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Real Estate Bill - Internal control implications

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The Real Estate (Regulation and Development) Bill has been cleared by both houses of parliament. The provisions of this new legislation assume critical importance in the context of internal controls at real estate companies. – PowerPoint PPT presentation

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Title: Real Estate Bill - Internal control implications


1
Customer Care No. 91-11-45562222
Real Estate Bill - Internal control implications
www.taxmann.com
2
  • 1.0 Introduction
  • The Real Estate (Regulation and Development) Bill
    has been cleared by both houses of parliament.
    The provisions of this new legislation assume
    critical importance in the context of internal
    controls at real estate companies. CFOs,
    controllers and audit committees of companies in
    this sector need to gear up for system and
    process changes to ensure compliance with this
    new legislation and at the same time comply with
    the provisions of section 134 of the Companies
    Act.

Customer Care No. 91-11-45562222
www.taxmann.com
3
  • 2.0 Internal Controls - Provisions of Companies
    Act
  • As per section 134 of the Companies Act, 2013,
    the Board of Directors, in case of a listed
    company, are responsible for laying down internal
    financial controls and ensuring the adequacy and
    effectiveness of such controls. The Directors are
    also responsible for devising proper systems to
    ensure compliance with the provisions of all
    applicable laws and that such systems are
    adequate and operating effectively.
  • The companies legislation articulates that the
    term "internal financial controls" to mean those
    policies and procedures adopted by the company
    for ensuring the orderly and efficient conduct of
    its business, including adherence to company's
    policies, the safeguarding of its assets, the
    prevention and detection of frauds and errors,
    the accuracy and completeness of the accounting
    records, and the timely preparation of reliable
    financial information
  • 3.0 Real Estate Regulation and Development Bill -
    Salient features
  • The salient features of the impending regulation
    are discussed herein below
  • a. Every commercial and residential project
    (greater than 500 sq.m or having eight units) to
    be registered with the Real Estate Regulatory
    Authority (RERA) to be set up in each state,
  • b. Project registration requirements apply to
    both on-going and new projects,
  • c. Disclosures encompassing details of promoters,
    project plans, status of land, approvals etc.
    need to be submitted at the time of project
    registration,



Customer Care No. 91-11-45562222
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4
  • d. Builders required to deposit 70 of money
    collected from buyers in an escrow account to be
    utilized only for purpose of construction and
    payment of land,
  • e. Sale of units to be based on carpet area,
  • f. Developers and buyers to pay same rate of
    interest on default,
  • g. Developers to advertise and sell homes in
    projects only after all approvals are obtained
    from local authorities.
  • 4.0 Conclusion
  • The present legislation was anticipated as the
    Bill was in public domain for some time. The
    Board of Directors in general and audit
    committees in particular are responsible for
    ensuring that an organization has good internal
    controls in place to ensure compliance with all
    applicable laws and legislations. Systems,
    process and controls need to be dynamic as
    changes to regulatory requirements are a common
    and expected feature of the business environment.
  • It is time to gear up for these changes, more so,
    in the context of an impending convergence with
    International Financial Reporting Standards
    (IFRS)

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Customer Care No. 91-11-45562222
5
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