Act before the authorities come knocking!
Author: E. Suhail Ahmed – Partner Trialbase Advocates, Partner Smriti Legal LLP (Advocates), Principal Legal Consultant at RERA Consultants LLP.
Introduction:
In a turbulent real estate market, the last thing any promoter or developer needs is a notice from regulatory authorities. Such notices not only impact operations but can also affect your sales momentum in more ways than one.
Hence, it is important for promoters and developers to understand the importance of Filing of Annual Audit Reports Under RERA.
Importance of Filing of Annual Audit Reports Under RERA in Karnataka.
1.
The Real Estate (Regulation and Development) Act, 2016 (RERA), under the third Proviso to Section 4(2)(l)(D), contemplates/requires that a Promoter of a project which is registered under the provisions of RERA, to get the accounts relating to that project audited within six months after the end of every financial year. It further requires that the audited report including statement of accounts is duly verified and certified by a Chartered Accountant in practice. The produced report will be verified during the audit to check if the amounts collected for a particular project have been utilized for the respective project and withdrawal has been done in proportion to the percentage of project completion.
2.
K-RERA prescribes that the Annual Audit for a project be done by filing the statement of accounts in Form-7 online which is prescribed by it and is available on the web portal of K-RERA- https://rera.karnataka.gov.in/resources/downloads/Form-7.pdf
3.
The Authority enables filing of the Annual Audit Report after the end of the financial year. Notices will be issued to Promoters of all registered projects which have not been reported as completed in the previous financial year. In case of non-compliance with mandatory requirement of submission of the Annual Audit Reports, the authority also issues a circular which is generally uploaded on the web portal of K-RERA.
4.
K-RERA enables the portal for filing of the Annual Audit. Communication will be issued to Promoters of registered projects on the requirement of filing of Annual Audit Reports and informs them of the extension of time, if any, for submission of the same.
5.
If the Promoters do not file the Annual Audit Reports within the prescribed time, the Authority, in the past, has taken cognizance of the same as a violation of Section 4 of the Act. Promoters who have violated the requirement to file the Annual Audit Report have been levied a penalty up to 1% of the estimated cost of the project under Section 60 of the Act..
6.
It is necessary for Promoters of projects which are registered under the provisions of the Act in Karnataka to ensure that the Annual Audit Reports as prescribed by Karnataka-RERA (KA–RERA) file the Annual Audit Reports within the due date or such extended date. When complied on time, the consequence of levying penalty will not arise.
7.
If any Promoter has not filed the Annual Audit Report for the year 2022-23, he/she/it may have received the show cause notice from KA- RERA for non-filing of the Annual Audit (Notice under Section 4 (2) (l) (D) of the RERA Act, 2016 for the Financial Year 2022-23). It is critical to reply to the show cause notice on priority, and the Annual Audit Report must be filed immediately for the relevant period to comply with the Act and avoid penalties.
Key Takeaways:
- Filing of Annual Audits should be done as prescribed by the respective state’s authority.
- Filing of Annual Audits under the Real Estate (Regulation and Development) Act, 2016 (RERA) must be mandatorily done within six months after the end of a financial year.
- Real estate projects that are reported as ‘completed’ during the previous financial year are exempted for the current year’s Annual Audit Filing.
- Project specific Statement of Accounts must be duly audited and certified by practicing Chartered Accountants (CAs)
- Respective state’s RERA authority will use the submitted audited report to verify a project’s collected funds and utilization are aligned with the project’s progress during its audit process.
Disclaimer:
The information contained in this article is provided for general informational purposes only and does not constitute legal advice. Readers should not act or refrain from acting on the basis of any content included herein without seeking appropriate legal or professional advice on the specific facts and circumstances at issue.
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