1. The Real Estate (Regulation and Development) Act, 2016
Presented by

2. RERA Audit – Challenges and Preparedness
Session
CA. Vinay Thyagaraj
B.Com., LLB
Chartered Accountant
Bengaluru
RERA Audit – Challenges and Preparedness
21st September, Friday at 5 PM
At Vasavi Vidyaniketan Trust, Bangalore
Venu & Vinay, Chartered Accountants

3. Presentation Overview - Contents
Post Registration – Financial Management
Funds collected from Allottees
Utilisation of / withdrawal of funds
Professional Certification
2. RERA Audit – Challenges and possible solutions
Q & A Session
Venu & Vinay, Chartered Accountants

4. Post Registration – Financial Management
Funds collected from Allottees
Utilisation of / withdrawal of funds
Professional Certifications
Venu & Vinay, Chartered Accountants

5. Types of Certificates – CA’s
Sl No
Certificate for
Act / Rule Ref
Certifying 1
Ongoing Project – 1st time
Karnataka 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
3rd proviso to sec 4(2)(l)(D)
Amounts collected from Allottees for a particular project have been utilised for the same project and
the withdrawal has been in compliance with the proportion to the % of completion of the project
Venu & Vinay, Chartered Accountants

6. Venu & Vinay, Chartered Accountants

7. Why
Whom
When
Who
How
What
Venu & Vinay, Chartered Accountants

8. Legal Mandate of RERA Audit
Why
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 particular project have been utilised for the same project and
the withdrawal has been in compliance with the proportion to the % of completion of the project
Venu & Vinay, Chartered Accountants

9. RERA Audit – Applicable to
Whom
RERA Audit – Applicable to
Applicable to All promoters of Real Estate Projects registered under RERA and not completed project :-
Questions – is it applicable if -
No money is collected from intending buyers
Development work has not been started - many reasons
Any treshhold limit – like turnover criteria / size of the project
Project is stopped / discontinued – NGT / litigation
Exclusions –
Projects not under RERA
Venu & Vinay, Chartered Accountants

10. Accordingly 30th September is the due date
When
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
Project registered with RERA post 31st March 2018 – yes / no
Project abandoned / filed under IBC
Venu & Vinay, Chartered Accountants

11. RERA Audit – who should issue report
Chartered Accountant in practice shall issue audit report
Questions :-
Who is CA -is it defined in the Act – yes
Can CA in employment audit / certify - no
Can internal auditor audit / certify - no
Can Tax Auditor certify– no
Can Statutory Auditor - yes
Can ? The Same CA, who issued periodical withdrawal certificate – yes / no
Venu & Vinay, Chartered Accountants

12. RERA Audit – where to submit
Act and Rules silent about method of submission of the Audit Report and Certificates
However authorities have made a provision to upload these reports online / manual submissions
Venu & Vinay, Chartered Accountants

13. RERA Audit – how to start
Group – multiple entities
Entity –
multiple
Projects
Project - multiple
Phases / tower
RERA Project
Understand the scheme of the project first
Venu & Vinay, Chartered Accountants

14. 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 :-
Start with RERA Application and details available there on
Understand what is mentioned in RERA Application about the project
Note down financial aspects of project as per RERA Application
Ascertain on what basis the financial details are give /declared
Estimated Cost of the Project
Estimated Cost of Land
Estimated Cost of Development
Amount collected from Allottees
Amount Spent as on date of application
Amount remaining with promoter, if any
Venu & Vinay, Chartered Accountants

15. RERA Audit – how to start ….continued
Note down project bank account declared in the RERA Application
Collect list of bank accounts maintained by promoter for a project
policy of promoter in managing the finance of a project –
Collection account and transfer viz., 30/70
Lender / JV / JD Escrow account ,if any
Passthrough charges bank account
GST / taxes bank account
Venu & Vinay, Chartered Accountants

16. RERA Audit – how to start ….continued
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
First time certificate from professionals as per KA RERD Rules
Excess money collected if any
Deposit into project account with in 90 days from the date of application
Collect total money collected from allottees
Deposit of such money in 30 / 70
Withdrawal of such 70 % money from project bank account
Supported by A / C / E certificates
Venu & Vinay, Chartered Accountants

17. RERA Audit –start …. continued
How - 4
RERA Audit –start …. continued
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
Check and ensure this information from application
Check 100 % collections are deposited (without taking 30 %)
Eg.,
funds required to complete the project – 10 Crores
Receivables as on are 8 Crores
30 / 70 is not applicable as per proviso to KRERA Rule 4(5)
Venu & Vinay, Chartered Accountants

18. RERA Audit –start ….audit now
begin
RERA Audit –start ….audit now
Consolidate all the information / documents received till 31st March 2018 in a Excel to arrive at conclusion on :-
Amounts collected for a particular project have been utilised for the same project
Withdrawals have been in proportion to the % of completion of the project
Venu & Vinay, Chartered Accountants

19. process
RERA Audit – collected
Amounts collected for a particular project to be deposited in project bank -
From allottees only
If project loan / borrowing made, it should not be deposited into PB A/c
Reconcile the receipts from various sources
Agreements / demand sent
26 AS – 1 % deduction made by allottees
GST filed (difficult as it has been filed Company wise)
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 , however certificate has a mention of during the year
Venu & Vinay, Chartered Accountants

20. RERA Audit – utilised And have been utilised for the same project
process
RERA Audit – utilised
And have been utilised for the same project
Having drawn money for PB A/c, money has been utilised to make payment to vendors, suppliers, expenses, establishment cost etc.,
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
Venu & Vinay, Chartered Accountants

21. RERA Audit – utilisation
process
RERA Audit – utilisation
Questions:- utilisation
Repayment of Loan – permitted if loan obtained is for this project
Payment of penalty or fines – no restrictions as such
Advance to suppliers – permitted – ensure such materials are supplied
GST / Indirect Tax payments – yes
Income Tax payments – NO – it is out of 30 %
Refund to clients – Yes
Payment to associate / related party / sister concern as advance – yes / no
Venu & Vinay, Chartered Accountants

22. RERA Audit – proportion and % of completion
process
RERA Audit – proportion and % of completion
Withdrawal has been in compliance with the proportion to the % of completion of the project :-
Based on Architect and Engineer Certificate
Calculate % based on financial statements / books of accounts
Prudence to be followed (which ever is lower) + advance payments towards supply of materials and services shall be considered
Venu & Vinay, Chartered Accountants

23. RERA Audit – Qualification / Non Compliance
Report
RERA Audit – Qualification / Non Compliance
Qualification / Non Compliance :-
collection from customers are deposited in other than 70 %RERA project Bank Account
collection from customers in cash, not at all deposited into bank
amount withdrawn in excess of eligible amount
Withdrawn amount has not been utilised for the same project
Non maintenance of prescribed register / records / documents (like professional certificates)
Venu & Vinay, Chartered Accountants

24. RERA Audit – Challenges
Sufficient Knowledge of Act and Rules –Both promoter and professionals
Information filled during registration is erroneous – what stand will u take
Record / data / expenses maintenance
RERA Project wise
Allocation of common expenses RERA project-wise
Basis of allocation
Loan availed and interest apportionment to RERA project-wise
Reconciliation at various stages and different records
Clarity on the statute, being new to all
In case of single RERA registration – information from Landlord and compliance there on under RERD (being a Co- Promoter)
Venu & Vinay, Chartered Accountants

25. RERA Audit – unanswered questions
avyakrta
RERA Audit – unanswered questions
Certificate has a mention of YEAR – however RERD Act 2016 applicable WEF
Which format to issue Audit Report in KA
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
Where to submit – online or manual
Venu & Vinay, Chartered Accountants

26. RERA Audit – Best Practices
To Follow
RERA Audit – Best Practices
Don’t be biased on the information and report
Don’t be under the influence of Promoters
Don’t be casual on report / certification
Collect sufficient documents / information
If you don’t know, ask others
If you are not sure – report it
Certificates issued may become public documents and amenable under RTI
Venu & Vinay, Chartered Accountants

27. Certificates – CA’s
Different states may prescribe different formats of certificates.
Currently, the regulators in few states (MH, KA, AP, TN, GJ etc.,) have prescribed the formats.
This certificate shall be issued by a CA holding COP
CA to collect project financial information from the promoter.
Collect estimated cost of project, escalation if any and details there on
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. It could be made available for viewing at the portal of the regulators in the respective states. The comments in this note are purely a matter of interpretation and not binding on any regulatory authorities. Therefore, there can be no assurance that the regulatory authorities will not take a position contrary to our comments or views.

28. 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.
Venu & Vinay, Chartered Accountants

29. RERA Audit Certificate – Form
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. ________.
Venu & Vinay, Chartered Accountants

30. RERA Audit Certificate – Form
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:

31. Documents Accounting records – updated books of accounts
Copy of application filed for registration of project under RERD Act
Details of calculations considered to arrive at estimated cost of project.
All project related documents like land documents, sanctions, clearances, NOC’s
Amount incurred towards acquisition of land or TDR etc
All bank statements of RERA project account and other bank accounts
Statement of customers, list of agreement of sales entered, advances received, balance receivables etc
Money collected from allottees, 70 % deposit made to RERA project bank account
All government fees challahs for all clearances etc
All development expenses bills, vouchers, invoices for both onsite and offsite expenditures
Advance paid for supply of materials or services vouchers, references etc
Certificates from Engineer, Architect and CA for withdrawal of money based on % of completion of construction
Project Loan or other loan statements
Interest calculation / attribution towards the project.
Indirect taxes / GST paid from time to time

32. Offences and Penalty – under RERA Act
RERA Provision
Promoter
Agent
Allottee
Non-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 default tenure up to 5% of property cost
False information while making an application to RERA
Up to 5% of the estimated project cost
Non-compliance with any provision of the Act
Up to 5% of the property cost
Non-compliance with the order of RERA
Up to 5% of cost
property cost
Non-compliance with the order of the Appellate Tribunal
Up to 10% of cost and imprisonment of up of up to 3 years or both
Up to 10% of cost and imprisonment of up of up to 1 years or both
Venu & Vinay, Chartered Accountants

33. Sl No
Challenges
Probable Solutions 1
Estimated Cost of Project declared is wrong in the Application – while registration
Let Promoter file application for amendment
Satisfy yourself before accepting such changes
Take undertaking to that effect from promoter
Issue report based on revised with a note in the certificate 2
Project is registered as ONE – No
co-operation from either promoter / Co-promoter
Proper note and qualification in the Audit report
Mentioning the basis of issuance of report 3
Differences in % of Completion between statutes (e.g., Income Tax, Accounts)
1. Yes, always there will be a difference between RERA and other statutes, reconcile and retain the details and documents 4
Non obtaining of professional certificate -
1st time certificate
For every withdrawal
@ first instance many are not aware of these compliances
Do the audit and issue the certificate
Mention in the certificate fact of non obtaining of periodical certificates for withdrawal of funds 5
Not Followed 30 / 70
1. Report in the certificate

34. Sl No
Challenges
Probable Solutions 6
Not Deposited 70 % of the amount collected in the RERA Designated bank account
1. Report in the certificate 7 8 9 10

35. write to vinay@vnv.ca 080 - 23462003 consult@reraconsultants.in

36. 080 - 23462003 consult@reraconsultants.in
Services Offered –
End to End Services under RERA
Workshops and Trainings
Consultation on Structure of Project
Project and Agent Registration
First Time and Quarterly Update
Legal Title Certification
CA, Architect, Engineer Certifications
Formation of Association for Allottees
Extension of project
RERA compliances Review / Health checkup
Defect Liability Training and Best Practices
SOP’s and Best Practices under RERA
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