It is just over a month since the Haryana Real Estate (Regulation and Development) Act (H-Rera) was notified in the state. And already, the registration of ongoing projects under the Act has hit a roadblock for many developers. The problem, claim developers, is with the clause that requires them to submit 70% of their sale proceeds to an escrow account, in order to ensure that money taken from the buyers is not diverted for other projects or purposes.

Developers said in ongoing projects, where only 5-10% of the work is pending, they have already invested most of the amount deposited by buyers in construction, making it impossible for them to submit the amount required. "In projects where we have completed 80-90% of the work, we cannot submit 70% of the sale proceeds in the escrow account. If we were to do so, we won't be able to complete these projects," said a city-based developer with several ongoing projects.

In case a developer fails to register due to the said clause, they are liable for a penalty, which is 10% of the total project cost. "In case of ongoing projects, we're now waiting for the projects to be completed, before we approach the government," said another developer, requesting anonymity.

However, in these cases, many projects will be liable for a 10% penalty, which will be a huge cost to the developers. Sources within the industry said the quantum of such projects might be as high as 40% of the total, though no official numbers are available in this regard.

The builder lobby had approached the state government to get this clause modified before it got notified in the state, but the government did not budge. "We'd approached the state government and asked them to follow the Maharashtra model, where the developer is asked to submit a plan explaining the cash flow for a particular project, for smooth completion of the project, instead of asking them to deposit 70% of the payment collected from buyers in an escrow account," said Praveen Jain, president, NAREDCO.

Government officials however claimed these are mere excuses by developers in order to shun registrations. "We have given them an option to give us a detailed plan of the money they took from buyers, and how and where was it spent," said Dilbag Singh Sihag, official of the H-Rera.

The money has to be submitted under four categories — land cost, statutory charges, infrastructure development and miscellaneous. Sihag added, "As of now, 547 applications have been received, out of which 185 projects have been registered. Additionally, 300 real estate agents have got themselves registered."