Priya sat in a developer's sales lounge off Sarjapur Road, pen hovering over a booking form, when a quiet question stopped her. She had just written a booking cheque for an under-construction flat, and nobody in the room could say, in plain words, where that money would sit until her keys arrived. Once it left her account, it seemed to vanish into a black box.

The short answer. The RERA 70% rule Bengaluru buyers keep hearing about comes from Section 4(2)(l)(D) of the Real Estate Regulation and Development Act, 2016, and it requires a promoter to deposit at least 70 percent of the money collected from allottees into a separate bank account for that project. The trade-off, named up front: the account is self-managed by the builder, not a bank-controlled escrow, so verification still falls on you.

Quick facts for the record: the 70 percent obligation sits in Section 4(2)(l)(D) of the 2016 Act, and on 3 June 2026 the Karnataka Real Estate Regulatory Authority (K-RERA) held that homebuyer money held by a promoter is a trust asset that cannot be diverted for construction, directing Smart Value Homes and Tata Value Homes to transfer amenities and sinking funds to the allottee association of the New Haven Bengaluru Phase 1 project, as reported by LiveLawBiz.

What is the RERA 70% rule Bengaluru buyers should know?

The RERA 70% rule Bengaluru buyers should know is a funds-protection provision: under Section 4(2)(l)(D) of the Real Estate Regulation and Development Act, 2016, a promoter must deposit at least 70 percent of the money collected from allottees for a project into a separate bank account maintained only for that project. The logic is simple. When you buy an under-construction home, you are paying for something that does not yet exist, and your money is meant to build the very home you booked, not to prop up a different tower in a different city or to fund the promoter's next land deal.

The remaining share, up to 30 percent, is not locked in the same way, which is why the rule is often shorthanded as the 70 percent rule. The point of the separate account is ring-fencing. Your money and the money of every other allottee in that project is supposed to stay pooled and dedicated to that project's land and construction costs. In principle, this turns the promoter into a custodian of your funds rather than a free spender.

Where does your booking money actually sit after you pay?

At least 70 percent of it should sit in a dedicated project bank account, legally set aside from the promoter's other money. That is the whole design. The funds in that account belong, in substance, to the allottees until they are spent on that project, and the promoter cannot lawfully divert them to other projects or to personal use. Think of it less as the builder's cash and more as a construction fund held in the buyers' collective interest.

This matters most when a builder runs several projects at once. Without ring-fencing, a common failure pattern in Indian real estate has been money from a new launch quietly financing an older, stalled project, leaving the newest set of buyers exposed. The separate account requirement is meant to break that chain. Whether it does in practice depends on enforcement, which is where the gap between the letter of the law and daily reality shows up.

How can a builder withdraw money from the project account?

A builder can withdraw only towards the land cost and construction cost of that same project, and only in proportion to the stage of completion. The law does not let a promoter empty the account at will. Each withdrawal is meant to be certified by three independent professionals: an engineer, an architect and a chartered accountant. The engineer and architect vouch that the physical progress justifies the drawdown, and the chartered accountant ties the numbers to the certified stage of work.

On paper this is a strong control. In practice, buyers rarely see these certificates. They are filed and held on the project side, and unless you actively ask or check the project's RERA disclosures, you may never lay eyes on them. That asymmetry is important: the certification exists to protect you, but you are usually not the one holding it, so you cannot assume it is being done rigorously without looking.

What did K-RERA rule on 3 June 2026, and why does it matter?

On 3 June 2026, the Karnataka Real Estate Regulatory Authority held that homebuyer money held by a promoter is a trust asset that cannot be diverted for construction, as reported by LiveLawBiz. In that matter, K-RERA directed Smart Value Homes and Tata Value Homes to transfer amenities and sinking funds to the allottee association of the New Haven Bengaluru Phase 1 project.

Why it matters to a buyer weighing a purchase today: the ruling reinforces the principle behind the 70 percent rule, that your money is not the builder's to repurpose, and it specifically protects funds meant for shared amenities and long-term maintenance. Amenities money and sinking funds are exactly the pools that tend to go missing when a project changes hands or a builder gets stretched. A regulator publicly treating those funds as trust assets, and ordering them handed to the residents' own association, is a signal that the custodial idea has teeth in Karnataka. It is one data point, not a guarantee, but it is the kind of precedent worth citing if you ever have to argue your case.

Compliant versus non-compliant builder: what does the difference look like?

A compliant builder keeps your money where the law intends and can show you the paper trail, while a non-compliant one leaves you guessing. The table below lays out the practical contrast a Bengaluru buyer can actually check before signing.

How do you verify the 70 percent rule as a buyer?

You verify it by treating the separate account as a document you are entitled to understand, not a detail to skip. Because the certificates and account records usually stay on the builder's side, the burden of checking sits with you, and a short, disciplined routine goes a long way. Confirm the project's registration first, because everything else depends on the project actually being registered and disclosed. You can cross-check any registration on the official Karnataka RERA portal, and our guide on how to verify a K-RERA registration for a Bengaluru project walks through that step in detail.

Run through this checklist before you commit serious money:

1. Ask for the project's RERA registration number and confirm it on the official Karnataka RERA portal.
2. Get the separate project account details in writing and ensure your payments are directed there, not to a personal or unrelated account.
3. Request sight of the engineer, architect and chartered accountant withdrawal certificates for the current stage.
4. Check that the sale agreement names the project account and references the 70 percent deposit obligation.
5. Compare the claimed stage of completion against the physical progress you can see on site.
6. Ask specifically how amenities money and sinking funds are being held, given the recent K-RERA position.
7. Keep every receipt and email, so you have a clean record if you later need to file a complaint.

If answers are evasive, treat that as information. A builder confident in compliance has little reason to hide the account details or the certificates.

What are the limits of the 70 percent rule for a Bengaluru buyer?

The main limit is that the rule protects you on paper more reliably than it does in real time. Enforcement is slow, and a regulator's order often arrives after the damage, when a project is already delayed or funds are already stretched. The separate account is self-managed by the builder rather than a bank-controlled escrow that requires a regulator to approve each withdrawal, so day-to-day discipline depends heavily on the builder's own honesty and on the certifying professionals doing their job.

There is also the visibility gap. Because buyers rarely see the chartered accountant certificates, the practical work of verification falls back on you. The penalty for breach can reach up to 5 percent of the estimated cost of the project, which is meaningful, but a penalty is a consequence after a violation, not a wall that stops the money from moving in the first place. Central authorities have pushed banks toward tighter compliance on withdrawals from RERA accounts, as covered in this Business Standard report, and that direction of travel helps. Still, the honest summary for a buyer is this: the 70 percent rule is a strong shield you should absolutely use, but it is not a substitute for your own due diligence. If you do end up in a dispute, our walkthrough on filing a RERA complaint in Karnataka explains the process from the buyer's side.

Does the RERA 70% rule mean my money is held in a bank escrow?

Not exactly. It means at least 70 percent of collections must sit in a separate project bank account, but that account is self-managed by the builder, not a bank-controlled escrow that needs regulator approval for each withdrawal. Withdrawals are instead certified by an engineer, an architect and a chartered accountant.

Can a Bengaluru builder use my booking money for another project?

No. Under Section 4(2)(l)(D), money in the separate account can be spent only on the land and construction costs of that same project. The funds belong to the allottees until spent, and diverting them to other projects or personal use is a breach that can attract a penalty of up to 5 percent of the project cost.

What can I do if I suspect my builder is diverting funds?

Gather your receipts, payment proofs and the sale agreement, then ask in writing for the project account details and the withdrawal certificates. If the builder stays evasive, you can file a complaint with K-RERA. The penalty for breach can reach up to 5 percent of the project's estimated cost.

Why does the 3 June 2026 K-RERA ruling matter for buyers?

On 3 June 2026, K-RERA held that homebuyer money is a trust asset that cannot be diverted for construction, and directed two builders to hand amenities and sinking funds to the New Haven Bengaluru Phase 1 allottee association, as reported by LiveLawBiz. It strengthens the custodial principle buyers rely on.

Last updated 2026-07-02. PropNewz Team.