By Arosh John – Founder, John Real Estate (MahaRERA Reg. No. A51700001835) & Editor-in-Chief, Thane Real Estate News (TREN)
One of the biggest fears for any homebuyer is diversion of funds – the worry that the money you pay for your apartment is being used by the builder to buy land for some other project or to plug gaps elsewhere, leaving your own building delayed or stalled.
MahaRERA has a precise financial control mechanism designed to address this risk. It is called the 70% Fund Mandate.
This rule is one of the strongest pillars of financial protection in Indian real estate. Here is a simple, structured explanation of how this three-account system is designed to protect your money.
The Core Rule: Ring-Fencing Your Money
The legal foundation lies in Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016.
In simple terms, the rule says:
At least 70% of every rupee you pay (excluding taxes and statutory charges) must be set aside exclusively for the land cost and construction cost of your specific project.
To enforce this, MahaRERA (through Order No. 56/2024) requires promoters of new projects to maintain a Three-Tier Bank Account Structure in one scheduled bank.
The 3-Account Security System
For every eligible MahaRERA-registered project, the developer must open three specific accounts in a single scheduled bank:
- RERA Designated Collection Account
- RERA Designated Separate Account (the 70% Fund)
- RERA Designated Transaction Account (the 30% Fund)
Think of them as a controlled filter system through which your payment flows.
1. The Gateway: RERA Designated Collection Account
Role:
This is the only account where the developer can receive money from homebuyers. All amounts you pay towards flat consideration, parking, club/amenity charges and other project-related amounts (excluding GST, stamp duty, registration and similar statutory levies) must first come into this account.
Safety Net – Not an Operating Account:
- This is not a standard operating account.
- The developer cannot issue cheques or use debit cards, credit cards, internet banking, or UPI to spend directly from this account.
- The bank is required to ensure that no direct withdrawals are permitted.
Auto-Sweep Instruction – The Built-In Split:
The developer must give the bank a standing written instruction to automatically split every eligible credit:
- Minimum 70% is automatically transferred to the RERA Designated Separate Account (the 70% Fund).
- Maximum 30% is automatically transferred to the RERA Designated Transaction Account (the 30% Fund).
The Collection Account, therefore, acts purely as a gateway – money cannot be parked here and siphoned out. It must flow into the protected 70% pool and the controlled 30% pool.
2. The Safe: RERA Designated Separate Account (The 70% Fund)
Role:
This is the core “safety vault” of the system. It holds at least 70% of the total amounts realised from allottees for that project, which are auto-swept from the Collection Account.
Permitted Usage – Land and Construction Only:
Money in this account can be used only for:
- Land cost of the same project;
- Development / construction cost of that project;
- Interest on loans explicitly taken to finance the construction of that project;
- Certain refunds / cancellations / compensation payable to the allottees of that same project, where applicable.
It is not meant to finance other land purchases, other projects, or unrelated business activities.
Free from Encumbrances – Not an Escrow, Not Security:
The Separate Account:
- Cannot be treated as an escrow account for lenders;
- Must remain free from lien, charge or pledge;
- Cannot be used as security or be freely appropriated by any bank or financier for other dues.
In substance, it behaves like a statutory trust fund for the benefit of the project and its homebuyers.
How Withdrawals Work – Form 1, Form 2, Form 3:
The developer cannot simply withdraw money at will. To access funds from the Separate Account, they must demonstrate progress on site and compliance with the law.
Withdrawals are allowed only:
- In proportion to the percentage of completion of the project, and
- Against a set of three professional certificates:
- Form 1 – Architect’s Certificate: Confirms the stage and percentage of physical construction completed.
- Form 2 – Engineer’s Certificate: Confirms the cost of works, materials and labour incurred.
- Form 3 – Chartered Accountant’s Certificate: Confirms that the withdrawals match the cost incurred and are in line with the 70% rule.
Result: money moves out of the 70% fund only when the building actually progresses on the ground, not just because units are sold.
3. The Wallet: RERA Designated Transaction Account (The 30% Fund)
Role:
The balance up to 30% of the amount you pay is swept into the Transaction Account.
Usage:
This account is used for other legitimate project-related and promoter-operational expenses that are not categorised as land cost or core construction cost. Typical uses can include:
- Marketing and sales expenses;
- Office and administrative overheads tied to the project;
- The promoter’s margin, subject to law and overall cash flow planning.
Important Protection – Penalties Come From Here:
If MahaRERA imposes a penalty or fine on the promoter, it is to be paid from this Transaction Account.
It cannot be paid from the 70% Separate Account. This ensures that regulatory non-compliance and penalties do not dilute the funds reserved for completing your building.
Your Protection as a Homebuyer
1. Bank Account Details in Your Documents
The details of the RERA Designated Collection Account must be mentioned in:
- Your Allotment Letter, and
- Your Agreement for Sale.
The Agreement for Sale also needs to disclose the existence of the Separate Account and Transaction Account for the project. This gives you contractual visibility of the financial control system in place.
2. Audit Trail and Public Disclosure
The RERA-designated accounts are subject to an annual audit.
- Within a fixed time after the end of each financial year, the promoter must get these accounts audited by a Chartered Accountant.
- The certified statements and required forms are then uploaded to the project’s page on the MahaRERA portal.
This creates an audit trail showing whether withdrawals from the 70% fund are in line with the percentage of completion and with the rules laid down.
3. Penalties for Misuse and Non-Compliance
If a promoter:
- Misuses the funds,
- Fails to follow the three-account structure, or
- Violates the directions on use and disclosure of these accounts,
MahaRERA has the power to initiate action under the penalty provisions of the RERA Act. In serious cases, fines may reach a significant percentage of the project cost, in addition to other regulatory steps.
Practically, this means that non-compliance with the 70% Fund Mandate is not just a procedural lapse – it can become a serious regulatory and reputational issue for the developer.
The Bottom Line: What the 70% Fund Mandate Really Does
The 70% Fund Mandate is not a cosmetic or symbolic rule. It fundamentally changes how a developer can handle your money:
- Your payments first go into a non-operational Collection Account.
- At least 70% is locked into a protected Separate Account, reserved for land and construction of your project and released only against certified progress.
- The remaining up to 30% is parked in the Transaction Account to cover other expenses and bear penalties, without touching your core construction pool.
In short, it is the financial backbone of MahaRERA – a structure designed so that homebuyer capital is disciplined, monitored and focused on one clear outcome: completing your home.
About the Author
Arosh John is the Founder of John Real Estate (MahaRERA Reg. No. A51700001835) and Editor-in-Chief of Thane Real Estate News (TREN) – a digital platform dedicated to regulation-led, infrastructure-led and data-backed coverage of the Mumbai Metropolitan Region real estate market.
With over a decade of experience in the Thane–MMR residential, villa, resale and NRI advisory segments, he focuses on simplifying complex laws, MahaRERA directions and financial structures for homebuyers and investors.
For structured advisory and guidance on Thane real estate, contact John Real Estate:
+91 98198 81455 | +91 98201 48755
Disclaimer
This article is an informational explainer based on the provisions of the Real Estate (Regulation and Development) Act, 2016, applicable rules and publicly available MahaRERA directions and formats, as understood at the time of writing. It does not constitute legal, financial, or professional advice for any specific project, transaction or dispute.
Readers should consult their own legal, tax and financial advisors and refer to the latest Acts, Rules, Regulations, Orders, Circulars and MahaRERA portal records before taking any decision or action.
John Real Estate is a MahaRERA-registered real estate agent and acts as an intermediary; it is not a law firm, financial intermediary or developer. All names, brands, projects and trademarks, if mentioned, belong to their respective owners and are used only for descriptive and informational purposes. This article is not an advertisement or solicitation for any particular project, but a general guide to understanding MahaRERA’s 70% Fund Mandate.
