RERA Act 2016, Section 4(2)(l)(D) — In Plain Language
Promoters must deposit 70% of the amounts realised from buyers for a project into a separate escrow account in a scheduled bank. This money can be used only for the construction and land cost of that specific project — not for any other business purpose or project.
Before RERA, a common practice was for developers to collect money from Project A's buyers and use it to complete Project B, or to service unrelated debt. When Project A then ran out of funds, buyers had booked and paid — sometimes fully — for an apartment that never got built. The 70% escrow rule exists specifically to break that pattern.
70% — Escrow account
Ring-fenced for this project only
Construction cost + land cost of THIS project only
30% — Free account
No usage restriction under RERA
Overheads, marketing, other projects, general business use
Money going into escrow is only half the protection. The other half is that the promoter cannot withdraw it freely — withdrawals must be proportionate to construction progress and certified by three professionals before release:
Why This Three-Way Certification Matters
It closes the gap between "money collected" and "work actually done." A promoter cannot withdraw 80% of the escrow while only 20% of the building is up — the certification chain is designed to catch exactly this mismatch before funds are released, and quarterly audits are required to keep it honest.
Frequently Asked Questions
What is the RERA 70% escrow rule?
Under Section 4(2)(l)(D) of the RERA Act, promoters must deposit 70% of the money collected from buyers into a separate escrow account in a scheduled bank, to be used only for that project's construction and land cost — preventing diversion to other projects.
What can the remaining 30% be used for?
The remaining 30% is not escrow-restricted and can be used by the promoter for other business purposes, including overheads, marketing, and other projects, at their discretion.
Can a promoter withdraw money from the escrow account freely?
No. Withdrawals from the escrow account are only permitted in proportion to the percentage of construction completed, and must be certified by an engineer, an architect, and a chartered accountant before withdrawal.
How can I check if a project is complying with the escrow rule?
Most state RERA portals with detailed project pages, such as MahaRERA, publish quarterly progress reports (QPRs) showing amounts deposited, withdrawn, and the corresponding construction percentage, which buyers and agents can review directly.
What happens if a promoter is found violating the escrow rule?
Escrow violations can trigger penalties under the RERA Act and are treated seriously by authorities since fund diversion was one of the core problems RERA was designed to prevent. A promoter found diverting escrow funds may face penalty action and closer regulatory scrutiny of the project going forward.
Does the 70% escrow rule apply to plotted developments as well as apartments?
The escrow requirement applies broadly to RERA-registered real estate projects collecting advance payments from allottees, which generally includes plotted developments registered under RERA, not just apartment projects — check the specific project's registered category on the state portal to confirm.
Change Log
Sep 21, 2026 — Converted FAQ to single-source array pattern, expanded FAQ from 4 to 6 questions.
Sep 20, 2026 — Initial guide published.
Read Escrow & QPR Data Like a Pro
CREP™ covers escrow rules, QPR interpretation, and every financial due-diligence check a professional agent needs before recommending a project.
Enroll in CREP™ — ₹4,999 →