RERA FORM 3 NEW

In the context of a RERA Form 3 certificate, the estimated cost of the project and the total promoter sale consideration are distinct financial metrics that serve different purposes. It is entirely possible—and common in redevelopment projects—for the estimated project cost to exceed the sale consideration of the units sold.

Here is a breakdown of why this happens and how it works:

1. Understanding the Components

• Total Estimated Cost (Table A of Form 3): This includes the entire cost of completing the project, which involves:

  • Land/Rehabilitation Costs: In redevelopment, this is significant. It includes the cost of constructing the rehab building for existing members, transit rent, clearance of encumbrances, and various premiums payable to authorities (ASR-linked premiums, FSI costs, etc.).

  • Construction Costs: The total cost to build both the rehabilitation component and the "free-sale" (marketable) component.

• Sale Consideration: This represents only the revenue generated from the sale of the "free-sale" units to external buyers.

2. Why Costs May Exceed Sale Consideration in Redevelopment

In a redevelopment project, the "sale consideration" only accounts for the portion of the project being sold to new buyers. However, the "estimated cost" covers the entire project, which typically includes:

• The Rehab Component: You are essentially building homes for the existing society members for "free" (as they are the original owners). This massive construction cost is part of your total project cost but does not generate any direct sale consideration.

• High Premiums: Redevelopment often involves high payments for additional FSI, TDR, and government premiums, which inflate the "Total Estimated Cost."

• Operational Overheads: Costs like transit rent for existing tenants are expenses incurred by the developer that do not have a corresponding "sale" value.

3. Does it "Work" for RERA Compliance?

Yes, it is legally and practically permissible for the estimated cost to be higher than the sale consideration. RERA does not mandate that the project cost must be lower than the sale consideration. Instead, the focus of Form 3 is to:

• Track Liquidity: Ensure that the 70% of funds collected from the actual buyers are deposited into the separate (escrow) account and used exclusively for the construction and land costs of that specific project.

• Monitor Progress: The Chartered Accountant (CA) uses the "Total Estimated Cost" to determine the percentage of work completion. If the project cost is higher, it simply means the denominator (Total Estimated Cost) in the "Percentage of Completion" calculation is larger, which affects the amount you are eligible to withdraw from the escrow account.

Summary

The fact that your estimated costs exceed the sale consideration is not an error; it is a mathematical reality of most redevelopment projects where a large portion of the built area is given to existing members rather than being sold. The CA certification will proceed based on these actual figures, provided they are supported by your books of accounts and the engineer’s estimates.

Summary: It is normal for the total estimated project cost (including rehab construction and premiums) to exceed the sale consideration of the free-sale units in a redevelopment project. RERA Form 3 compliance focuses on ensuring the 70% of funds collected from buyers are utilized correctly for the project; it does not require your sale revenue to cover the total project cost.