Customer Care No.

91-1145562222

Real Estate Bill - Internal

control implications

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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.

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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,

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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-

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