RERA's 70 Percent Separate Account: Where a Chennai Buyer's Instalments Should Go
MoHUA's RERA FAQ says promoters must keep a separate bank account for every project holding seventy percent of buyer money, usable only for construction and land cost. Withdrawals must match completion and be certified by an engineer, architect and CA, with an annual audit within six months.
Every time a Chennai buyer pays a construction-linked instalment, the money lands in the promoter's bank account and the buyer loses sight of it. RERA was written partly to change that. One clause of the Real Estate (Regulation and Development) Act, 2016 tells the promoter where seventy percent of that money must go, what it may be spent on, and who has to sign off before it is withdrawn.
The Ministry of Housing and Urban Affairs explains the clause in plain terms in its July 2025 FAQs on the Real Estate Act. For a buyer weighing an under-construction flat in Chennai, the separate account is one of the few structural protections that operates while the building is still going up, so it is worth knowing exactly what the FAQ says, and what it does not.
The short answer. MoHUA's FAQ says Section 4(2)(l)(D) requires the promoter to maintain a separate bank account for every project, into which seventy percent of the money received from allottees is deposited, to be used only for construction and land cost. Withdrawals must be in proportion to the percentage of completion, certified by an engineer, an architect and a chartered accountant in practice, and the accounts must be audited within six months of every financial year end. The trade-off: this is not an escrow account needing the regulator's approval for each withdrawal, so it protects buyers through certification and audit after the fact rather than through advance sign-off.
What does the RERA separate account rule require?
A dedicated account for each project. In answer to whether the promoter must maintain an escrow account or a separate account, the FAQ states: "Section 4(2)(l)(D) provides that the promoter shall maintain a separate bank account for every project undertaken by him wherein seventy percent of the money received from the allottees shall be deposited for the purposes of construction and land cost."
The words "for every project" matter for Chennai buyers looking at developers with several sites. Money collected for one registered project is meant to sit in that project's account, not be pooled with others.
Is it an escrow account controlled by the regulator?
No. The FAQ is specific: "The account has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal." The promoter operates the account. The regulator does not approve each cheque.
That is the trade-off at the heart of this rule. The FAQ continues that "Section 4(2)(l)(D) clearly provides that the funds can only be used for construction and land cost." The restriction on use is clear, but enforcement rests on the professional certificates and the annual audit described below, and on the buyer's ability to check what the promoter has disclosed. A buyer who understands this can ask better questions: not whether the regulator approved a withdrawal, but whether the three certificates and the audited statement exist and agree with the site.
When can the promoter withdraw money from the account?
Only in step with construction, and only with three certificates. The FAQ says that "As per section 4(2)(l)(D) first and second proviso, the promoter is required to withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project."
It adds: "In addition, the promoter is permitted to withdraw from the separate account after it is certified by an engineer, an architect and a chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project." Three separate professionals, in other words, have to put their names to the claim that money withdrawn matches work done.
For a buyer, the practical link is between the payment schedule and the progress on site. If a promoter is demanding instalments tied to a slab or stage, the separate account rule expects withdrawals from the account to track that same progress.
| Feature | What MoHUA's FAQ says | Provision |
|---|---|---|
| Account type | Separate bank account for every project, self maintained | Section 4(2)(l)(D) |
| Amount to deposit | Seventy percent of money received from allottees | Section 4(2)(l)(D) |
| Permitted use | Construction and land cost only | Section 4(2)(l)(D) |
| Withdrawals | In proportion to completion, certified by engineer, architect and CA | First and second proviso |
| Audit | Within six months after the end of every financial year | Third proviso |
What does the annual audit check?
Whether project money stayed with the project. The FAQ says that under the third proviso, "the promoter is required to get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such chartered accountant."
It then states what the audit must verify: "It shall be verified during the audit that the amounts collected for a particular project have been utilized for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project." For a Chennai buyer, the audited statement is the document that closes the loop each year between collections, spending and progress.
What other disclosures sit alongside the account?
Quarterly updates on the regulator's website. The FAQ says that under Section 11, the promoter "is required to update all project information as furnished at the time of application (as provided under section 4) on the website of the Authority," and that Section 11 also provides for certain information "which needs to be updated by the promoter on quarterly basis, in order to make an informed choice by the buyer." It adds that Sections 4 and 11 "provide for a detailed list of disclosures on the website of the Authority by the promoter for public viewing," with the detailed list "required to be specified in the Rules."
Under Section 34, the FAQ says, the Authority must maintain a website of records for public viewing of all registered projects, details of promoters, and details of projects whose registration was revoked or which were penalised. In Tamil Nadu, these records are kept by the state's real estate regulatory authority; buyers should search the project's registration on the authority's portal. Our earlier explainer on RERA documents a Chennai flat buyer can demand covers the wider set of papers available from booking to handover.
What happens if a promoter breaks the rule?
The Act provides penalties linked to project cost. The FAQ says that under Section 60, "if the promoter defaults as regards matters covered under section 4, he shall be liable to a penalty upto five percent of the estimated cost of the real estate project." Under Section 61, default on any other provision of the Act, Rules or Regulations carries a penalty of up to five percent of the estimated cost.
Revocation is also possible. The FAQ says that under Section 7 the Authority can revoke a project's registration for specified violations, but that this "is envisaged as a last resort and can only be done after providing a reasonable opportunity of being heard." Under Section 8, after revocation, the Authority in consultation with the appropriate Government may arrange for the remaining work to be carried out, and "the association of allottees shall have the first right of refusal for carrying out the remaining development works."
Chennai buyers following stalled or rebuilt projects may also find our report on the Madras High Court's order on Jains Westminster in Saligramam useful as an example of what can follow when a project goes wrong.
There is also a narrow case where the separate account may not apply. The FAQ says that if a project "is being constructed by Development Authority from its own fund and not taking any fund from the buyer," the Real Estate Regulatory Authority "may grant the exemption to open the separate bank account as required under Section 4(2)(l)(D) of RERA on a case-to-case basis." Separately, the FAQ lists projects that need no registration at all under Section 3(2), including those where the land "does not exceed five hundred square meters or the number of apartments proposed to be developed does not exceed eight, inclusive of all phases." Buyers in small buildings should confirm the registration position before relying on RERA protections.
What should a Chennai buyer check before paying the next instalment?
- Find the project's registration on the Tamil Nadu real estate regulator's portal and note the registration number.
- Confirm the project is not one of the small-building categories exempt from registration under Section 3(2).
- Review the promoter's latest quarterly update on the regulator's website against the stage claimed in your demand letter.
- Ask the promoter which bank holds the project's separate account under Section 4(2)(l)(D).
- Ask whether the latest withdrawal certificates from the engineer, architect and chartered accountant are on record.
- Ask for, or look for, the audited statement of accounts for the last financial year.
- Keep every demand letter, receipt and site photograph dated, so you can match payments to progress later.
Frequently asked questions
How much of my payment must go into the RERA separate account?
MoHUA's RERA FAQ says Section 4(2)(l)(D) requires the promoter to maintain a separate bank account for every project, in which seventy percent of the money received from allottees is deposited. The FAQ states the funds can only be used for construction and land cost of that project.
Does RERA require regulator approval for each withdrawal?
No. MoHUA's FAQ says the separate account is self maintained and is not an escrow account requiring the Authority's approval for withdrawal. Instead, withdrawals must be in proportion to the percentage of completion and certified by an engineer, an architect and a chartered accountant in practice.
When must the promoter's project accounts be audited?
According to MoHUA's FAQ, the third proviso to Section 4(2)(l)(D) requires the promoter to get accounts audited within six months after the end of every financial year by a chartered accountant in practice, verifying that project collections were used for the project and withdrawals matched completion.
What penalty applies if a promoter breaches Section 4?
MoHUA's FAQ says that under Section 60, a promoter who defaults on matters covered under Section 4 is liable to a penalty of up to five percent of the estimated cost of the real estate project. The Authority can also revoke registration under Section 7, after giving a reasonable opportunity of being heard.
This article explains the Ministry of Housing and Urban Affairs' general FAQs for information only and is not legal or financial advice.
Last updated 2026-11-09. PropNewz Team.
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