Property, Real Estate & RERA

RERA Escrow Account Rule: The 70% Rule Explained

CA Nikhil Gupta·July 2026· Section 4(2)(l)(D), RERA 2016 RERA COMPLIANCE

Reviewed by CA Nikhil Gupta · Last reviewed 17 July 2026

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 Funds in this account can be withdrawn only to cover the cost of construction and land cost of that specific project, and — critically — only in proportion to the percentage of project completion,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.

⚠ The remaining 30% is not unrestricted either — but it is more flexible: While the 70% must go into the ring-fenced project escrow account, the remaining portion is generally available to the promoter for broader business purposes, though promoters should still exercise this within the bounds of their overall regulatory and fiduciary obligations — the rule's core protection is specifically about the 70% ring-fencing, not a complete lockdown of every rupee collected.

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.

Frequently Asked Questions

Does the 70% escrow rule apply to all real estate projects, or only RERA-registered ones? ▼

The escrow requirement is part of the RERA registration compliance framework, so it applies specifically to projects that meet the RERA registration threshold and are properly registered — a project falling below the registration threshold (and therefore exempt from RERA registration) would not be subject to this specific statutory escrow requirement.

Can a promoter use escrow funds from one project for a different phase of the same overall development? ▼

The escrow ring-fencing is generally tied to the specific registered project — if different phases are registered as separate RERA projects, funds collected for one registered project should not be diverted even to another phase, unless the phases are structured and registered in a way that treats them as part of the same single project for this purpose. This is a fact-specific structuring question that should be checked in the specific registration.

What happens if a promoter is found to have violated the 70% escrow rule? ▼

Violation of the escrow requirement is a compliance breach under RERA that can attract penalties from the state RERA Authority, and in serious or repeated cases can contribute to more severe regulatory action against the promoter, including impacting their ability to register future projects.

Source and review trail

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Primary category: Property, Real Estate & RERA
Official starting point: mohua.gov.in

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