No. A builder cannot legally spend your flat money on another project. Under the Real Estate (Regulation and Development) Act, 2016, the promoter must put 70 percent of the money collected from buyers of a project into a separate bank account for that same project, and can take money out only in step with real, certified construction progress. If your builder is quietly moving your money to a different tower or a land deal, that is a violation you can complain about to your state RERA authority.
This guide explains the rule in plain words, shows you the exact documents to ask for before and after you book a flat, lists the warning signs of fund diversion, and walks you through filing a RERA complaint.
Many buyers and even some agents call this the “70 percent escrow account”. Legally that name is not exact, and the difference matters for you.
A true escrow account is held by a neutral third party who releases money only when conditions are met. What RERA actually requires is a separate designated account in a scheduled bank, opened and operated by the builder for one specific project. The bank does not police the withdrawals. Instead, three professionals, an engineer, an architect, and a chartered accountant, must certify that any withdrawal matches the percentage of construction actually completed.
So the safeguard is not the bank. The safeguard is the certificate. That is why checking those certificates is the single most useful thing a buyer can do.
The rule sits in Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016. When a builder applies to register a project with the RERA authority, the builder must give a written declaration 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.”
The same Section 4(2)(l)(D) has provisos that control how the money comes out:
In short: your money is fenced off for your project, and it can be released only against proof of matching construction. An “allottee” is simply the buyer to whom the flat is allotted.
A note on the number. 70 percent is the figure in the central Act. A few states have set their own rules, so always read the RERA registration page for your specific project rather than assuming the number.
Do this while you can still walk away. Every registered project has a public page on the state RERA portal.
If a project has no RERA number, or the number does not open a real page, treat that as a stop sign.
After booking, you have the standing of an allottee and more leverage.
Worked example: how Dr. Shrawan Kumar Pathak caught a diversion
Dr. Shrawan Kumar Pathak booked a 2BHK in a registered project and paid his instalments on time. After a year the tower had barely reached the third floor, yet his demand letters kept climbing.
He pulled up the project's RERA page and downloaded the quarterly progress reports and the withdrawal certificates. The builder had withdrawn far more from the separate account than the certified construction stage justified, and one payment demand asked him to pay into an account that was not the declared separate account.
Dr. Pathak collected his allotment letter, payment receipts, the demand letters, and screenshots of the RERA progress reports. He filed a complaint with his state RERA authority under Section 31, attaching all of it. Because he had the certificates and the account mismatch in writing, his complaint had teeth from day one.
Section 31 of the Act gives any aggrieved person the right to complain. It says:
“Any aggrieved person may file a complaint with the Authority or the adjudicating officer … against any promoter allottee or real estate agent.”
The word “person” in Section 31 also covers an association of allottees or a registered voluntary consumer association, so buyers can act together.
Steps:
Complaints seeking compensation are usually decided by the adjudicating officer. You do not always need a lawyer to start, but for a large claim it can help.
Not in the strict sense. Section 4(2)(l)(D) requires a separate account in a scheduled bank, operated by the builder, from which withdrawals are allowed only against certification by an engineer, architect and chartered accountant. A true escrow has a neutral third party releasing funds, which this is not.
No. The 70 percent deposited in the separate account must be used only to cover the construction and land cost of that same project. Moving it to another project is a violation you can raise before your state RERA authority.
The quarterly progress reports on the RERA portal, the engineer, architect and CA withdrawal certificates, the annual audit statement, and any demand letter that names an account different from the declared separate account. Compare claimed progress with what you see on site.
Section 31 of the Real Estate (Regulation and Development) Act, 2016. It lets any aggrieved person, including an association of allottees, complain to the Authority or the adjudicating officer against a promoter. Section 31(2) says the form and fee are as prescribed by each state.
The fee is fixed by each state under Section 31(2), so it varies. Check the current amount on your own state RERA portal before filing, rather than relying on a figure quoted on any other website.
The 70 percent figure is in the central Act. Some states have set their own variations, so read the registration page for your specific project on your state RERA portal to confirm the number and the account details that apply to you.
If you suspect diversion, get your facts and paperwork ready first, then complain.
</content> </invoke>