A Mumbai buyer in Chembur once asked a developer a simple question at the sales desk: where does my money actually go? The answer she got was a shrug and a line about company accounts. What she was really asking is the question that decides whether a project finishes or stalls, because the single most common reason a tower stops rising is that money raised from one project was quietly spent on another. The Real Estate (Regulation and Development) Act, 2016 has a specific answer to her question, and it is worth every buyer knowing it before the first instalment leaves their account.

The short answer. Under Section 4(2)(l)(D) of the Act, a promoter must maintain a separate bank account for every project, into which 70 percent of the money received from allottees is deposited, and those funds may 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. The trade off worth understanding: this is a self maintained account, not an escrow account requiring the regulator's approval for each withdrawal, so the protection depends on certification and audit rather than on a regulator signing off every payment.

What is the 70 percent rule under RERA?

It is the Act's central defence against a builder funding one project with another project's money. As the Ministry of Housing and Urban Affairs sets out in its official FAQs on the Real Estate Act, Section 4(2)(l)(D) provides that the promoter shall maintain a separate bank account for every project undertaken, wherein 70 percent of the money received from the allottees shall be deposited for the purposes of construction and land cost.

Two words in that sentence carry most of the weight. The account is separate, meaning per project rather than a single pooled corporate account. And the permitted purposes are construction and land cost, meaning the money is ring fenced for building the thing you bought rather than for marketing, land acquisition elsewhere, or servicing debt on an unrelated site. The Ministry FAQs state that Section 4(2)(l)(D) clearly provides that the funds can only be used for construction and land cost.

Is the separate account the same as an escrow account?

No, and this is the most widely repeated misunderstanding about RERA. The Ministry FAQs are explicit that the account has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal. Sales teams sometimes describe the account as regulator controlled, and buyers often assume a government officer approves every rupee that leaves it. That is not how the provision works.

Understanding this changes what you should actually check. Because no regulator signs off each withdrawal, the discipline comes from the certification and audit requirements attached to the account. A buyer who knows this asks about certifications and audited accounts rather than assuming an official is watching the balance. It is a meaningful protection, but it is a documentary one.

How is the builder allowed to withdraw the money?

Only in step with construction progress, and only with professional certification. Under the first and second provisos to Section 4(2)(l)(D), the promoter is required to withdraw amounts from the separate account to cover the cost of the project in proportion to the percentage of completion of the project. The Ministry FAQs add that 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.

That triple certification is the mechanism that replaces regulator approval. Three independent professionals, each with their own licence at stake, have to attest that the money being taken out matches the work actually done. The table below shows how the rule is designed to work against the failure mode it was written to stop.

The remaining 30 percent sits outside this ring fence and can be used for the promoter's other legitimate costs. The Act's design assumption is that if the construction linked 70 percent stays disciplined, the project has the funding it needs to reach completion.

It is worth pausing on why the certification is tied to percentage of completion rather than to a fixed schedule of dates. A calendar based release would let a promoter draw money on time even when nothing had been built, which is exactly the pattern that left so many buyers stranded before the Act existed. Linking the money to measured progress means that if construction slows, the permitted withdrawals slow with it, and the funds that remain in the account still belong to the project rather than to the promoter's wider business.

Does anyone audit the account?

Yes, annually and by a chartered accountant. Under the third proviso to Section 4(2)(l)(D), 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. This creates a yearly checkpoint independent of the per withdrawal certifications, and it is the closest thing the framework has to a periodic health check on where project money went.

There are consequences attached to getting this wrong. The Ministry FAQs record that under Section 60, if the promoter defaults as regards matters covered under Section 4, he shall be liable to a penalty of up to 5 percent of the estimated cost of the real estate project. Because Section 4 is the provision that carries the separate account obligation and the registration disclosures, that penalty sits behind the funding discipline described here rather than being a purely paper requirement.

For a buyer, the audit requirement is useful mainly as a question to ask. A promoter running a compliant project has audited accounts and has no particular reason to be evasive about their existence. Persistent vagueness about whether the annual audit has been completed is worth noticing, particularly on a project that has already slipped past its declared timeline.

What can a Mumbai buyer actually check?

Start with the project's disclosures on the regulator's website rather than with the sales team. The Ministry FAQs note that Section 4 and Section 11 provide for a detailed list of disclosures on the website of the Authority by the promoter for public viewing, and that Section 11 requires certain information to be updated on a quarterly basis so buyers can make an informed choice. Those quarterly updates are where a stalling project usually shows itself first, as declared progress flattens while dates move.

Pair that with the commercial checks you are already making. Our guide to carpet area versus super built up area for Mumbai buyers covers what you are actually buying, and the funding question covered here is about whether what you bought will get built. A project can be honest about area and still be starved of money, which is why both checks belong in the same afternoon of work.

What does the 70 percent rule not protect you against?

It does not guarantee completion, and it is important to be clear eyed about that. The rule constrains how money is held and released, but it cannot conjure demand, fix a badly priced project, or stop a promoter who never deposited the money correctly in the first place. Compliance is a legal obligation, not a physical impossibility of breach, and enforcement generally follows a complaint rather than preceding it.

Nor does the rule cover the 30 percent that sits outside the ring fence, or protect you from ordinary construction risk. Treat it as one strong structural safeguard among several, alongside the project's registration status, its disclosed timelines, and the cost checks in our breakdown of Mumbai ready reckoner rates and stamp duty for flat buyers. No single provision substitutes for reading the record yourself.

A funding diligence checklist before you pay

Run these seven checks on any under construction Mumbai project.

1. Confirm the project is registered, so the Section 4 disclosures exist at all.
2. Read the quarterly updates on the Authority website and track declared progress over time.
3. Ask whether withdrawals have been certified by the engineer, architect, and chartered accountant.
4. Ask whether the annual audit under the third proviso has been completed for the last financial year.
5. Compare declared percentage of completion against what you actually see at the site.
6. Check whether declared completion dates have been revised, and how often.
7. Keep your own dated record of every disclosure you relied on before paying.

These questions are unremarkable for a well run project and revealing for a weak one. The point is not to catch a builder out, but to see whether the paperwork the Act requires actually exists before your money joins it.

Frequently asked questions

What is the 70 percent rule in RERA? Section 4(2)(l)(D) requires a promoter to keep a separate bank account for every project and deposit 70 percent of the money received from allottees into it. The Ministry FAQs confirm those funds can be used only for construction and land cost, which stops money raised for one project funding another.

Is the RERA account an escrow account? No. The Ministry of Housing and Urban Affairs FAQs state the account has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal. Control comes from professional certification and annual audit rather than from the regulator approving each withdrawal.

How can a builder withdraw money from the account? Only in proportion to the percentage of completion of the project. The Ministry FAQs state withdrawal is permitted after an engineer, an architect, and a chartered accountant in practice certify that the withdrawal is in proportion to the percentage of completion, which ties cash flow to actual construction progress.

Are the promoter's accounts audited? Yes. Under the third proviso to Section 4(2)(l)(D), the promoter must get his accounts audited within six months after the end of every financial year by a chartered accountant in practice. Asking whether that audit is complete is a reasonable question for any buyer in an ongoing project.

Last updated 2026-07-25. PropNewz Team.