How does RERA conduct audits and inspections of real estate companies?
It is important to note that the role of Real Estate Regulatory Authority (RERA) in Dubai is essential to ensure the right standards of the market. To achieve this, RERA carries out research and investigations involving implementation of audits and inspections of companies that deal with real estates. Here’s an overview of how these processes are carried out:
1. Types of Audits
RERA mandates several types of audits to ensure compliance and financial transparency within the real estate sector:
- Operational Audit: This audit establishes the operational status of a developer at the launching of a project phase. It encompasses areas such as assessment on controls within the organization with regards to the project, management of the project, and compliance to the marketing and sales laws.
- Financial Audit: Done during the construction phase it checks that money is spent in accordance to the approved budgets and plans. It entails examination of financial statements, use of the funds, payments made to contractors and suppliers among others.
- Compliance Audit: This is carried out at the end of the project to ensure that all RERA’s requirement has been observed and the developer has honored all his commitments to the buyers. Within the Sales division it entails verifying that construction work is completed, handover processes are done /completed, and sales contracts are met.
2. Escrow Account Audits
One of the rules in RERA’s regulation is the creation of escrow accounts by developers who engage in these activities. These accounts keep the amount paid by buyers and guarantees that the cash would just be utilized for the specific project mentioned. RERA conducts audits of these accounts to verify the following:
- Account Setup and Management: The proper setup and management of the escrow accounts based on the provision of RERA law.
- Fund Utilization: Subsequently ensuring that the funds are utilized for the proper project costs such as construction expenses, management and others.
3. Owners’ Association Audits
RERA also involves provision of financial statements and service charge budgets for owners’ associations, and provision of annual audit of the information. Such audits help in establishing fairness and accuracy on how the service charges are charges are estimated, collected and used for the benefits of owners and residents.
4. Inspection Procedures
One of the functions of RERA is its checking activities; they include, for instance, site visits in order to check records of a company or a particular project. These inspections include
- Review of Financial Records: Verifying the company’s accounting documentation and records in order to conform to the requirements outlined by RERA on financial statements and records.
- Operational Checks: Assessing and comparing operational activities in order to determine whether they conform to the standard requirements in project, sales and marketing management.
- Compliance Verification: Verifying compliance with all legal aspects that may be relevant to the business such as those governing advertisement, sales, and interactions with customers.
5. Regulatory Actions
If discrepancies or non-compliance issues are found during audits or inspections, RERA can take several actions, including:
- Fines and Penalties: Imposing financial penalties on non-compliant companies.
- License Suspension or Revocation: Temporarily or permanently revoking the licenses of companies that fail to comply with regulations.
- Public Disclosure: Publicly disclosing the names of non-compliant companies to inform and protect potential buyers and investors.
By conducting thorough audits and inspections, RERA ensures that real estate companies in Dubai operate transparently and ethically, thereby maintaining investor confidence and the overall health of the real estate market.
RERA Audits and Inspections Quiz
Quiz based on information from 95dubai.com