Every Bengaluru buyer who pays a booking amount is really handing a developer their savings and trusting that the money builds the home they signed for, not a different project across town. That trust is exactly what one clause of the real estate law tries to protect. Under Section 4 of the RERA Act, a builder must ring fence most of what you pay in a separate account that can only be spent on your project. The RERA 70 percent escrow rule in Bengaluru is the single provision that stands between your money and the fund diversion that sank so many projects before it existed.

The short answer. Under Section 4(2)(l)(D) of the RERA Act, a promoter must deposit 70 percent of the money collected from buyers into a separate account in a scheduled bank, and use it only for the construction and land cost of that specific project. The developer can withdraw only in proportion to how much of the project is actually built, certified by an engineer, an architect and a chartered accountant. The upside is real protection against your money being siphoned elsewhere. The trade-off is that 30 percent sits outside the ring fence, and the rule guards against diversion, not against a project that simply fails. Quick fact: RERA requires 70 percent of buyer funds to stay in a separate project account, withdrawn only against certified construction progress.

This guide explains how the escrow works, what the money can and cannot be spent on, how a Bengaluru buyer verifies it, and where the protection runs out.

What is the RERA 70 percent rule?

The 70 percent rule is the requirement that a developer park most of your payment where it cannot be spent on anything but your project. Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016 obliges the promoter to deposit 70 percent of the amounts realised from allottees into a separate account in a scheduled bank. It is a no lien account, meaning the bank cannot set it off against the developer's other dues, and it is tied to the single project you bought into.

The reason the rule exists is the old disease of the sector, where money collected for one tower quietly funded land for the next, leaving the first set of buyers stranded when cash ran out. By law, that route is now closed for 70 percent of what you pay. For a buyer, this is the difference between a promise and a protected balance.

How does the escrow account actually work?

The account does not simply hold your money, it releases it in step with construction. A developer cannot draw the full 70 percent at will. Withdrawals are allowed only in proportion to the percentage of the project that is genuinely complete, and that proportion has to be certified by three independent professionals, an engineer who verifies the physical progress, an architect who confirms the stage of development, and a chartered accountant who certifies that the amount drawn matches the completion. On top of that, the account statements must be audited by a chartered accountant within six months of each financial year.

In practice, the account fills and empties on a rhythm you can follow. As buyers pay their instalments, 70 percent of each payment flows into the project account, and as the towers rise, the developer draws against certified milestones rather than against optimism. A buyer who understands this rhythm can ask a sharp question at any stage, namely whether the drawings so far match the construction they can actually see on site. When the two diverge, that gap is the earliest warning a project is being run loosely, long before it shows up as a stalled crane.

This layered check is the heart of the protection. It means a builder cannot take your money faster than it builds your home, at least on paper, and it creates a documented trail that a buyer, a lender or the authority can inspect. The certifications are the mechanism that turns a bank balance into a genuine safeguard.

What can and cannot be paid from the escrow?

The permitted uses are narrow by design, limited to the cost of construction and the cost of the land for that project. Marketing, the developer's overheads on other ventures, or spending on a separate project are not legitimate calls on the 70 percent. The table sets out how the rule is structured.

Read the last row carefully, because it is where buyers over read the protection. The law ring fences 70 percent, not all of it, so the developer does have a slice it can deploy more freely. The escrow is strong, but it is not a claim on every rupee you pay.

How can a Bengaluru buyer verify compliance?

You verify it on paper, not on trust, and most of the paper is public. Start on the Karnataka RERA portal, where a registered project's details, including the declared separate bank account and the periodic filings, are meant to be available. Then ask the developer for the engineer, architect and chartered accountant certifications that support withdrawals, and review the audited account statements filed with the authority. A compliant developer will produce these without drama. A reluctant one is telling you something.

This check pairs naturally with confirming the project is properly registered in the first place, which our guide to K RERA project verification in Bengaluru walks through. Registration and the escrow account are two halves of the same due diligence, one confirms the project is legitimate, the other confirms your money is being handled as the law requires.

Where does the escrow protection stop?

The rule is powerful but partial, and an honest buyer should hold both facts at once. It stops fund diversion of the ring fenced 70 percent, and it forces a certified link between drawings and progress, which is genuinely valuable. What it does not do is guarantee that the project succeeds. A developer can stay within the escrow rules and still be defeated by cost overruns, approval delays or a weak market, and the 30 percent outside the ring fence remains at the developer's wider disposal.

There is also the reality of enforcement. The safeguard is only as strong as the honesty of the certifications and the vigilance of the authority in checking them. Certifications can be optimistic, and monitoring is not perfect. So the escrow lowers your risk substantially, but it does not remove the need to judge the developer's track record and the project's fundamentals. If the worst happens, our guide to a K RERA refund in Bengaluru covers the route to recovering your money.

What should a buyer check before paying into a project?

Run this before you release any large sum.

1. Confirm the project is registered with Karnataka RERA and note its registration number.
2. Check that the developer has declared a separate project bank account on the RERA portal.
3. Ask for the latest engineer, architect and chartered accountant certifications supporting withdrawals.
4. Review the audited account statements filed with the authority for the project.
5. Pay into the project as the agreement specifies, so your money is traceable to the escrow.
6. Keep receipts for every payment, since they are your proof of what you put in.
7. Weigh the developer's track record and the project fundamentals, because the escrow is a safeguard, not a guarantee.

Even a strong project deserves this discipline. When you pay into a development such as Brigade Sanctuary on Sarjapur Road, the escrow rule is what should route the bulk of your money into construction, and confirming that is simply good buying.

How should you use this before you pay?

Treat the escrow as a question you ask, not an assurance you assume. Before you commit, establish that the separate account exists, that withdrawals are certified against progress, and that the filings are current, and you have converted a legal right into a checked fact. This costs you a portal visit and a few document requests, and it materially lowers the chance that your money leaves the project it was meant to build.

The honest summary is that the 70 percent rule is one of RERA's strongest buyer protections and one of its most under used, because too few buyers ever check it. Use it. Confirm the ring fence, read the certifications, and keep your own records, and you turn a clause in an Act into real security for the largest cheque you may ever write.

What is the RERA 70 percent rule?

Under Section 4(2)(l)(D) of the RERA Act, a developer must deposit 70 percent of the money collected from buyers into a separate account in a scheduled bank, used only for the construction and land cost of that project. It exists to stop developers diverting buyer funds to other projects.

Can a builder withdraw the escrow money freely?

No. A developer can withdraw from the 70 percent account only in proportion to the percentage of the project actually completed, and that proportion must be certified by an engineer, an architect and a chartered accountant. The account statements must also be audited by a chartered accountant within six months of each financial year.

How do I verify the escrow account in Bengaluru?

Check the Karnataka RERA portal for the project, where the declared separate bank account and filings should appear. Ask the developer for the engineer, architect and chartered accountant certifications supporting withdrawals, and review the audited account statements filed with the authority. A compliant developer will share these on request.

Does the 70 percent rule guarantee my project will be completed?

No. The rule protects 70 percent of your money from being diverted to other projects and ties withdrawals to certified progress, but it does not guarantee completion. The remaining 30 percent is less restricted, and a project can still fail on cost or approvals. Judge the developer's track record alongside the escrow.

Last updated 2026-07-10. PropNewz Team.