Quietlist

Real Estate Intelligence · Guide

Understanding RERA escrow accounts & fund diversion.

Why do projects halt when sales are high? The most common reason for project delay in India is fund diversion—developers using customer advances from one project to buy land or pay loans elsewhere. Here is how RERA's 70/30 escrow system works and how to monitor it.

1. The 70% Escrow Rule

RERA mandates that **70% of all customer receivables** for a project must be deposited in a separate bank account (known as the RERA Escrow Account). The developer can only withdraw these funds to cover the actual cost of land and construction.

The Vetting Rule: Check the developer's bank account details in their RERA registration profile. The account name must explicitly contain the word "RERA Designated Account" or "RERA Escrow Account". Paying your booking advances into any other generic corporate account is illegal and a massive red flag.

2. Architect and Engineer Certificates

A developer cannot withdraw money from the escrow account at will. To make a withdrawal, they must submit certificates from:

  • The Project Architect: Certifying the percentage of construction work completed.
  • The Project Engineer: Certifying the actual construction cost incurred.
  • A Chartered Accountant: Certifying that the withdrawal is in proportion to the completion percentage.

The Vetting Rule: These certificates (specifically CA Form 3) must be uploaded online. If the CA report shows huge withdrawals for "development" while the physical construction on-site is non-existent, it indicates developer collusion or fraudulent reporting.

3. Monitoring CA Form 3 Audits

Every year, developers must file an **Annual CA Audit (Form 5)** certifying that funds collected were utilized strictly for the designated project and withdrawals were matched with milestones.

The Vetting Rule: Review the project's **Annual Audit Report** on the RERA portal. Look for the auditor's qualifications section. If the independent CA notes discrepancies, unbacked loans to subsidiary entities, or failure to maintain the 70% balance rule, the project is in deep financial danger.