As a spill over of this trend, the buyer, more often than not does not know if the money he/she payed is used to complete his/her villa or apartment project.
Breaking this trend, a Bangalore-based property developer has decided that cash flow from buyers will be used for a specific project that he receives the money for. Lalith Gangadhar Constructions Private Limited (LGCL), has revealed that it will keep booking money in an escrow account for its LGCL-Ashlar project, coming up off Sarjapur Road, here and use it only for this project.
Escrow accounts for realty projects are specially created with banks for a specific project where fund flow from booking and sale of apartments are deposited. All payment related to the development of the project will only be disbursed from the said account. The money in the escrow account cannot be spent or transferred for any purpose other than the said project.
Speaking to Deccan Herald, LGCL Managing Director Girish Purvankara said “Though there is no law in India, we have gone ahead and initiated this model of execution, as we want to be as transparent as possible,” adding that it will be implemented for their Ashlar project — with 63 villas to be built across 7.7 acres at a cost of Rs 40 crore.
In addition, he said that in case of a delay in completing the project with in the stipulated time, the firm is ready to pay the buyers a fixed sum as rent until the property is handed over to the buyer. Villas in this project ar priced from Rs 2.2 crore onwards. However, the rent amont for the villas are yet to be fixed.
On the same lines, a recent white paper released by the Associated Chambers of Commerce and Industry of India, states that in countries like US, UK etc, it is a common practice to hold such accounts for real estate transactions. Further, it said that real estate developers here should be asked to open an escrow account to ensure complete transparency on the usage of funds.
Purvankar also revealed that the company has two more projects in the pipeline, one villa project in Hennur and another town house project on the Old-Airport Road.
While, the project in Hennur is to be built across 7 acres of land (65 villas), the Airport Road project will come up in 4 acres of land. Further, he conceded that Kotak Realty Fund, has invested Rs 50 crore into LGCL for multiple projects including Ashlar and that it is interested in investing another Rs 100 crore. Market sources, however point out, that Kotak is likely to take up to 49 per cent in LGCL.
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