Realty co plans separate a/c for luxury project

Realty co plans separate a/c for luxury project
The Hindu Business Line, September 18, 2009, Page 3

S. Shanker, Mumbai

To bring in more transparency to its accounting procedure and instil greater confidence among home buyers, Bangalore-based real estate developer Lalith Gangadhar Constructions (an investee company of Kotak Realty Fund) will maintain an exclusive construction escrow account with a bank (Kotak Bank) for the LGCL-Ashlar project it is developing in Garden City.

The Rs 150-crore project comprises 63 villas on 7.75 acres, each carrying a minimum price tag of Rs 2 crore.

The developer plans to launch two more luxury format projects.

The company will keep the budgeted construction cost for the project in a separate construction escrow account from payments received from the home-buyers. The funds here will be used solely for project construction.

Assurance guaranteed

Mr Girish Puravankara, Managing Director of LGCL Developers, said, “This is a major initiative from us to give utmost comfort to our buyers. We realised that home buyers need an assurance that their investment is in safe hands. The escrow account provides added safety as well as increases transparency for our customers in a market where a lot of real estate projects are stuck because of the diversion of sales proceeds received from the customers for non-construction purposes.”

The escrow account procedure is said to be widely followed in the US, UK and Australia. Mr Puravankara said the company would alone operate the account and that the transactions were beyond the purview of buyers who had made their bookings. The account would be operated in accordance to a method the firm’s Board had decided upon.

The Associated Chambers of Commerce and Industry of India has brought out a white paper to make it mandatory for real estate developers to open up an escrow account to ensure transparency in transactions.