration

4. First Time and Quarterly Update

5. Legal Title Certification

6. CA, Architect, Engineer Certifications

7. Formation of Association for Allottees

8. Extension of project

9. RERA compliances Review / Health checkup

10. Defect Liability Training and Best Practices

11. SOP’s and Best Practices under RERA