(164)

Haryana Government Gazette

Published by Authority

No. 12-2020]

CHANDIGARH, TUESDAY, MARCH 24, 2020 (CHAITRA 4, 1942 SAKA)

PART III

Notifications by High Court, Advertisement, Notices and Change of Name etc.

HARYANA REAL ESTATE REGULATORY AUTHORITY GURUGRAM

Notification

The 2nd March, 2020

Directions regarding [Compliance of Section 4(2)(l)(D)] of the Real Estate

(Regulation and Development)

Act, 2016.

No. 2/RERA GGM Directions 2020.— In exercise of the power conferred by Section 37 of the Real Estate

(Regulation and Development) Act, 2016 the Haryana Real Estate Regulatory Authority, Gurugram having

considered it necessary for the legitimate utilisation of funds by the promoter as per the provisions contained in third

proviso to section 4(2)(l)(D) of Real Estate (Regulation and Development) Act, 2016 which provides that the

promoter shall get his accounts audited within six months after the end of every financial year by a chartered

accountant in practice, and shall produce a statement of accounts duly certified and signed by such chartered

accountant and it shall be verified during the audit that the amounts collected for a particular project have been

utilised for the project and the withdrawal has been in compliance with the proportion to the percentage of completion

of the project,the Haryana Real Estate Regulatory Authority, Gurugram has decided to issue the directions herein

specified

The Haryana Real Estate Regulatory Authority, Gurugram [Compliance of Section 4(2)(l)(D)] of the

Real Estate (Regulation and Development) Act, 2016, Directions 2020

*****

Necessity and Background

Neither the Act nor the rules prescribe the format of certificates or audit report. Accordingly,these directions

are hereby issued by the authority. The directions have defined the scope of audit which cannot be less than the

scope laid down by third proviso to sub-clause (D) of clause(l) of section 4 of the Act.

Introduction

The third proviso to sub-clause (D) of clause (I) of sub-section (2) of section 4, provides that the promoter will

present statement of accounts duly audited and certified by a chartered accountant in practice, within six

months after the end of every financial year.

PART III]

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

165

Scope of Audit

Third Proviso to sub-clause (D) of clause (I) of sub-section (2) of section 4 lays down the scope of

examination to be carried out by the chartered accountant as per section 4(2)(l)(D) of the Real Estate

(Regulation and Development) Act, 2016.The scope is limited to verifying the following:

(i)

That seventy percent of the amounts realized for the real estate project from the allottees, from time to

time, have been deposited in a separate account maintained in a scheduled bank to cover the cost of

construction and the proportionate land cost and has been used only for that purpose:

(ii)

That the withdrawal from separate RERA Account of the project to coverthe cost of project, in

proportion to the percentage of completion of the project:

(iii)

That the amounts from the separate account have been withdrawn by the promoter after it is certified by

an engineer, an architect and a chartered Accountant in practice that the withdrawal is in promotion to

the percentage of completion of the project.

(iv)

That the promoter has to get his accounts audited within six months after the end of every financial year

by a chartered accountant in practice, and has produced a statement of accounts duly certified and

signed by such chartered accountant.

(v)

That it has been verified during the audit that the amounts collected for a particular project have been

utilized for that project and the withdrawals have been in compliance with the proportion to the

percentage of the project.

Declaration by the promoter

The promoter has to give declaration, supported by an affidavit, duly signed by the promoter or any person

authorized by the promoter in consonance with section 5 and 6 of the Real Estate (Regulation and

Development) Act, 2016 submitted at the time of registration of the above-mentioned project in compliance of

section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016. These directions are issued to

the promoters regarding the above mentioned compliance.

Time limit for submission of statement of accounts and certificate

The statement of accounts audited, duly certified and signed by the chartered accountant in respect of the

project for the year is to be submitted in the office of the authority till 30^th September. In case of non-

submission of statement of accounts audited duly certified and signed by the chartered accountant in respect of

the project till 30^th September is a violation of Section 4(2)(l)(D) of the Real Estate (Regulation and

Development) Act, 2016.

Audit or certification

From the scope of examination laid down in third proviso to sub-clause (D) of clause (l) of sub-section (2) of

section 4, it is seen that the reporting is about the findings of facts in respect of the aspects referred to in the

preceding paragraphs. The verification is not about expressing any opinion on the accounts as a whole or part,

or on any other aspect of accounts. An audit exercise usually involves formation and expression of an

opinion, whereas certification involves verification and reporting of facts as they are found.

Therefore, the exercise contemplated in the third proviso to sub-clause (D) of clause (I) of sub-section (2) of

section 4 is more akin to certification than it is to audit.

Role of Rules

(i)

The Government of Haryana has framed the Haryana Real Estate (Regulation and Development)

Rules, 2017. The Act provides definition of “Estimated cost of project” in section 2(v) as under:

Estimated cost of real estate project: Estimated cost of real estate project means the total cost involved

in developing the real estate project and includes the land cost, taxes, cess, development and other

charges;

(ii)

The rules have explained certain terms “land cost" and "cost of construction", etc. As per the

explanation (1) and (2) of rule 4 of Haryana Real Estate (Regulation and Development) Rules, 2017

land cost and cost of construction has been explained as under:

Land Cost: Land Cost shall be the cost incurred by the promoter, whether as an outright purchase, lease,

registration charges, stamp duty and brokerage cost etc.

Cost of construction: The construction cost shall be the cost incurred by the promoter, towards the on-

site expenditure for the physical development of the project inclusive of all statutory charges as well as

external development charges (EDC).

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

[ PART III

166

Scope of Examination

(i)

The scope of audit is explained earlier. The auditor is expected, to report on the following aspects,

namely,

(a)

That seventy percent of the amounts realized for the real estate project from the allottees, from

time to time, has been deposited in a separate account maintained in a scheduled bank to cover

the cost of construction and the proportionate land cost and has been used only for that purpose:

(b)

That the withdrawal from separate RERA account of the project have been to cover the cost of

project, in proportion to the percentage of completion of the project:

(c)

That the amounts from the separate account have been withdrawn by the promoter after it is

certified by an engineer, an architect and a chartered accountant inpractice that the withdrawal is

in proportion to the percentage of completion of the project:

(d)

That the promoter has got his accounts audited within six months after the end of every financial

year by a chartered accountant in practice, and shall produce a statement of accounts duly

certified and signed by such chartered accountant

(e)

That it shall be verified during the audit that the amounts collected for a particular project have

been utilized for that project and the withdrawals has been in compliance with the proportion to

the percentage of completion of the project.

(ii)

While verifying that the amounts collected for a project have been utilized on the project, the auditor

will confine examine that amount of collection from the allottees has been utilized on the project. The

scheme of the Act is such that it requires a promoter to deposit seventy percent of the collection

received from allottees into a separate bank account and utilize this amount for land cost and cost of

construction, thereby leading to the inference that the promoter is not free to utilize the remaining thirty

percent in any manner but only to be utilised for other items of expenditure relating to project.

Therefore, the auditor will be concerned about the end-use of the thirty percent and also the amount

deposited in to the separate bank account.

Issues relating to ongoing projects

For implementing the requirements of third proviso to sub-clause (D) of clause (I) of sub-section (2) of section 4

certain clarifications are given as hereunder.

(i)

The issue about the manner in which the certificate should be issued may arise in respect of ongoing

project registered under the Act.

(a)

The chartered accountant is required, as part of the aspects to be certified, to certify the amounts

collected from allottees have been utilized on the project. In the first year, a question may arise

about the period that the chartered accountant should cover for his examination of the

transactions.

The period could be the period beginning with the commencement of the project or beginning

with 1st April of the year or the period beginning with the commencement of the Act or the

period beginning with the date of application for registration or with the date of the registration

of the project and such period ending, in all the cases, on 31st March of the relevant financial

year.

(b)

The period covered by the first accounts certified and signed by a chartered accountant should

begin from the date of registration of the project. The reason is that the requirement of

production of annual accounts duly certified and signed by a chartered accountant is referred to

in third proviso to sub-clause (D) of clause (I) of sub-section (2) of section 4. This section

provides that the promoter shall furnish along with the application for registration a declaration

in which he commits that he shall produce a statement of accounts duly certified and signed by a

chartered accountant.

The promoter makes this commitment pursuant to a requirement that he should make a

declaration to this effect at the time of making application for registration. The commitment is

effectively an acceptance of a condition that the promoter agrees to abide by provided his project

is registered. Thus, all the obligations as a promoter as per the commitments made in the

declaration begin with the registration.

PART III]

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

167

(c)

Another ancillary question may also arise from the requirement that the chartered accountant

will certify that the collection from the allottees has been utilized for the project. Whether the

collection made since the inception of the project should be considered, and if not, whether the

collection made for the period since the commencement of the Act or the registration of the

project should be considered.

Based on the reasoning adopted in para above, it should be deemed as sufficient compliance if

the collection made for the period since registration of the project should be considered. But the

difference of 70% amount collected from the allottees for the project and amount spent on

proportionate land cost and construction cost be brought back in the separate RERA account for

whatever may be the sources

10.

Manner of Examination

(i)

In order to verify that the amounts collected were utilized on the project, the auditor will communicate

to the promoter his requirements.

(ii)

In order to ensure that the amounts collected from the allottees were utilized on the project, the auditor

will first find out that seventy percent of such amounts was deposited in the separate bank account, the

auditor may call for the particulars in the following format.

(a)

List of allottees in the following Table:

S. No

Name and

Address of

Allottee

Description

property

sold

Gross

consideration

per

Agreement/

Letter

Allotment

Cumulative

Amount

collected up

to the last

day of the

previous year

Aggregate

amount

collected

during

the

year

Total

amounts

collected

up to date

(5)+(6)

Balance

collectible

as at…

Total

amount

collected

for

the

project

Total cost

involved

the

project

Note: Particular in column No.6 will be supported by a subsidiary statement giving date-wise

collection from each party. The aggregate figure of collection from a particular allottee will

appear in column No.6.

(b)

Ledger accounts of the allottees.

(c)

Relevant Bank statements of the account with the separate bank.

10.2.1 Check, at random, receipts credited to the accounts of the allottees with corresponding

amounts appearing in the bank account. The deposit in the bank account will be at least

seventy percent of the concerned receipt credited to the relative allottee's account.

(iii)

The second aspect to be verified is that the withdrawals made from time to time from the separate bank

account were in accordance with the percentage of completion of project criteria for deciding

percentage completion of the project.

(a)

In order to report on the aspect of withdrawals, the auditor may call for copies of certificates

issued by the chartered accountant, the engineer and the architect.

(b)

The auditor will verify the individual withdrawals from the separate bank account with the help

of the relevant certificates issued by the chartered accountant on the basis of which the

withdrawals were made. The auditor is advised to verify on a random basis the certificates

issued by the chartered accountant to satisfy himself that the chartered accountant has correctly

worked out and certified the percentage of completion of work.

(c)

In case the chartered accountant certifying the annual accounts finds that the amount deposited

into the separate bank account is short of the seventy percent of the amount collected

mandatorily required to be deposited, he will make a note of that and find out the end-use of the

amount not deposited. If the chartered accountant finds that such amount was not utilized on the

project, he will report the fact. It may be noted that it will not matter that the promoter has made

good the shortfall in the next deposit and utilized the amount on project, for if there is a single

case of non-utilization of amount collected from allottees on the project, it will be reported

notwithstanding the fact that such lapse may have been cured later by the promoter.

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

[ PART III

168

However, before reporting such lapses, the chartered accountant, if satisfied about the fact that

the lapse was unintentional and was the result of a pure human error, may decide to point out the

lapse in his report without adversely commenting that the withdrawals were not in compliance

with the provisions of the Act.

11.

Auditor and chartered accountant issuing certificates for withdrawal

It may have been seen that the auditor is required to report on whether or not the amounts collected from the

allottees were utilized on the project and that the withdrawals from the bank account were made in compliance

with the provisions of the Act. In the course of verification of these aspects, the auditor will be required to

satisfy himself that the figure of the project cost incurred which was used by the certifying chartered

accountant as the basis for the purpose of working out the percentage of completion of work, was correct. If

the project cost incurred at a point of time when the certificate is issued is inflated, it may result in certification

of a higher percentage of completion of work, which in turn may have resulted in a higher withdrawal than

would be permitted if the correct project cost as was incurred was reported. Therefore, the chartered

accountant issuing certificates for withdrawals from the bank may be a chartered accountant other than the

chartered accountant who will certify the annual accounts referred to in third proviso to sub-clause (D) of

clause (I) of sub-section (2) of section 4 of the Act. Chartered Accountant shall ensure that repayment of any

loan is not made directly from serrate RERA Account. There shall be only one separate RERA Account for a

project.

12.

Audit and certification in conformity with these directions

Certification by a chartered accountant for withdrawal from the separate bank account, and in behalf of audit

referred to in third proviso to sub-clause (D) of clause (I) of sub-section (2) of section 4in conformity with

these directions have been maintained. The auditor will follow the rules in such cases and prepare his

certificate/report in the format, specified for the purpose.

Audit report form by the chartered accountant who is the statutory auditor of the promoter/promoter’s

company/firm/business entity is annexed herewith these directions. Form attached as annexure A.

13.

Disclosure

In all the cases of audit, the auditor is advised to append his notes explaining certain practices he has adopted

in certification, which, he believes, require disclosure. The auditor may also state in such notes if he has

departed from normal practice which he otherwise would have followed but for certain reasons or

circumstances. In such cases, the auditor will explain the circumstances and why he took a particular position.

14.

Deviations

These directionshave been framed for laying down the manner in which the chartered accountant should issue

the certificate for withdrawal and on the annual accounts. In case of deviation, it is advised that the chartered

accountant append an explanatory note to his certificate why he has taken a particular view or stand.

(Sd.)…,

Secretary,

Haryana Real Estate Regulatory Authority, Gurugram.

PART III]

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

169

Annexure A

FORM

[See Section 4(2)(l)(D)]

ON THE LETTER HEAD OF CHARTERED ACCOUNTANT (WHO IS STATUTORY AUDITOR OF THE

PROMOTER/PROMOTER’S COMPANY / FIRM/BUSINESS ENTITY)

ANNUAL REPORT ON STATEMENT OF ACCOUNTS

To,

Name of the Promoter

Address of the promoter

I/We _________________ the auditor have examined the books and all the relevant records of

______________________ (Promoters Name) having PAN No. ____________ related to_________________

(Project Name) Project RERA Registration No. _____________________ having site address as

_______________________ for the year ending 31st March_________

We have conducted our engagement and examination in accordance with the standards on auditing, Guidance

Note on Reports or Certificates for Special Purpose and other applicable authoritative pronouncements issued

by the Institute of Chartered Accountants of India. We confirm our compliance to all such applicable

pronouncements and with the ethical requirements of the code of ethics issued by the Institute of Chartered

Accountants of India.

It is the primary responsibility of the management of ______________________ ( Name of the

entity/company) to prepare, produce and maintain all accounting and other relevant supporting records and

documents required for the purpose of this certificate. This responsibility includes the design, implementation

and maintenance of necessary and appropriate internal control commensurate with the nature and size of

entity.

Period under Certificate: From _________________ to 31st March___________________________________

Whether separate RERA Bank Account has been opened as

envisaged in Haryana RERA Bank Account Direction, 2019?

YES

1.1

Whether the existing operational Bank account was

made known at the time of application for registration

as RERA Bank account?

YES

Details of RERA Bank Account as registered with Haryana RERA (Mention details of three bank

accounts i.e master a/c, RERA compliant account and free account)

2.1

Bank Name

2.2

Branch Name

2.3

Account Name

In case of change in RERA Bank Account as indicated above,

whether due approval following prescribed documentation was

taken from Haryana RERA under the Haryana RERA Bank

Account Directions, 2019 ?

YES

Whether any of the Annexure C issued during the certificate

period mandated deposit of 100% of the money collected from

the booking of the project units (refer Annexure D of additional

information for ongoing projects of Annexure C)

YES

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

[ PART III

170

4.1

If Yes, please mention the certificate date and name of certifying chartered accountant

(i)

Certifying Professional

(ii)

Date of Certificate

Whether the required proportion of money collected from the

allottees of the project units (as indicated in Annexure C)

deposited in the RERA Bank Account?

YES

5.1

If no, please mention the amount not deposited under the above non-compliance

Sr.

No.

Period (From ____ to _____ )

Amount not deposited

Whether the project registration is as New or Ongoing Project?

YES

6.1

In case of New project registration, whether there was

any booking taken prior to project registration?

YES

6.2

If Yes, Please provide details below :

(i)

Number of such units booked

(ii)

Amount Collected from such bookings

(iii)

Total Consideration of such bookings

Whether all amounts withdrawn from RERA bank account were

within the withdrawal limit as certified under the relevant

“Annexure C” issued during the period?

YES

7.1

If no, please provide the below details

Sr.

No.

Period (From _____ to ____)

Amount of Excess withdrawals

Whether any fixed deposit was created out of funds deposited in

RERA Bank account?

YES

8.1

If Yes, whether the fixed deposit is credited with the

same RERA account bank branch in compliance with

para 8 (iii) of Haryana RERA Bank Account

Directions, 2019

YES

8.2

If Yes to 8 above, whether any lien is created on such

fixed deposit in violation of para 8(iii) of Haryana

RERA Bank Account Directions, 2019?

YES

PART III]

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

171

Whether there has been any instance of receipt of consideration

in excess of 10% of apartment value without entering into a

registered agreement for sale?

YES

9.1

If Yes, please provide the information as below

Sr.

No.

Unit Number

Total Consideration

Amount received in excess of

10% till registered agreement for

sale

10.

Whether

the

project

executed

availing

any

loan/borrowings?

YES

10.1

If Yes, please provide details as below

Sr.

No.

Name

& Type

lender

Amount of

Loan

Sanctioned

(Rs.)

Sanction Date

Loan

Outstanding

31st

March _____

Rs.)

Collateral

Mortgage

Details

Amount of

Default in

Repayment

if any

10.2

Whether the financial encumbrance is reported

to Haryana RERA?

YES

10.3

If Yes to 10.2 above, whether promoter has

mortgaged or created a charge on any booked

unit?

10.4

Whether any repayment of loan has been made

from RERA account

YES

11.

Whether any discrepancy noticed in Annexure A,B,C

with reference to their issuance in accordance with the

RERA Act, Rules and regulations?

YES

11.1

If Yes, please provide the details below

Sr.

No.

Annexure Tick

Applicable

Certifying

professional

Date of Issuance

Details

Discrepancy

12.

Whether any amount of collected for the project/phase has been

transferred to any related party (related party as mentioned in

company act 2013)

YES

HARYANA GOVT. GAZ., MAR. 24, 2020 (CHTR. 4, 1942 SAKA)

[ PART III

172

12.1

If Yes, please provide the details below

S. No.

Date of loan/advance

Name

the

Related Party

Amount of

Loan/

advance

13.

Please specify any other things which are not covered above

I/We have obtained all necessary information and explanation from promoter, during the course of our audit,

which in my/our opinion are necessary for the purpose of this certificate. Also I/we have attached herewith the

copies of financial statements and audit report of the _______________ (project/phase as registered) for the

financial year ending on 31st march_______________.

I/We hereby confirm that I/We have examined the prescribed register, books, documents and relevant records

of _________________________(project) for the period ended and this certificate is being issued based on the

records and document produced before me and explanations provided to me by the management of the

promoter based on the verification of books of accounts till (date) 31st March______________

For Name of the Firm

Date:

Place:

(Signature and Stamp/Seal of the Signatory CA)

Name of the Signatory:

Proprietor/Partner

Membership No.:

UDIN:

Full Address of firm:

Enclosed:



Copy of all CA Certificates submitted at the time of withdrawal from RERA account maintained as per

Haryana Real Estate Bank Account Directions 2019.



Copy of Annexures A, B, and C for all four quarter & required to submit with Report.



Copy of balance sheet & profit and loss account and cash flow statement for the project/phase as

registered.

[71-1]

8706—C.S.—H.G.P., Pkl.