Before 2017, a Mumbai buyer paying into an under construction tower had no way of knowing where the money actually went. A developer could collect from one project and quietly pour it into land for the next, and buyers only discovered the diversion when their own building stalled for want of funds. The real estate law changed that with a single, unglamorous rule about a bank account. It is not the kind of clause that appears on a brochure, but for a buyer funding a flat over three or four years, it may be the most important protection in the entire Act.

The short answer. Under the real estate law, a promoter must deposit at least 70 percent of the money collected from buyers of a project into a separate account for that project alone. That money can be used only for construction and land cost, and it can be withdrawn only in proportion to how much of the project is actually built, certified each time by an architect, an engineer and a chartered accountant. The trade off to understand is that this protects your money from diversion, but it protects it inside the project, so verifying the developer is following the rule matters as much as the rule itself.

What is the 70 percent rule and where does it come from?

The rule sits in Section 4 of the Real Estate Regulation and Development Act, and it requires that at least 70 percent of the amounts realised from allottees be kept in a separate account with a scheduled bank, one account for each registered project. The remaining 30 percent is available to the promoter more freely, but the large majority of your payments are ring fenced. The purpose is blunt and buyer friendly, which is to stop the money you pay for your building from being spent on anything other than your building.

This is why the account is often called the RERA account or the project escrow. It is not a courtesy the developer offers. It is a statutory condition of registering the project at all, which is one more reason a buyer should only ever fund a registered project.

What can that money be spent on, and what is off limits?

The ring fenced money can be used only for construction cost and land cost of that project, and nothing else. Specifically, the 70 percent cannot be used to pay marketing or advertising expenses, and it cannot be used to repay loans or pay interest to financial institutions. Those costs are real, but the law deliberately keeps them out of the protected account so that buyer money flows to bricks and land rather than to the developer's borrowing or promotion.

For a buyer this restriction is the whole point. It means the money you pay cannot lawfully be used to service the debt on a different project or to fund the glossy launch of the next one. The account is a promise, written into law, that your rupees build your tower.

How can a developer take the money out?

A developer cannot simply draw from the account at will, and this is the part buyers most often miss. Withdrawals must be strictly in proportion to the percentage of completion of the project. If the project is 40 percent complete, the promoter can draw only up to a corresponding share of the estimated cost, not more. The money is released as the building rises, not before it.

Each withdrawal also has to be certified by three professionals together. A practising architect certifies the percentage of completion of the construction, an engineer certifies the actual cost incurred, and a chartered accountant certifies that the withdrawal is in proportion to completion. This three way check is what makes the rule real rather than decorative, because no single party can wave the money out.

These certificates are not private paperwork that vanishes into a file. They are the mechanism regulators and banks rely on to police the account, and in Maharashtra the chartered accountant's certification of proportionate withdrawal is a recurring obligation rather than a one time formality. The developer must keep certifying as the project progresses, which means the discipline of the rule is applied again and again over the years you are paying, not just once at the start. For a buyer, the useful mental model is that every rupee leaving the account is supposed to be matched to a rupee of visible construction, attested by people whose professional standing is on the line.

How does this compare with life before the rule?

The change is easiest to see when the old practice and the new law are placed side by side. The table shows what the separate account rule replaced.

Seen this way, the rule is less a piece of paperwork and more a structural change in who controls your money while your home is being built. To confirm a project is registered and therefore bound by this rule, our guide to the MahaCRITI portal for verifying a project shows exactly where to look.

What does the rule mean for you as a Mumbai buyer?

For you, the rule turns a leap of faith into something you can partly verify. Because the protection only exists for registered projects, the first practical step is to confirm registration and read the project's financial and progress disclosures on the regulator's portal. A registered Mumbai project discloses its completion status, and a completion percentage that has been stuck for quarters while sales continue is a warning sign worth taking seriously.

The rule does not make a project risk free, and it is honest to say so. It protects money inside the project from diversion, but it cannot conjure money that was never collected, nor rescue a project that is genuinely unviable. What it does is remove one specific, historically common failure, the quiet movement of your money to somewhere else. Reading a project's grade and complaint history rounds out the picture, and our guide on checking a MahaRERA project grade explains how.

How should a buyer use this knowledge before paying?

Use it to change what you ask for and what you watch. Do not ask the developer whether there is a RERA account, since for a registered project there must be. Instead confirm the project is registered, track the disclosed completion percentage over time, and be wary if payment demands run ahead of visible construction, because the law ties withdrawals to progress for exactly that reason. A demand for money far ahead of the build is in tension with the spirit of the rule.

It also helps to connect this rule to how your own payment schedule is written. A well drafted agreement for sale links your instalments to construction milestones, which naturally aligns with a system that releases the developer's money only as the building rises. If instead you are asked to pay large sums up front, disconnected from any stage of construction, that structure is worth questioning, because it puts your money into the developer's hands ahead of the progress that would justify its release. The account rule cannot force a fair payment schedule on your contract, so a buyer still has to read the payment plan and push back where it front loads risk onto you.

Finally, treat the disclosed numbers as something to monitor rather than glance at once. Because registered projects update their status periodically, a buyer who checks the portal each quarter builds a small time series of their own, and it is the trend that tells the story. A completion figure that climbs steadily quarter after quarter is reassuring in a way a single snapshot never can be, while one that flatlines while your instalments keep falling due is precisely the pattern the law was written to expose. The rule gives you the data. Watching it over time is what turns the data into protection.

Your seven step RERA account protection checklist

1. Confirm the project is registered, since the 70 percent account exists only for registered projects.
2. Read the project's disclosed completion percentage on the regulator portal.
3. Track that percentage across quarters to see whether construction is actually progressing.
4. Remember the protected money is for construction and land cost only, not marketing or loan repayment.
5. Expect withdrawals to follow completion, so be cautious if demands outpace visible progress.
6. Keep your own payment receipts, which feed the amounts the account is meant to hold.
7. If progress stalls while payments are demanded, raise it with the regulator before paying more.

Frequently asked questions

What is the RERA 70 percent rule? Under Section 4 of the real estate law, a promoter must deposit at least 70 percent of the money collected from a project's buyers into a separate account for that project alone. The money can be used only for construction and land cost, which stops buyer funds from being diverted to other projects or purposes.

Can a developer withdraw the money whenever they want? No. Withdrawals must be in proportion to the percentage of completion of the project, so a builder who has completed 40 percent can draw only a corresponding share. Each withdrawal must be certified together by a practising architect, an engineer and a chartered accountant before the bank releases funds.

What can the 70 percent account not be spent on? The protected money cannot be used for marketing or advertising expenses, and it cannot be used to repay loans or pay interest to financial institutions. It is restricted to the construction and land cost of that specific project, which is what keeps your payments tied to building your own tower.

Does this rule make an under construction flat safe? It removes one major historic risk, the diversion of your money to other projects, but it does not make a purchase risk free. It cannot rescue a genuinely unviable project. Verifying registration, tracking the disclosed completion percentage and checking the project grade together give a fuller picture of the risk.

Last updated 2026-08-27. PropNewz Team.