Builder Escrow Account: The RERA 70 Percent Rule
One of RERA's most important protections for home buyers is the escrow account rule. It forces builders to keep most of your money locked for construction, so it cannot be diverted to other projects. If you are buying an under-construction flat, understanding this rule tells you how safe your money really is. This guide explains it in plain terms.
Quick summary
- RERA requires builders to deposit 70 percent of the money collected from buyers of a project into a separate escrow account.
- That money can be withdrawn only for land and construction cost of the same project, in proportion to work done.
- Withdrawals must be certified by an engineer, architect and chartered accountant, so builders cannot pull funds freely.
- The rule exists to stop the old habit of diverting one project's money to another, a main cause of stalled projects.
- Buyers should confirm the project's RERA registration and its designated account before paying.
What the escrow account is
Under the Real Estate (Regulation and Development) Act, every registered project must have a separate bank account for that project alone. The builder has to deposit 70 percent of all money received from buyers, the sale receipts, into this account. The remaining 30 percent can go to the builder's own account for other expenses. The 70 percent is ring-fenced, which means it is set aside and protected for building the project you actually bought into.
Why the 70 percent rule exists
Before RERA, a builder could collect money for Project A and quietly spend it on land for Project B. If sales in B slowed, both projects stalled, and buyers in A were left with a half-built tower and no money left to finish it. This diversion of funds was the single biggest reason projects across NCR and other cities got stuck for years. The escrow rule breaks that chain by keeping each project's money inside that project.
How withdrawals work
The builder cannot simply take money out of the escrow account. To withdraw, three professionals must certify that the money matches the construction actually completed.
- An engineer certifies the physical progress of construction.
- An architect certifies the stage of the project.
- A chartered accountant certifies that the withdrawal is in proportion to the cost incurred.
Only then can the builder draw funds, and only up to the share of work done. This keeps spending tied to real progress, not to the builder's cash needs elsewhere.
The rule at a glance
| Element | Detail |
|---|---|
| Amount in escrow | 70% of money collected from buyers |
| Allowed use | Land and construction cost of the same project only |
| Withdrawal check | Certified by engineer, architect and CA |
| Free portion | 30% for the builder's other costs |
| Applies to | All RERA-registered projects |
What it means for buyers
The escrow rule is a strong reason to buy only in RERA-registered projects. It does not guarantee a project will finish on time, but it makes fund diversion much harder and keeps your money working on your building. When you buy under construction, this is one of the biggest protections you have. It also means you should pay only into the project's designated account, never into some other account a salesperson suggests. Read our related guides on how to file a RERA complaint and the builder-buyer agreement clauses to protect yourself fully.
How to check before you pay
First, confirm the project is registered on your state's RERA website, with a valid registration number. Second, check that your payments go into the project's designated bank account, which the builder must disclose. Third, watch construction progress against your payment plan, since a construction-linked plan ties your money to real work. If a builder pressures you to pay into an unrelated account or off the books, treat it as a red flag and step back. The escrow rule only protects money that actually enters the escrow account.
Frequently asked questions
What is the RERA escrow account rule?
Builders must deposit 70 percent of money collected from buyers into a separate account for that project alone.
Why 70 percent?
To ensure most of the buyers' money stays available for construction and cannot be diverted elsewhere.
Can the builder use the 30 percent freely?
The remaining 30 percent can go to the builder's own account for other costs, with fewer restrictions.
How can the builder withdraw the escrow money?
Only after an engineer, architect and chartered accountant certify that the withdrawal matches the work done.
Does escrow guarantee my project finishes?
No. It stops fund diversion and ties spending to progress, but it is not a completion guarantee.
What problem does the rule solve?
The old practice of spending one project's money on another, which stalled many projects before RERA.
Where should I pay my instalments?
Only into the project's designated bank account disclosed by the builder, never into an unrelated account.
Does the rule apply to all projects?
It applies to all RERA-registered projects. This is a strong reason to avoid unregistered ones.
How do I confirm a project is registered?
Check your state's RERA website for the project's registration number and details.
What if the builder still diverts money?
That is a violation. You can file a complaint with your state RERA authority.
If you are buying an under-construction home and want help checking the RERA status and paperwork, talk to our team. We will help you verify before you pay.
