RERA 70% Escrow Compliance

What Is the RERA 70% Escrow Compliance?

Before RERA, developers routinely used money collected from one project to fund another or to buy fresh land, leaving buyers exposed if a project stalled. The 70% escrow rule under the Real Estate (Regulation and Development) Act 2016 ring-fences buyer money: 70% of everything collected from allottees of a project must go into a dedicated account and can only be drawn for that project's construction and land cost.

A developer meets this at every collection and every withdrawal. Buyer receipts are split — 70% to the RERA designated account, 30% to the free account — and drawdowns from the 70% account require a certificate from an engineer, an architect and a chartered accountant confirming the cost incurred and the stage of completion. In the books this shows as a restricted bank balance with a controlled withdrawal trail, which auditors and the state RERA authority both scrutinise.

How RERA 70% Escrow Compliance Works

Buyer money is controlled from receipt to certified withdrawal in a set path:

1. 1Open the designated account

   At project registration the developer opens a separate RERA account with a scheduled bank for that project alone.

2. 2Split every collection

   On each buyer receipt, 70% is swept to the designated account and 30% to the free account — the bank mandate is the artefact.

3. 3Incur and record project cost

   Construction and land costs are booked against the project as work proceeds and bills arrive.

4. 4Obtain the three certificates

   An engineer, architect and CA certify the cost incurred and percentage of completion before any drawdown.

5. 5Withdraw in proportion to completion

   The developer draws from the 70% account only up to the certified proportion, leaving the balance ring-fenced.

Where RERA 70% Escrow Compliance Applies — Construction and Real-Estate Developers

The escrow rule bites on almost every registrable real-estate project:

• Registered residential projects — Any project above the state size threshold must register and operate the 70% account from first collection.
• Phased developments — Each registered phase runs its own designated account, so funds cannot cross-subsidise phases.
• JDA projects — Even where land comes through a development agreement, buyer collections still feed the 70% split.
• Projects with heavy land cost — Because land cost is an eligible use, developers must document it carefully to justify drawdowns.
• Multi-project developers — Firms running several projects must keep separate accounts and never pool collections.

See also: Construction & Real Estate Accounting Accounts Reconciliation & Audit

Statutory Position on RERA 70% Escrow Compliance

Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act 2016 requires that 70% of the amounts realised from the allottees of a real-estate project be deposited in a separate account maintained in a scheduled bank. The 70% is measured on money collected from buyers, not on total project cost or sales value. Withdrawals from that account are permitted only to cover construction and land cost, in proportion to the percentage of completion, and must be certified by an engineer, an architect and a chartered accountant. Breach can attract penalties under the Act and action by the state RERA authority.

• Rule — 70% of amounts realised from allottees into a separate scheduled-bank account. Law stated as at 22 July 2026.
• Legal basis — Section 4(2)(l)(D), RERA Act 2016, administered by each State RERA authority.
• Permitted use — Construction and land cost of that project only, in proportion to completion.
• Certification — Drawdowns certified jointly by an engineer, an architect and a CA.

RERA 70% Escrow Compliance: A Practical Example

A Pune developer collects ₹10 crore from buyers of a registered project in FY 2025–26. ₹7 crore is swept into the RERA designated account and ₹3 crore to the free account. With the project certified 40% complete, the developer may withdraw only ₹2.8 crore — 40% of the ring-fenced ₹7 crore — for construction and land cost. The remaining balance stays locked until further completion is certified.

Common Mistakes With RERA 70% Escrow Compliance

Escrow breaches usually come from treating buyer money as free cash:

• Depositing only 70% of sales value — Computing 70% on total sales instead of amounts actually realised misstates the deposit → base it on money collected from allottees.
• Pooling multiple projects — Running one account for several projects lets funds cross-subsidise, breaching RERA → keep a separate account per registered project.
• Withdrawing beyond completion — Drawing more than the certified completion percentage diverts buyer money → cap withdrawals at the certified proportion.
• Skipping the tri-party certificate — Withdrawing without the engineer, architect and CA certificate is a direct breach → obtain all three before each drawdown.
• Booking escrow as free cash — Showing the 70% balance as unrestricted overstates liquidity → present it as a restricted balance in the accounts.

Related Accounting Terms

Terms a developer meets alongside the escrow rule:

• Joint Development Agreement (JDA) — Landowner-developer land structure.
• Third-Party Administrator (TPA) Receivables — Hospital insurance receivables concept.
• Section 44ADA Presumptive Cap — Presumptive tax scheme for professionals.
• Accounting Terms Glossary — Browse every accounting term in one place.