The 70 percent rule: how RERA's escrow account protects your money

Before 2017, the most dangerous thing about paying a builder was not dishonesty. It was plumbing. Money collected from buyers in Project A routinely flowed into land for Project B, a loan repayment in Project C, or a different business altogether. When the music stopped, Project A stood half-built with the buyers' money spent two projects away. The RERA Act's answer is one of the least glamorous and most important consumer protections in Indian law: the 70 percent escrow rule.

The story Suresh and Kavita could not forget#

Suresh and Kavita, planning a retirement home in Ahmedabad, had a reason to be nervous. In 2013 a colleague of Suresh had paid most of the price of a flat in a project that stalled at the plinth. The builder had launched three projects at once; money moved between them until none could be finished. A decade later, that experience was still deciding how this couple read every brochure. What they wanted to know was simple: if we pay, does our money stay with our building? Names in this story are illustrative; the 2013 pattern was anything but rare.

What the rule says, in plain words#

Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016, requires every promoter, at registration, to declare that 70 percent of the amounts realised from allottees will be deposited in a separate account in a scheduled bank, to cover the cost of construction and the land cost, and to be used only for that purpose.

Withdrawal is not free. The promoter can take money out only in proportion to the percentage of completion of the project, and each withdrawal must be certified by an engineer, an architect and a chartered accountant confirming the withdrawal matches completion, the three certificates you can read on the project's page as Forms 1, 2 and 3. The account is also audited annually by a CA, and the audit must confirm collections and withdrawals were compliant. These certificates and the quarterly filings fall on a fixed schedule, the MahaRERA compliance calendar.

The remaining 30 percent stays with the promoter for overheads, marketing, financing costs and margin. The law is not trying to run the builder's business; it is trying to make one specific move impossible: emptying a project's till for use elsewhere.

An analogy: the wedding caterer#

Imagine paying a wedding caterer the full amount six months early, into his general business account. Whether your wedding gets its food now depends entirely on how his other weddings go. Now imagine instead the money sits with a trusted third party who releases it course by course, against a bill for ingredients actually bought for your wedding. The caterer still earns the same amount. What changed is that your event stopped subsidising someone else's. The escrow account is that arrangement, with an engineer, an architect and a CA standing where the trusted third party stands.

The damage the rule was written to stop#

The scale of the pre-RERA failure is documented. ANAROCK's August 2021 analysis counted about 6.29 lakh homes worth roughly Rs 5 lakh crore delayed or completely stalled across the top 7 cities, overwhelmingly projects launched in 2014 or earlier, before the Act's discipline applied. About 1.74 lakh of those units were completely stalled, with NCR alone holding roughly two-thirds of the stalled stock.

Cleaning that up has taken a dedicated government fund. The SWAMIH Fund, created in 2019 to finish stalled projects, had delivered about 61,000 homes by December 2025 and committed its entire corpus, and a second Rs 15,000 crore instalment was announced in the February 2025 Union Budget targeting another 1 lakh units (Ministry of Finance and government data reported December 2025 to January 2026). That is the cost of the era when buyer money had no fence around it. The full picture of that cleanup is in our data story on stalled housing projects.

How the money flows now#

The honest limits of the rule#

The escrow rule is a fence, not a vault. Buyers should know its edges. Certification quality varies, and a compliant paper trail can coexist with slow work. Some states have had to tighten monitoring after finding gaps between certificates and sites. And 30 percent of your money is legitimately outside the fence. The rule dramatically lowers the odds of the 2013 failure mode; it does not replace reading the project.

Which is why the visible test matters more than the invisible account: construction pace against sales pace. A project that reports strong bookings quarter after quarter while the construction percentage crawls is telling you something is wrong with the flow of money, whatever the certificates say. That is exactly what quarterly progress reports exist to reveal, and delay remedies are covered in RERA's rules for delayed possession.

What the buyer report checks for you#

For any covered project, the Rs 499 ReraGenie buyer report puts the escrow rule's visible evidence on one page: the quarterly construction percentage trendline against the booking trendline, extension history, and whether financial filings like the annual audit certificate are present and current, alongside a plain verdict. For Suresh and Kavita, that one page answered the 2013 question directly: their shortlisted project showed construction tracking slightly ahead of sales for six straight quarters, which is what a fenced till looks like from outside. If you are at that same deciding stage, sign up on ReraGenie and read the money's shadow before you send the money.

The one-line summary#

The 70 percent rule turned "trust the builder" into "trust the account, the three certifiers and the public filings that shadow it". Verify the shadow, and you have most of the protection the law intended.

This article is educational and not legal advice. For a dispute, consult a lawyer who practices before your state's RERA.