Under the Real Estate (Regulation and Development) Act, 2016 (RERA), the concept of an escrow account is an important provision designed to protect homebuyers and ensure transparency in real estate transactions. The escrow account provisions are primarily aimed at regulating the flow of funds to prevent the misuse of buyer's money by real estate developers. Here are the key provisions related to the escrow account under RERA: 1. Mandatory Escrow Account: - Under Section 4(2)(l)(D) of RERA, it is mandatory for developers to deposit 70% of the amount received from homebuyers for a particular project into a separate escrow account maintained in a scheduled bank. - This account is specifically for covering the cost of construction and the cost of land for that project. 2. Purpose of the Account: -The money deposited in the escrow account can only be used for construction and development purposes related to that particular project. It ensures that the funds are not diverted to other projects or for personal use by the developers. 3. Withdrawal of Funds: - Developers can only withdraw funds from the escrow account in proportion to the work completed on the project. - Section 4(2)(l)(D) requires that withdrawals be certified by: An architect or engineer confirming the stage of completion of the project. - A chartered accountant confirming that the withdrawal is in proportion to the percentage of work completed. 4. Auditing of the Escrow Account: - The account must be audited by a practicing chartered accountant within six months of the end of each financial year. The audit report ensures that withdrawals from the account are in compliance with the provisions of RERA. - This requirement promotes transparency and accountability by keeping track of how the funds are being used. 5. Restrictions on Misuse of Funds: - Developers are prohibited from using funds collected for one project to finance another project. The escrow account acts as a safeguard to ensure that the funds for each project are used exclusively for that project’s development. 6. Penalties for Non-Compliance: - In case of non-compliance with the escrow account provisions under RERA, developers can face heavy penalties, including fines and imprisonment. The Act imposes strict penalties for diverting funds, which can go up to 10% of the estimated cost of the project, and in severe cases, even imprisonment. 7. Buyer’s Rights: -The escrow account system enhances the protection of homebuyers' investments by ensuring that the funds they provide are used appropriately. It builds confidence that their money will be used to complete the project on time. The escrow account provision under RERA is a crucial step in increasing transparency and accountability in the real estate sector. It protects homebuyers from financial risks and ensures that their funds are used properly for project completion.

Under the **Real Estate (Regulation and Development) Act, 2016 (RERA)**, the provisions related to **escrow accounts** are aimed at ensuring greater transparency and accountability in real estate transactions, particularly in relation to the use of funds by developers. The key provisions are: ### 1. **70% of Project Funds to be Deposited in Escrow Account (Section 4(2)(l)(D))**: - Developers are required to deposit **70% of the amount realized from real estate allottees** in a **separate bank account**, often referred to as an **escrow account**. - This account must be maintained in a **scheduled bank**. ### 2. **Usage of Funds**: - The funds deposited in the escrow account can **only be used for the construction of the project** and the **cost of the land**. - This provision ensures that developers do not divert funds to other projects or personal use, which was a common problem before RERA. ### 3. **Withdrawal of Funds (Section 4(2)(l)(D))**: - Developers can withdraw money from the escrow account **in proportion to the percentage of project completion**. - The withdrawals must be certified by an **engineer, an architect, and a chartered accountant** in practice. They need to ensure that the money withdrawn is based on the actual work completed at the site. ### 4. **Audit Requirements**: - The developer must get the accounts of the escrow account **audited by a chartered accountant** within six months of the end of every financial year. - The auditor will verify that the amounts withdrawn are being used for the intended purposes (construction and land cost). ### 5. **Penalties for Non-Compliance**: - If a developer violates the provisions related to the escrow account, they can face penalties under the act, including hefty fines and even imprisonment in severe cases of non-compliance. These provisions are designed to protect homebuyers by ensuring that the money they invest is used appropriately for the completion of the project they have invested in, thus reducing the risk of delays or financial mismanagement.