Diploma In Real Estate Compliance For Builders Module Iii: Rera Accounting And Escrow Mechanism

The Real Estate (Regulation and Development) Act (RERA) brought a paradigm shift in financial discipline for real estate developers. At the heart of this transformation is the Escrow Account mechanism and strict accounting compliance designed to protect homebuyers and ensure transparent utilization of project funds. Module III of the Diploma in Real Estate Compliance for Builders provides an in-depth understanding of the accounting framework, escrow requirements, certifications, and standards that govern project finances.

Overview

RERA’s financial provisions ensure that funds collected from homebuyers are used strictly for the respective project. Developers must follow structured accounting methodologies, maintain accurate financial statements, and submit periodic certifications from licensed professionals. This module offers a comprehensive overview of:

• Purpose and functioning of the RERA escrow mechanism
• Financial obligations of promoters under the Act
• Role of engineers, architects, and chartered accountants in certifying expenses
• Mandatory disclosures and financial reporting on the RERA portal

The overview ensures that learners understand the regulatory intent and operational structure of RERA financial compliance.

Items under the 30:70 Ratio for Expenditure

One of the most significant financial mandates under RERA is the 70% fund allocation rule. Developers must deposit 70% of the amounts collected from allottees into a dedicated project escrow account. This amount can be withdrawn only for land and construction cost. This section explains:

• Breakdown of the 70% project-specific expenditure category
• Land cost components allowed under RERA
• Construction cost components eligible for withdrawal
• Items included in the 30% promoter share
• Prohibited expenses that cannot be charged to the project

Learners develop clarity on proper allocation, ensuring the financial sanctity of the project and full compliance with RERA norms.

Escrow Compliance

Escrow compliance is central to RERA’s financial safeguards. Developers must follow strict protocols related to deposits, withdrawals, documentation, and reporting. This segment covers:

• Opening and operating a designated project escrow account
• Depositing booking amounts, instalments, and collections
• Withdrawal procedure based on stage-wise construction progress
• Role of engineer, architect, and CA certifications before every withdrawal
• Maintaining digital and physical records of fund utilization
• Mandatory quarterly financial disclosures on the RERA portal

By mastering escrow compliance, builders ensure financial legitimacy while minimizing the risk of penalties, delays, and project disputes.

Certifications Under Form 3 and Form 5

RERA mandates periodic certifications for transparency and accountability. Form 3 and Form 5 play crucial roles in regulating the withdrawal of funds and project completion.

• Form 3 – Chartered Accountant’s Certificate for withdrawal of funds from the project escrow account based on stage-wise progress.
• Form 5 – Annual certificate confirming the proper utilization of project funds and compliance with the 70% rule.

Learners gain insights into the structure, content, supporting documents, and importance of these certifications, along with understanding common errors that may result in compliance violations.

Accounting Standards for Project Completion

Proper accounting is essential for determining project completion, calculating revenues, and issuing final certificates. This section highlights:

• Applicable accounting standards (Ind AS, ICAI Guidance Notes)
• Revenue recognition principles for completed and ongoing projects
• Cost allocation methods and project costing norms
• Completion guidelines linked with Occupancy Certificate and Completion Certificate
• Financial documentation required at the time of project closure

These accounting principles ensure that the project’s financial status is presented accurately, ensuring transparency with buyers and regulators.

Module III empowers builders and professionals with essential knowledge of RERA financial compliance, ensuring they operate with full accountability, maintain transparent financial practices, and comply with all regulatory requirements. Mastering the escrow mechanism, certifications, and accounting standards is crucial for successful project execution under the RERA framework.