Tranche-release checks from Form 1, 2 and 3: disbursement vs real progress

Construction finance has always had a monitoring problem the sanction letter cannot fix: tranches release against progress, and progress is reported by the party that wants the tranche. RERA quietly built the missing instrument. The promoter's own withdrawals from the 70 percent account are gated, by law, on three professional certificates filed with the regulator. A lender who reconciles disbursement against those same certificates borrows the regulator's gate for free. This is the procedure.

The machinery you are borrowing#

The regulatory logic first, because the procedure only makes sense once the machinery is clear. Section 4(2)(l)(D) of the RERA Act requires 70 percent of every rupee collected from allottees to sit in a designated project account, withdrawable only in proportion to construction and land cost incurred. Rule 5 of the Maharashtra rules operationalises the proportion: before each withdrawal the promoter needs an architect's certificate of physical progress (Form 1), an engineer's certificate of cost-basis work done (Form 2), and a chartered accountant's certificate reconciling collections, permissible withdrawal and actual withdrawal (Form 3). For projects registered since 1 July 2024, MahaRERA's three-account order (Order No. 56/2024, dated 27 June 2024) has enforced the split structurally: collections land in a Collection account and are auto-routed 70 percent to the Separate account and 30 percent to the Transaction account, so the gate operates at the bank rather than on paper. What that order lets a lender charge, and what it closes off, is set out in the three-account regime and lender security. The buyer-facing version of this machinery is in the 70 percent rule guide; what follows is the lender-facing use of it.

The insight for a credit desk: the regulator has already forced the borrower to produce, quarterly and under professional signature, exactly the progress-versus-money reconciliation your tranche decision needs. Not using it is leaving a free covenant on the table.

The tranche-release procedure#

The worked example: Rs 40 crore, tranche four#

Illustrative numbers throughout. Facility: Rs 40 crore sanctioned against a project with estimated land-plus-construction cost of Rs 110 crore, releases in six tranches against progress milestones. Drawn to date: Rs 24 crore. Tranche four, Rs 8 crore, is requested against MIS-reported progress of 52 percent.

The filed set says: Form 1/2 certify 43 percent completion. Form 3 shows collections from allottees of Rs 58 crore, permissible withdrawal at 43 percent of cost equal to Rs 47.3 crore (43 percent of Rs 110 crore), actual cumulative withdrawals of Rs 36 crore.

Reconcile: certified work done is 43 percent of Rs 110 crore, about Rs 47 crore of value in the ground. Funds deployed are your Rs 24 crore plus Rs 36 crore of buyer money, Rs 60 crore. Allow the project's documented land payment of Rs 18 crore (land counts within the withdrawal basis) and approvals of Rs 4 crore: explained deployment is Rs 47 plus 22, Rs 69 crore against Rs 60 crore deployed, comfortable. But the MIS claimed 52 percent, nine points above certificate, worth about Rs 9.9 crore of claimed-but-uncertified progress, and the tranche was sized to the claim. The gate decision: release against 43, not 52, which means Rs 5.5 crore now and the balance on the next certificate, plus a written explanation of the nine-point gap. If the gap is timing (certificates lag a site by a few weeks), the paper trail will close it next quarter. If it is not timing, you have just kept Rs 2.5 crore out of a project that was borrowing against imaginary floors.

Run the sequel too, because gates are proven by the next quarter. If the following Form 1 certifies 50 percent, the nine points were timing: release the held balance and log the lag for future calibration. If it certifies 46, the MIS was manufacturing progress at roughly two points a quarter, and the desk now owns a documented, dated divergence series, which is the difference between a difficult conversation and a provable one.

The downstream stakes are statutory: once the registered date passes, allottees accrue interest at SBI's highest MCLR plus 2 percent, 10.90 percent per annum currently, and MahaRERA's warrant ledger (Rs 792 crore ordered, Rs 268.87 crore recovered by November 2025, per Business Standard, December 2025) is where unfunded promises end up. Bank exposure to commercial real estate is meanwhile compounding at 16.2 percent year on year (RBI sectoral deployment, January 2026); gates scale, site visits do not.

Who else holds security on this project#

The certificate gate tells you whether money matches work. It says nothing about who else has a claim on the asset, and RERA carries a second filing that does: the promoter's declaration of encumbrances, naming the lender and the secured amount.

Read it with its denominator, because the headline rate is a third of the truth. Across the 58,286 projects on the Maharashtra register as at 14 September 2026, the encumbrance endpoint is simply unanswered on 68.6 percent. Of the 18,355 projects that do answer, 2,717 declare a charge, a rate of 14.8 percent. Quoting 4.6 percent of the catalogue instead describes a market with almost no leverage in it, which is not the market you are lending into.

Two desk uses follow. Where a charge is declared, the filing names the lender and the amount, which is a free cross-check on what the borrower told you about existing security and about pari passu consent. And 44 projects name a holder that is an asset reconstruction company or a stalled-housing fund, which means the original loan was sold on as a bad debt. Nothing else in a RERA filing announces that, and it is a fact about the lender rather than a verdict on the project, but on a name you are underwriting it is a fact you want before the credit note goes up rather than after.

The limitation is symmetrical and worth stating in the note: an unanswered endpoint is not an unencumbered project, and a clean answer is a declaration rather than a search. CERSAI remains the registry of record, and 26.5 percent of charged projects declare a charge that does not appear there on their own filing.

The failure modes to watch#

Three ways the certificate gate degrades in practice, each with a countermeasure.

Staleness. Certificates are filed with quarterly updates; a tranche requested eleven weeks after the last filing is being sized on a season-old site. Countermeasure: for releases falling late in a quarter, require the borrower's request to state progress since the last certificate and reconcile the claim against the next filing before the subsequent release. The gap between claimed and next-certified becomes a running honesty score.

Land front-loading. Land cost sits inside the withdrawal basis, so early-stage projects can show large permissible withdrawals against little construction. That is lawful and appropriate; the failure mode is reading total withdrawals as construction spend. Countermeasure: split the Form 3 basis into land and construction components once, at origination, and track only the construction line against Form 1/2 progress thereafter.

Professional churn. A new architect or CA mid-project resets the certification baseline, and successive professionals rarely certify identically. One change is life; two changes in four quarters correlates with certificates under negotiation. Countermeasure: the signatory check in step 4, plus a covenant notice obligation, plus a conversation with the outgoing professional where the facility size justifies it. The professionals' own filed details are public, which is what makes the check cheap; buyers are taught the same verification habit in the portal-checking guide, and a credit desk should not be doing less diligence than a retail buyer.

The QPR stream wraps around all three: certificates say where the project is, the quarterly updates say how fast it is moving, and the QPR reading method turns the two into one trend line per borrower.

The analogy is the stock audit in working-capital lending: nobody releases enhanced limits against the borrower's own stock statement without periodic independent verification, because drawing power against unverified stock is how consortium frauds are built. Form 1, 2 and 3 are a quarterly stock audit of a construction site, pre-commissioned by the regulator, signed by professionals with registrations to lose.

Kavya Menon's team (illustrative, as ever) rebuilt its tranche checklist around the filed certificates after one reconciliation exactly like the worked example above. The relationship manager called the nine-point gap a formatting difference. The next Form 1 certified four points of progress in a quarter the MIS had claimed eleven. The facility finished the project on a tightened gate, fully recovered, eight months late, and the desk kept the format.

The register side of this reconciliation is what ReraGenie assembles. The Rs 2,999 project analysis sets a project's filed cost against the cost its chartered accountant has certified as incurred, states the spend still to be financed and how far construction runs ahead of or behind sales, and names the certifying professionals, so the signatory check in step 4 starts from the filing. The free project pages show each project's construction progress building by building, as filed, and the portal shows only the latest filing, which is why a desk should keep its own quarter-end copies.

The one-line summary#

The regulator already gates the promoter's money on three signed certificates; gate your tranches on the same documents, reconcile the two cash streams against certified work every quarter, and let divergence, not the borrower's narrative, decide when money moves.