Suresh booked a flat in a new residential project near GST Road in 2019. He paid ₹8 lakhs as initial instalments across four months. Six months later, the developer’s office stopped answering calls. The project website went offline. And the construction site which had barely progressed beyond the foundation went completely silent.
Suresh’s money was gone. Not misplaced. Gone used by the developer for purposes that had nothing to do with the project Suresh had paid for.
This kind of story played out across India in the decade before RERA arrived. The absence of an escrow requirement meant buyer funds were routinely used by developers to fund other projects, service unrelated debts, or simply sustain a business that was heading toward collapse. Buyers found out they were financing a developer’s survival not their own future home.
The escrow account requirement changed that fundamentally. Here is how it actually works.
What an Escrow Account Actually Does
A Protected Pool That Can Only Be Used for One Purpose
An escrow account in the context of Indian real estate under RERA is a dedicated bank account that a developer must maintain separately for each registered project. Every payment collected from buyers for that specific project must flow into this account. And the money sitting in it can only be withdrawn for construction-related expenses connected to that same project.
The developer cannot dip into the project’s escrow account to service a loan on a different development. They cannot use it to fund their corporate overheads. They cannot redirect it toward a new land acquisition in another city. The money belongs functionally if not legally to the project it was collected for.
RERA mandates that a minimum of 70 percent of all amounts collected from buyers for a project be deposited into this dedicated escrow account. Withdrawals are permitted only against certified completion of construction milestones verified by an engineer and chartered accountant.
Why This Matters for Every Buyer Making Stage Payments
Most under-construction property purchases involve stage-linked payments the buyer pays a percentage at booking, another at foundation completion, another at slab level, and so on until possession. Without escrow protection, each of those payments simply enters the developer’s general pool of funds accessible for any purpose the developer chooses.
With escrow protection, each payment enters a ring-fenced account that the developer cannot freely access. The funds are tied to construction progress rather than to the developer’s cash flow needs. For buyers making large stage payments across two or three years, this protection changes the risk profile of the entire transaction.
What RERA’s Escrow Requirement Means in Practice
How to Verify a Project’s Escrow Compliance
When evaluating any RERA-registered project, buyers can check the project’s registration details on the TNRERA portal where developers are required to disclose the escrow account details and periodic utilisation certificates submitted by their engineer and chartered accountant.
A developer who is maintaining the escrow account correctly and submitting utilisation certificates on schedule is demonstrating financial discipline that goes beyond marketing promises. A developer whose RERA filings show gaps in certification or account disclosures is signalling something that deserves follow-up before any money changes hands.
What Suresh Would Have Had With Escrow Protection
His ₹8 lakhs would have sat in a project-specific account. The developer could not have redirected it elsewhere without construction progress certificates from independent professionals. And the regulatory oversight built into the RERA framework would have created early warning signs through delayed certification or missed filing deadlines that might have surfaced the developer’s financial difficulty before buyers lost everything.
The escrow agreement is not a guarantee that every project completes successfully. But it is the mechanism that keeps buyer money attached to the project it was paid for rather than floating freely in a developer’s general finances where it becomes impossible to recover.
Suresh could not get his money back. Future buyers, under properly enforced RERA escrow requirements, have a meaningful layer of protection that he never had.
