RERA's 70% Escrow Rule and How It Protects Your Money

You transfer your down payment. The receipt says "Tower C, Unit 1204." But where does that money actually go? For decades, the honest answer in Indian real estate was: wherever the builder needed it most. A payment collected for one project could quietly fund the foundation of another project three kilometres away, land dispute settlements, or a promoter's other business entirely. When that other project ran into trouble, your tower — the one you'd already paid for — sat half-built, and your money was gone with it.

This is the exact failure the Real Estate (Regulation and Development) Act, 2016 was built to fix. Its centrepiece for buyer protection is a deceptively simple rule: builders must keep 70% of what they collect from buyers in a separate bank account, tied only to the project the money was collected for. It doesn't eliminate every risk in buying an under-construction home, but it closes the single biggest hole that swallowed buyer money before RERA existed. This article explains exactly how the rule works, where its protection ends, and how to use public information to confirm a project is actually complying with it.

What the 70% Escrow Rule Actually Says

Section 4(2)(l)(D) of the RERA Act, 2016 requires that a promoter (the legal term for a builder/developer under RERA) deposit 70% of the amounts realised from allottees for a real estate project into a separate bank account maintained in a scheduled bank. This account can only be used to cover the cost of construction and the cost of the land for that specific project.

The remaining 30% is left for the promoter's other costs — marketing, administrative overheads, and, notably, other business needs. That 30% is not restricted the way the 70% is. The rule doesn't claim to lock down every rupee a buyer pays; it targets the majority share and ring-fences it against diversion.

Before RERA, there was no legal requirement forcing this separation. A builder juggling five projects across a city could, and often did, move buyer money between them as cash flow demanded — usually because the most delayed project needed cash the most, and the newest project (still collecting fresh bookings) was the easiest source. The 70% rule breaks that cycle by making project-linked collections legally project-linked in practice too.

How the Escrow and Withdrawal Mechanism Works, Step by Step

The escrow account isn't just a locked vault that opens at possession — money is withdrawn continuously during construction, but only under a specific, certified process:

1. Registration and account opening. When a promoter registers a project with the State RERA authority, they must also declare the separate account details for that project.
2. Every buyer payment routes to the escrow split. As allottees pay instalments, 70% of each payment is required to go into the project's separate account; the balance goes to the promoter's general accounts.
3. Withdrawals are tied to construction progress. The promoter cannot withdraw funds from the 70% account at will. Withdrawals must be made in proportion to the percentage of construction completed.
4. Three professionals must certify each withdrawal. An engineer, an architect, and a chartered accountant (CA) must jointly certify that the withdrawal matches actual construction progress before funds are released.
5. The account is project-specific, not promoter-specific. A builder with three ongoing projects maintains three separate accounts — construction delays or cash problems on Project A cannot legally be patched using Project B's escrow funds.
6. State RERA authorities retain oversight. The authority can call for information on utilisation of the account and act on non-compliance, since maintaining and using the account correctly is a registration condition, not a one-time formality.

Escrow Rule at a Glance

Why This Mattered So Much in Delhi-NCR, Mumbai, and Bengaluru

Fund diversion wasn't a theoretical risk before 2016 — it was the defining structural problem of Indian real estate in several major metros. In Delhi-NCR in particular, thousands of buyers across large group-housing projects paid instalments for years while towers stood incomplete, in cases where the same promoter group had multiple projects and had allegedly used incoming cash from newer launches to plug holes in older, delayed ones. Mumbai and Bengaluru saw variations of the same pattern, especially among promoters running several projects simultaneously with tight, overlapping cash flows.

The 70% escrow rule was designed with this exact failure mode in mind. It doesn't require a promoter to run a profitable, well-capitalised company — it simply removes their legal ability to treat buyer collections for Project A as free-flowing capital for Project B. That single structural change addresses the mechanism that caused some of India's most visible stalled-project crises.

According to IBEF's coverage of the real estate sector (Feb 2026), India's real estate market is projected to grow from roughly US$200 billion in 2021 to US$1 trillion by 2030, contributing about 7.3% of GDP — a scale of growth that makes structural safeguards like escrow accounting even more relevant, since more buyer capital is flowing into the sector than ever before.

A Buyer's Mini Scenario: Checking Before You Commit

Consider a buyer evaluating a mid-rise project in a growing suburb. The brochure promises the usual things, and the site office assures her the project is "fully RERA compliant." Rather than taking that at face value, she does three things before signing anything:

1. She looks up the project on her State RERA portal using the RERA registration number quoted in the brochure or promotional material.
2. She checks the registration details — project timeline, promoter details, and the disclosed bank account information tied to the registration, since promoters are required to disclose their separate account under the registration.
3. She notes the declared possession date and revisits the RERA portal periodically during construction, since project-level disclosures are meant to be updated by the promoter as construction proceeds.

None of this requires legal training. It requires knowing the registration number exists, that it's public, and that checking it takes minutes rather than assuming compliance because a sales agent said so.

The Limits of the 70% Rule — What It Does Not Cover

The escrow rule is powerful, but buyers should be clear-eyed about its boundaries:

• It only applies to RERA-registered projects. A project that is legally exempt from registration (small plotted developments below the size threshold, or projects that already had a completion certificate before RERA applied) has no escrow obligation at all.
• The remaining 30% is unrestricted. Nothing stops a promoter from directing that share toward marketing spend, administrative costs, or other business priorities.
• Certification is not a guarantee against delay. The engineer-architect-CA sign-off confirms proportional withdrawal, not that the promoter will hit the declared completion date.
• Enforcement still depends on active oversight. The rule creates the legal structure; a State RERA authority following up on account misuse or a delayed project is what turns that structure into a real remedy.
• It doesn't verify land title or approvals. Escrow compliance is about fund handling — it says nothing about whether the underlying land and approvals are clean, which is a separate diligence track entirely.

Pro Tips for Using This Rule to Your Advantage

• Always ask for the RERA registration number in writing, and look it up yourself on the State RERA website rather than relying on a verbal claim.
• Read the project's disclosed financial and construction-progress filings where the State RERA portal makes them available — these are the buyer-facing trace of the escrow-and-certification cycle.
• Track the declared completion date against actual visible progress at the site periodically, since large gaps between filings and on-ground reality are worth raising with the authority.
• Ask directly whether the project you're considering is registered or exempt — don't assume registration just because a project is large or well-marketed.
• Keep your own payment and communication records organised from the first booking payment, since these become your reference point if a dispute over fund use or delay ever arises.

Common Mistakes First-Time Buyers Make

• Assuming all projects have an escrow account. Only registered projects are required to maintain one; smaller or exempt developments are not.
• Confusing "RERA mentioned in the brochure" with "RERA registration confirmed." Marketing language is not the same as a verifiable registration number you've checked yourself.
• Treating the 70% rule as protection against delay. It protects against fund diversion specifically — it does not guarantee a fixed timeline.
• Not revisiting the registration status during construction. Registration and project disclosures can be checked more than once; treating it as a one-time box to tick misses ongoing red flags.
• Believing 100% of payments are locked. The 30% outside the escrow structure is real, and is not protected by this specific rule.

How DrawMagic Fits Into This

DrawMagic's evolving buyer intelligence tools are built to help buyers locate and organise a project's public RERA registration details and filings in one place — turning what used to be a scattered, state-portal-by-state-portal search into something more manageable. It's worth being precise about what this is and isn't: DrawMagic is an information and organisation tool. It does not hold, move, or have any custody over buyer funds, and it is not an escrow agent, payment processor, or certifying authority for any project.

Alongside that, DrawMagic's private, voice-led buyer companion lets you talk through concerns — like "I can't find this project's RERA number" — and keep a running note of what you still need to verify, rather than losing track across scattered browser tabs and screenshots. If you're wondering how your information is handled while you do this research, DrawMagic's responsible AI page explains the platform's approach to data handling. And if you want a starting checklist for organising the documents and records you gather along the way, DrawMagic's help resources are a good next stop.

None of these tools substitute for the State RERA authority itself, a property lawyer, or a chartered accountant — they exist to help you organise public facts faster so that when you do need professional advice, you're walking in prepared rather than starting from zero.

Key Takeaways

• RERA Section 4(2)(l)(D) requires promoters to deposit 70% of buyer payments into a separate, project-specific bank account.
• That 70% can only be used for the land cost and construction cost of the specific project it was collected for — not diverted to other projects or unrelated business needs.
• Withdrawals are proportional to construction progress and must be certified by an engineer, an architect, and a chartered accountant before release.
• The remaining 30% is not subject to the same restriction and is left to the promoter's discretion.
• This rule directly targets the fund-diversion pattern that stalled major projects in Delhi-NCR, Mumbai, and Bengaluru before RERA existed.
• The protection only applies to RERA-registered projects — exempt or unregistered projects carry no such requirement.
• Buyers should independently confirm a project's registration number on the State RERA portal rather than relying on brochure claims.
• DrawMagic's buyer intelligence tools help organise these public facts, but DrawMagic is not a broker, escrow intermediary, financial advisor, or certifying authority.
• Escrow compliance says nothing about land title or approvals — that remains a separate diligence step.

FAQ

Does the 70% escrow rule mean my project can never be delayed? No. The rule protects against fund diversion between projects; it does not guarantee a construction timeline. Delays can still occur for other reasons, including approvals, disputes, or genuine construction challenges.

What happens to the 30% that isn't escrowed? It is left to the promoter's discretion for costs like marketing and administration. It is not subject to the same construction-linked withdrawal certification as the 70% share.

How do I find out if a specific project maintains a compliant escrow account? Start with the project's RERA registration number on your State RERA portal, where disclosed account and filing information should be available. For anything unclear, a lawyer or chartered accountant can help interpret the filings.

Is DrawMagic able to confirm compliance for me? No. DrawMagic helps you locate and organise publicly available registration information; it does not verify, certify, or guarantee compliance, and it never holds or moves buyer funds.

Ready to start organising the facts on a project you're considering? Explore DrawMagic's buyer intelligence tools to bring together public registration details in one place, or talk it through with DrawMagic's buyer companion if you're not sure where to start.