Criminal action against housing finance firms

The Haryana Real Estate Regulatory Authority (HRERA) has ordered the Gurugram police to initiate criminal action against three major housing finance companies for misappropriation of funds, which were acquired from consumers in various real estate projects in the city.

Officials in HRERA said this was perhaps the first time in the country that such strict action has been taken against entities providing financial support to real estate developers.

In an order on Wednesday, Dr K K Khandelwal, HRERA’s chairman in Gurugram, ordered criminal prosecution against three major housing finance companies which have supported four ongoing real estate projects of Supertech Limited.

The companies were found to have withdrawn several crores of rupees from ‘RERA accounts’ in which homebuyers’ funds had been kept in reserve.

Supertech Limited did not respond to multiple requests for comment.

The Real Estate Regulatory Act stipulates that these funds, though in charge of the real estate developer, is to be monitored by the RERA Authority. 

It also states that up to 70% of allottees’ funds are to be kept in reserve until the developer has completed the process of construction and land acquisition.

Speaking at a press conference Wednesday, Khandelwal explained that this clause had been built into the RERA to ensure that a homebuyer’s funds are utilised specifically for the project in which the person was investing.

“This provision has been incorporated into the law to prevent unscrupulous builders from diverting consumer funds toward purposes or projects other than what the consumer has paid for,” Khandelwal said.

However, in the case of these four Supertech projects, HRERA found that the housing finance companies had arbitrarily withdrawn 100% of reserve funds. 

“This is a flagrant violation of Section 4(2)(l)(D) of the Real Estate Regulation Act, 2016,” Khandelwal added.  

All three housing finance companies have been given 30 days to deposit the amounts they have withdrawn from the respective RERA accounts.

Supertech Limited has also been served with a show cause notice seeking explanations as to why penal proceedings should not be initiated against it in the matter.

Officials said punitive action against the developer could result in a fine to the tune of Rs 400 crore.

First Published: Apr 25, 2019 01:12 IST