East Bengaluru buyer answers
What is RERA's 70% rule for project money, and how do I check it?
Direct answer: Under section 4(2)(l)(D) of the RERA Act, a builder must deposit 70% of the money collected from buyers for a project in a separate account at a scheduled bank, use it only for that project's construction and land cost, and withdraw it in proportion to completion, certified by an engineer, an architect and a chartered accountant.
Disclosure: acre&key’s advice is free to buyers; we are an authorised sales partner for some projects and may be paid by the developer.
Verify with your lawyer: This page explains the RERA Act as published, not legal advice. Have your own property lawyer review the documents for your specific flat before you sign, pay or file anything.
The 70% rule is RERA's safeguard against buyer money for one project being spent somewhere else. It doesn't guarantee your flat will be finished, but it gives you something specific to ask about and check.
What exactly does the 70% rule say?
When a promoter applies for registration, section 4(2)(l) requires a declaration, supported by an affidavit, that includes (D):
"that seventy per cent. of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose"
Three provisos follow (RERA Act, s.4(2)(l)(D)):
- Withdrawals must be in proportion to the percentage of completion of the project.
- Each withdrawal must be certified by an engineer, an architect and a chartered accountant in practice as being in proportion to completion.
- The promoter must get its accounts audited within six months after the end of every financial year by a chartered accountant in practice and produce a CA-certified statement of accounts. The audit verifies that money collected for the project was used for it and that withdrawals followed the completion ratio.
"Scheduled bank" means a bank in the Second Schedule to the Reserve Bank of India Act, 1934.
It isn't an escrow account. The central RERA FAQ hosted on the K-RERA site says the account "has to be self maintained and is not an escrow account requiring the approval of the Authority for withdrawal" (RERA FAQ, Q34). The checks come from the three certificates and the annual audit.
Why does the rule matter to a buyer?
It ties your money to your project. Without it, a developer could collect from buyers in one tower and spend it on land for another. With it:
- most of what you pay is ring-fenced for construction and land cost of your project;
- money can only come out as work progresses; and
- three professionals and an auditor put their names to the withdrawals.
It's also why a construction-linked payment plan pairs well with RERA. Your instalments rise with progress, and the builder's withdrawals are meant to as well. See construction-linked vs time-linked payment plans.
What doesn't the rule do?
Be clear about its limits:
- It covers 70%, not 100%. The other 30% is not restricted by this clause.
- It doesn't guarantee completion. If costs overrun or sales stall, a project can still be delayed.
- It relies on certification. The safeguard is only as good as the engineer, architect and CA who sign off, and the audit that follows.
So treat it as one check among several, not a promise.
How can I check the rule is being followed?
You won't see the bank statement, but you can check a lot from the outside:
- Confirm registration. The 70% declaration is part of the registration application, so an unregistered project has no such commitment. Start with checking a project on the Karnataka RERA website.
- Read the quarterly updates. Section 11(1) requires the promoter to keep the project web page updated quarterly with bookings, approvals and the status of the project. If construction status barely moves while bookings climb, ask why.
- Check where your payment goes. Ask the builder in writing which account your instalments are paid into and whether it's the designated project account.
- Match demands to progress. On a construction-linked plan, a demand for "slab 10" should match what you can see on site and what the quarterly update says.
- Ask about the annual audit. The proviso requires a CA-certified statement of accounts after each financial year. Ask the builder whether the latest one is done.
What can I do if I suspect diversion?
If the quarterly updates, site progress and demand letters don't line up, write to the promoter first and keep the reply. A complaint to Karnataka RERA under section 31 is open for any violation of the Act, including the section 4 declaration. Here is how to file a complaint with Karnataka RERA. Section 7 also allows the Authority to revoke a registration where the promoter defaults on anything the Act requires or is involved in unfair practice or irregularities. On revocation, section 7(4)(c) says the Authority shall direct the bank holding the project account to freeze it, and section 8 lets the Authority, after consulting the appropriate Government, have the remaining work carried out, including by the association of allottees. See what happens if a project's RERA registration lapses or is revoked.
You don't have to complain alone. Under the Explanation to section 31(1), an association of allottees counts as a "person" who can file.
Does the rule apply to each phase separately?
Yes, in effect. The Explanation to section 3 says that where a project is developed in phases, "every such phase shall be considered a stand alone real estate project", and the promoter must register each phase separately. Each registration carries its own section 4 application, so the 70% declaration attaches to the phase you're buying in. So money collected for Phase 1 shouldn't be funding the land or towers of Phase 3. When you check the project on the RERA portal, make sure you're looking at the registration number for your phase, not a sister phase with a similar name. Ask the builder which registration number your agreement falls under and confirm it's printed in the agreement.
Where does this fit in my due diligence?
Before booking, put the 70% rule alongside the other checks: registration, approvals, title and the agreement. Our list of documents to verify before paying a token advance covers the rest.
Frequently asked questions
Does the 70% rule mean my money is safe?
It reduces one risk: diversion of buyer money to other projects. It doesn't guarantee completion, and 30% of collections aren't restricted by this clause.
Who certifies withdrawals from the project account?
An engineer, an architect and a chartered accountant in practice, who must certify that each withdrawal is in proportion to the percentage of completion.
Can I see the project bank account statement?
Usually not directly. You can check the project's quarterly updates on the Karnataka RERA portal and ask the builder in writing whether your payments go into the designated project account.
Is the 70% rule part of RERA registration?
Yes. It's a declaration under section 4(2)(l)(D), supported by an affidavit, filed with the registration application.
What if I think the builder diverted funds?
Raise it in writing with the builder, then consider a complaint to Karnataka RERA under section 31. Bring your payment records and the project's quarterly updates.
References
- Real Estate (Regulation and Development) Act, 2016, ss. 3, 4(2)(l)(D), 7, 8, 11(1), 31. https://rera.karnataka.gov.in/resources/staticpage/Real_Estate_Act.pdf, accessed 17 Oct 2026.
- RERA FAQs (Ministry of Housing & Urban Poverty Alleviation, hosted by K-RERA), Q34 to Q36: https://rera.karnataka.gov.in/resources/staticpage/FAQ.pdf, accessed 17 Oct 2026.
- Karnataka RERA portal (project search). https://rera.karnataka.gov.in/, accessed 17 Oct 2026.
This page explains public rules and processes. It isn't legal or tax advice. acre&key gives buyers advice for free. We are an authorised sales partner for some projects and may be paid by the developer.