The reason a Bengaluru buyer's money used to vanish into a builder's other, more troubled project was simple: nothing stopped it. A developer could collect from buyers of one tower and pour it into a stalled site across town, leaving the first set of buyers funding a building that never rose. RERA changed that with a single, powerful rule about where your money has to sit. Understanding the seventy percent escrow account is one of the most reassuring things a buyer of an under construction flat can learn, because it explains exactly how the law keeps your payments tied to your own project.

The short answer. Under section 4 of the Real Estate Regulation and Development Act, a promoter must deposit at least seventy percent of the money collected from buyers of a project into a separate account with a scheduled bank, and use it only for the construction and land cost of that same project. The builder can withdraw only in proportion to how much of the project is complete, and only after an engineer, an architect, and a chartered accountant certify the progress. The trade off is that this does not guarantee a project finishes, but it makes diverting your money to another project far harder than it once was, which removes a common cause of stalled homes.

What is the seventy percent escrow rule?

It is the core financial safeguard RERA built for buyers. The Act requires that at least seventy percent of the amounts a promoter realises from the buyers of a project be deposited into a separate bank account maintained specifically for that project. That money is ring fenced: it can be used only to cover the construction cost and the land cost of the very project the buyers are paying into. The remaining portion gives the developer some flexibility for other legitimate expenses such as marketing and approvals, but the clear majority of your money is legally tied to your own building. This is the mechanism that turns a vague promise to complete into a funded obligation, and it is why a RERA registered project is structurally safer than an unregistered one. In Karnataka these projects and their filings sit on the state authority's portal at K-RERA, which is where a buyer can confirm a project is registered before relying on any of this.

Why does the escrow account matter to a buyer?

Because it directly targets the failure that ruined so many buyers before RERA: fund diversion. When a developer could freely move money between projects, the buyers of a slow selling or troubled project effectively subsidised the builder's other ventures, and a cash crunch anywhere could stall their homes. By requiring seventy percent of collections to stay in a project specific account used only for that project, the law keeps your payments working on your building. It does not remove every risk, since a project can still face delays for other reasons, but it removes one of the largest and most common causes of stalled construction, which is money leaving the project it was collected for.

How is the escrow protection verified in practice?

The protection is not just a promise on paper; it runs through a defined set of professional certificates. Before the bank releases money from the separate account, the promoter has to produce certificates from the project's architect and engineer on the stage of completion, and a chartered accountant's certificate that reconciles the amounts collected and spent. Read together, these tie every withdrawal to verified progress. For a buyer, the useful consequence is that the developer's own financial discipline is checked by outsiders whose professional standing is on the line. You will not usually see these certificates yourself, but knowing they exist tells you why a registered project cannot quietly drain your money the way an unregistered one might, and it is a fair question to ask a builder how their project's fund flow is being certified and whether the account is a dedicated project account.

How are withdrawals controlled?

The builder cannot simply draw the money at will. Withdrawals from the separate account are permitted only in proportion to the percentage of the project that is actually complete, and only after that stage of completion has been certified by an engineer, an architect, and a chartered accountant in practice. In effect, the money is released to match real progress on the ground, verified by three independent professionals rather than the builder's own say so. This ties the developer's access to funds to the pace of construction, which aligns their incentive with finishing the building. For a buyer, it means the money you pay is meant to be spent building the very thing you are buying, at a rate the law can check. It also gives you a plain reading of what healthy progress looks like: if a developer is demanding large payments while the site shows little movement, that gap between money collected and work certified is exactly the mismatch the escrow rule is designed to expose. A buyer who watches construction against the payment demands is, in effect, applying the same discipline the bank applies to the escrow account.

Does the escrow account guarantee completion?

No, and it is important to be clear about what it does and does not do. The escrow rule protects against diversion of funds and ties spending to progress, but it cannot guarantee that a project will be completed on time or at all, because delays can stem from approvals, litigation, market conditions, or a developer who runs short despite the safeguards. Think of it as a strong protection against one specific and once common failure, not a warranty of delivery. This is why the escrow rule is best read alongside the rest of RERA, particularly your rights if possession is delayed, rather than as a standalone promise that nothing can go wrong.

The escrow related checks for a buyer

Use these to make the protection real rather than theoretical for your purchase.

1. Confirm the project is RERA registered, since the escrow rule flows from that.
2. Pay only into the account the builder is required to use for the project.
3. Keep receipts for every payment tied to your unit and the project.
4. Watch that construction progress matches the payments being demanded.
5. Be cautious if a builder pushes large early payments ahead of progress.
6. Read the project's disclosures and progress updates on the RERA portal.
7. Know your delay rights in case the project stalls despite the safeguard.

How does this connect to your payment schedule?

The escrow rule works best when your own payments track construction rather than run ahead of it. A construction linked payment plan, where you pay as stages are completed, sits naturally alongside the escrow mechanism, because both tie money to progress. A plan that front loads large payments before much is built puts more of your money at risk earlier, even with the escrow account in place, since no safeguard fully protects money that has already left your hands for work not yet done. So while the seventy percent rule is the builder's obligation, a buyer strengthens their own position by choosing a payment schedule that mirrors the same principle of paying for progress actually made. The two safeguards, one legal and one contractual, reinforce each other, and a buyer who understands both is far harder to rush into paying for a building that is still mostly a rendering on a hoarding.

The seventy percent escrow account is one of the clearest examples of RERA shifting the balance toward buyers. It does not make an under construction purchase risk free, but it attacks the single failure that used to swallow buyers' money, and it ties the builder's spending to visible progress certified by independent professionals. Whether you are buying into a large development such as Sobha Royal Pavilion on Sarjapur Road or a smaller registered project, the protection works the same way. Read it together with our guide to verifying a project's registration, which is what unlocks these protections, and with our explainer on your refund and interest rights if a project is delayed despite them.

Frequently asked questions

What is the RERA seventy percent escrow account?

It is a rule under section 4 of the RERA Act requiring a promoter to deposit at least seventy percent of the money collected from a project's buyers into a separate bank account for that project. The money can be used only for the construction and land cost of that same project.

Can a builder use my money for another project?

No. The seventy percent kept in the separate account can be used only for the construction and land cost of the project it was collected for, and the Act prohibits diverting it to other projects. This is the central protection the escrow rule provides, and it directly addresses the fund diversion that stalled many projects before RERA existed.

How can a builder withdraw from the escrow account?

A builder can withdraw only in proportion to the percentage of the project that is actually complete, and only after that stage of completion is certified by an engineer, an architect, and a chartered accountant in practice. This ties the release of funds to verified construction progress rather than the developer's own word, aligning their access to money with finishing the building.

Does the escrow rule guarantee my flat will be completed?

No. The escrow rule protects against diversion of funds and ties spending to progress, but it cannot guarantee completion, since delays can arise from approvals, litigation, or market conditions. Treat it as a strong protection against one common failure, and read it alongside your delay and refund rights under RERA rather than as a warranty of delivery.

Last updated 2026-08-12. PropNewz Team.