Authorities & RERA
What is the RERA Escrow Account? (The 70% Rule)
One clause. It ended the practice that destroyed more Indian home buyers than any other — and almost nobody can name it.
The short answer
RERA requires 70% of the money you pay a builder to be kept in a SEPARATE, PROJECT-SPECIFIC account — and spent only on that project's construction and land cost.
Before this, builders routinely took money from Project A and used it to buy land for Project B. When B failed, A's buyers lost everything.
This single clause is the most important reform in the entire Act.
The rule
Seventy per cent of the amounts realised from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank — to cover the cost of construction and the land cost — and shall be used only for that purpose.
Withdrawals are in proportion to the percentage of completion, and must be certified by an engineer, an architect and a chartered accountant.
Three professionals must sign before the builder can touch it.
What it stopped — and this is the whole point
Before RERA, a builder would:
1. Launch Project A. Collect crores from buyers.
2. Use that money to buy land for Project B.
3. Launch Project B. Collect crores. Use it to buy land for Project C.
4. Repeat.
It works, as long as the music keeps playing. And when it stops — a market downturn, a funding freeze, a regulatory shock — every project fails at once, because none of them was ever actually funded.
That is what happened in the NCR. Tens of thousands of families, who had paid in full for flats in projects whose money had been spent on land somewhere else, years earlier.
The 70% escrow rule exists to make that impossible. Your money can now only be spent on your building.
How it works in practice
- You pay the builder. 70% goes into the project's designated escrow account.
- The remaining 30% the builder may use for other costs — marketing, overheads, their own margin.
- To withdraw from the escrow, the builder must show construction progress.
- An engineer certifies the physical progress.
- An architect certifies it matches the approved plan.
- A chartered accountant certifies the proportion of cost incurred.
- Only then, and only in proportion, may the builder draw the money.
Which means the builder cannot take your money and spend it elsewhere. They must build to get paid.
Where it still fails — the honest bit
1. It only covers registered projects. Money paid in a pre-launch — before registration — is outside the escrow entirely. That is precisely why builders want your money early, and precisely why you should not give it.
2. The 30% is unprotected. Three rupees in ten can still go anywhere.
3. Certification is only as good as the certifier. Engineers, architects and CAs sign these. Most do so honestly. Not all.
4. It does not create money. If the project was under-costed from the start, escrow discipline will not conjure up the shortfall.
5. Enforcement varies enormously by state. The rule is central. The rigour is not.
None of that diminishes the reform. The escrow rule turned a system in which your money was routinely spent on someone else's building into one in which it usually isn't. That is an enormous improvement, and it is why buying a RERA-registered project is fundamentally safer than what came before.
How to check
- Is the project RERA registered? If not, there is no escrow. That alone should end the conversation.
- Look at the quarterly progress filings on the RERA portal. Escrow withdrawals track construction progress — so a project that has stopped filing progress has usually stopped drawing money, which means it has stopped building.
- Take a construction-linked payment plan. It aligns your money with the escrow discipline. A down-payment plan hands over everything at once.
- Never pay in a pre-launch. That money is outside every protection RERA gives you.
The escrow rule is why you must never, ever pay a builder before the project is RERA registered.
Not because pre-launch is technically a breach — though it is. But because money paid before registration is not in the escrow, and is not protected by anything at all.
The discount is not compensation for that. Nothing is.
The Real Estate (Regulation and Development) Act, 2016 is a central law. But it is administered by a separate authority in each state, each with its own portal, its own rules, its own forms, and its own fee schedule.
Which means: the principles below apply everywhere. The procedure does not.
Always check YOUR state's RERA portal for the current rules, forms and fees. Search for it by name — MahaRERA, K-RERA, TS-RERA, TNRERA, UP RERA, HARERA — rather than following a link a builder or a broker sends you.
Frequently asked questions
What is the RERA escrow account?
Under Section 4(2)(l)(D), a promoter must deposit 70% of the money received from buyers into a separate, project-specific bank account, to be used only for that project's construction and land cost. Withdrawals must be certified by an engineer, an architect and a chartered accountant, in proportion to construction progress.
Why does the 70% rule matter?
Because before it, builders routinely took money from one project and spent it buying land for the next. It worked as long as the music kept playing — and when it stopped, every project failed at once, because none was ever actually funded. That is what happened in the NCR, to tens of thousands of families. The escrow rule makes it impossible: your money can now only be spent on your building.
Does the escrow rule protect money paid before RERA registration?
No — and this is the most important thing on the page. Money paid in a pre-launch, before the project is registered, sits outside the escrow entirely, in the builder's general funds. That is precisely why builders want your money early, and precisely why you should not give it.
Is 70% of my money completely safe?
It is a large improvement, not a guarantee. The 30% is unprotected. Certification is only as good as the certifier. Escrow discipline cannot conjure money for a project that was under-costed from the start. And enforcement varies by state. But it turned a system where your money was routinely spent on someone else's building into one where it usually isn't.
How can I tell if the escrow is being used properly?
Look at the quarterly progress filings on the RERA portal. Escrow withdrawals track construction progress — so a project that has stopped filing progress has usually stopped drawing money, which means it has stopped building. That is the earliest warning signal available to you, and it is free.