Bangalore realty co to maintain escrow account for its project

Bangalore realty co to maintain escrow account for its project

Bangalore realty co to maintain escrow account for its project

Union Finance Minister Pranab Mukherjee (C) speaks as P V Bhide (L), Revenue Secretary, Ministry of Finance and R. Seshasayee, CII Past President, look on at a CII seminar and interactive session on the Direct Tax Code in Bangalore on Saturday. PTI

In a first-of-its-kind move in India that could elevate corporate governance standards and usher in transparency in realty transactions, a Bangalore-based real estate player has decided to maintain an exclusive construction escrow account with a bank for its luxury homes project.

The Girish Puravankara-run Lalith Gangadhar Constructions Limited (LGCL) will now keep the budgeted construction cost for its 63-villa LGCL-Ashlar project in a separate construction escrow account from the payments of the home-buyers.

"This is a first in the Indian real estate sector though the practice is widely followed abroad," LGCL's Managing Director, Girish Puravankara, told PTI here today.
LGCL, a start-up firm, has Kotak Realty Fund as an investor. The Fund has invested close to Rs 50-crore, Puravankara said.

The move will ensure comfort to home-buyers as the money they pay to a realty company for a particular project will now be used only for that project. "Their money now cannot be diverted to any other project or for other purposes," Puravankara said.
"I am in discipline to use their money for only that particular project," Puravankara said.

The escrow account increases transparency for home-buyers in a market where a lot of real estate projects are stuck because of the diversion of sales proceeds received from customers for non-construction purposes, Puravankara said.
Industry body, Assocham, has recently brought out a White Paper to make it mandatory for realty companies to open an escrow account to ensure transparency in real estate transactions.

LGCL's Ashlar project was launched in November 2008 and comprises of 63 high-end villas spread over 7.75-acres of land.
"All approvals are in place and 45 villas are under construction," Puravankara said, adding that the price of each villa is between Rs 2-3-crore.