In a move aimed at tightening financial compliance within the real estate sector, the Tamil Nadu Real Estate Regulatory Authority (TNRERA) has made it mandatory for developers to deposit an additional 20% of the total amount collected from allottees when seeking an extension of project registration beyond one year. The provision has been brought under Section 7(3) of the Real Estate (Regulation and Development) Act, 2016.
The new condition applies to all developers who seek a second or subsequent extension of registration beyond the one-year permissible extension already allowed by the regulator. This 20% must be deposited into the separate escrow account that already holds the previously mandated 70% of buyer collections.
According to TNRERA officials, the decision follows repeated observations that developers seeking long-term extensions often show significant shortfalls in their escrow balances, despite mandatory requirements. The authority aims to discourage fund diversion and improve buyer protection, particularly in cases where projects are delayed for multiple years.
A senior regulatory officer at TNRERA said that in several extension cases, project completion remained uncertain due to inadequate funds left in the designated account. The authority believes the additional 20% deposit will ensure that only financially capable developers seek such extended timelines.
The decision has prompted mixed responses from industry stakeholders. S Ramprabhu, who chairs the DTCP committee of the Builders Association of India, flagged concerns about the financial feasibility for mid-sized developers. He pointed out that many projects begin construction through self-funding, and initial buyer contributions typically come only after visible site progress. He indicated that requiring an additional 20% deposit at the extension stage could strain working capital for many small and medium developers.
G Mohan, former president of the Chennai Southern Builders Association, also expressed apprehension, particularly about projects delayed due to uncontrollable external factors. He noted that heavy monsoons or civic delays can stall timelines even when developers have complied with all other requirements. He recommended that TNRERA examine such cases on merit and provide conditional waivers when justified.
TNRERA has clarified that the authority retains discretionary powers to relax the 20% deposit condition in cases where developers can provide documented evidence of force majeure events. However, developers will need to formally request such exemption and undergo a case-specific review.
The new directive is applicable with immediate effect and covers all extension applications filed after its issue. Developers seeking extensions beyond one year must adjust their financial planning to comply with the revised condition or risk regulatory action, including possible project registration cancellation.
Buyer advocacy forums have largely welcomed the move, viewing it as a step toward stricter financial discipline and greater transparency in project execution. Many argue that these financial safeguards are necessary to restore trust in delayed residential projects across the state.
TNRERA is expected to issue further clarifications or FAQs on procedural aspects in the coming weeks.
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