Maharashtra RERA Rules and Withdrawal of Amount by Promoters to be Deposited in Separate Account.

May 11, 2017 Share

Maharashtra RERA Rules and Withdrawal of Amount by Promoters to be deposited in Separate Bank Account.

First RERA mentioned in Act that a developer / builder needs to open an 'escrow account' for each project they undertake to develop.

What is an Escrow Account?

A separate account which is for a specific purpose and withdrawals from such account is restricted. Funds can be withdrawn only for a specific purpose. The word 'escrow' is originated from the French word escroue, meaning paper or scroll of parchment; which indicates the deed that a third party held until a transaction is complete. Escrow accounts are mostly used during property transaction to hold third-party funds such as payments towards new bookings, deposits for a property rental in which money is released when the tenant leaves the property, purchase of second-hand car where funds are released once the warranty is over and provision of construction services where funds are released when the construction work is complete as per proposal.

What is Escrow Account for Real Estate Project?

Previously developers and builders have been accused of diverting funds, received from homebuyers. For example builders use to collect funds for a particular project and use those funds for buying land and for construction of other projects. This situation used to cause delay in possession of projects. Therefore to restrict this diversion of funds the Act Stipulates that, "70% of the amount realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account and will be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.”

But now RERA specifies Separate Bank Account Not an Escrow Account

The account has to be self-maintained and is not an escrow account requiring the approval of the Authority for withdrawal, initially the bill mentioned about the escrow account.
As per the RERA act, if the promoter has not been issued a occupation certificate or completion certificate of all buildings/wings as per sanctioned plan of an  ongoing real estate project, then 70% of the amount shall be realized from the allottees shall be deposited in such separate bank accounts.

If an ongoing projects estimated receivables is less than the estimated cost of completion of the project, in such event 100% of the amount is to be realized from the allottees and deposited in separate bank account and not an escrow account. By this the developer will be forced to use the project accruals for the development of the same project and will not be able to use the amount for any other purpose.

To understand the above statements see the table below:



Project XYZ (Ongoing Phase 1+ New Phase 2) -OC not received

5 acres

Estimated cost of Project XYZ

Rs. 60 crores

Estimated cost of Phase 1

Rs. 30 crores


1 residential building (90%) + club house (10%)

No. of floors (two flats per floor)

22 floors (44 flats)

Total floors completed

10 floors (20 flats)

No. of flats sold


Cost of flat

Rs. 1 crore

Total sale consideration received (70% of Rs.15 crore)

Rs. 10.5 crores

Expenditure incurred on Phase 1 till date

Rs. 8 crores

Remaining funds left in project account (10.5 –8)

Rs. 2.5 crores

Fund spending to be realized (for 15 flats)

Rs. 4.5 crores

As the estimated receivables is less than estimated cost of completion of project, 100% of amount to realize to be kept in separate bank account.

Separate Account Withdrawals

The withdrawal from the separate account will have to be in proportion to the percentage of completion of the project after it is certified by an engineer, an architect and a chartered accountant that the withdrawal is in proportion to the percentage of completion of the project. 

Let's see what are the rules of Maharashtra RERA for withdrawal of amounts by promoter deposited in separate account.

The promoter has to submit following certificates to the bank operating the separate account.

Rule5 (1) (i) (b)

  • A certificate from the project architect certifying the percentage of completion of construction work of each of the building/ wing of the real estate project.
  • A certificate from the builder stating the percentage of the completed construction work in each wing of the project.
  • A certificate from the engineer for actual cost incurred on the construction work of each of the building / wing of the project.
  • An official statement from the project engineer for the actual cost levied for the construction work of all the wings in the project.
  • Last a certificate stating the cost of construction and cost of land from a CA.  In this case the CA has to also mention the estimated cost of the project with the construction cost and land cost. The total estimated cost of the project multiplied by such proportion will determine the maximum amount that can withdrawn by the promoter from the escrow / separate account.

A promoter has to follow this procedure every time he has to withdraw from the separate account until he obtains occupation certificate. Once the promoter receives completion certificate he can withdraw entire amount from the separate account.

To understand the withdrawal of funds as per the percentage of completion of the project see the table below:



Total saleable area

5,000 Sq. ft.

Estimated Project Cost (This comprises land cost of Rs. 300 Lakhs and construction costs of Rs. 300 Lakhs)

Rs. 600 lakhs

Cost incurred till end of reporting period (This includes land cost of Rs 300 Lakhs and construction cost of Rs 60 Lakhs)

Rs. 360 lakhs

Total area sold till the date of reporting period

1,000Sq. ft.

Total sale consideration as per agreements of sale executed

Rs. 200 lakhs

70%to be kept in separate bank account

Rs. 140 lakhs

Percentage of completion of project (360/600*100)

60% of total project cost (including land cost)

Amount that can be withdrawn(60% of Rs. 140 lakhs)

Rs. 84 lakhs


Audits and Sanction Limits

To avoid any misuse of the funds, 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 and 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.

Project with Phases

If the project is to be developed under phases, every phase shall be considered a standalone real estate project and the builder will have to obtain registration under the RERA Act for every new phase separately. Every new phase will have to have separate account to be maintained.

Share Your Comment 1 Comments


Dec 07, 2017

So this means RERA escrow account is no longer needed. As per RERA builder will have to open 2 separate accounts

Roger Londhe

Dec 08, 2017

Correct as per RERA escrow bank account will not be necessary but the builder will have to make two separate bank accounts in which the builder will require approval from the authority for withdrawal of funds

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