RERA Escrow Account Rule: The 70% Rule Explained
Before RERA, a builder could take your booking money and use it to fund an entirely different, unrelated project — sometimes leaving your own project starved of cash and stalled. The 70% escrow rule was built specifically to close off that exact practice.
The problem RERA's escrow rule was designed to fix
Before RERA, it was a well-documented and widespread practice for developers to collect advance payments from buyers of one project and use those funds to finance land acquisition or construction of an entirely different project — a practice sometimes described as "diversion of funds." This left individual projects perpetually undercapitalised relative to what buyers had actually paid in, contributing significantly to the pattern of stalled, indefinitely delayed projects that predated RERA.
The rule
Under Section 4(2)(l)(D), a promoter is required to deposit 70% of the amounts realised from allottees for a specific project into a separate escrow account maintained specifically for that project, in a scheduled bank. Funds in this account can be withdrawn only to cover the cost of construction and land cost of that specific project, and — critically — only in proportion to the percentage of project completion, as certified by an engineer, architect, and chartered accountant.
Why the certification requirement matters
Withdrawals from the escrow account require certification of the proportion of project completion by a qualified engineer, architect, and chartered accountant — this creates an independent, professional check against a builder simply drawing down escrow funds faster than actual construction progress justifies, which is exactly the kind of premature drawdown that could otherwise recreate the same fund-diversion risk the escrow structure is meant to prevent.
Why this specifically protects buyers
Because the 70% is legally ring-fenced to the specific project it was collected for, a buyer's payment is far more likely to actually be spent on completing their building, rather than being redirected to shore up a struggling, unrelated project elsewhere in the developer's portfolio — this doesn't eliminate all project-completion risk (construction can still face delays for legitimate reasons, and a genuinely under-capitalised or poorly-managed project can still struggle even with escrow protection), but it removes one of the most consequential and previously common causes of stalled projects.
What buyers can (and can't) verify directly
Buyers generally do not have direct visibility into the project escrow account's balance or transaction history — verification and enforcement of the 70% rule is primarily a regulatory function of the state RERA Authority, through the project's periodic compliance filings, rather than something an individual buyer can independently audit. A buyer's practical assurance comes from the project being properly RERA-registered (implying it is subject to this oversight) and from monitoring actual visible construction progress against the disclosed timeline.