Starting January 1, 2026, a significant update will be implemented concerning real estate law in Tamil Nadu. This update pertains to the enforcement of a three-bank account structure for real estate projects. This change aims to tighten the monitoring of homebuyers’ funds and also address any potential misuse of their money for unrelated projects.
According to TNRERA’s circular, builders are now required to establish three specific bank accounts within a single Scheduled Bank and branch for each real estate project. The details of these accounts shall be furnished when applying for the registration of a real estate project.
- A. RERA Designated Collection Account (100%)
- B. RERA Designated Separate Account (70%)
- C. RERA Designated Transaction Account (30%)
This setup means that the homebuyers’ money will first be deposited into the collection account (100%) and from there, the bank will transfer (70%) to the separate account designated for land and construction expenses.
The funds in the ‘RERA Designated Separate Account’ (70%) can only be accessed by the builder upon submitting of Form 1 (Architect Certificate), Form 2 (Engineer Certificate) and Form 3 (Certificate by Chartered Accountant in practice) as prescribed in Regulation 7, to the bank and these documents must also be uploaded to TNRERA’s portal.
The third account (30%) will contain any funds contributed by the builder that are not from homebuyers. This amount can be used for various expenses, including refunds (up to a maximum of 30% of the total refund), compensation, interest on refunds / compensation, marketing, repayment including interest on project loans, project administrative and overhead expenses and the penalty, if any, imposed by TNRERA.
Rahul Hingmire, Managing Partner, Vis Legis Law Practice, says that this new development in Tamil Nadu RERA ensures that every rupee paid by a homebuyer is routed only through a protected three-account system and cannot be diverted to any other project or personal use of the promoter.
Hingmire points out that earlier collections were parked in loosely monitored accounts, but now auto-sweep transfers and certificate-based withdrawals block misuses and impose real-time discipline.
For instance, a builder cannot move your booking money to another project. In practice, construction payments stop if engineer and CA certificates are missing.
Hingmire says: “This circular legally secures your money from day one and clearly operates in favour of homebuyer safeguards.”
Background of existing TNRERA law and the gap which is now plugged
The Tamil Nadu Real Estate Regulatory Authority (TNRERA) in its circular (no.TNRERA/A3/3816/2025) said that in compliance of Section 4(2)(I)(D) of the Real Estate (Regulation and Development) Act, 2016, the promoter has to open a separate account in a Scheduled Bank to cover the cost of construction and the land cost.
TNRERA said that while filing an application for registration of a real estate project, the promoter opens an account in a Scheduled Bank and furnishes the Bank Certificate in the prescribed format.
Normally, promoters receive the amount from home buyers / allottees in a collection account and from there 70% of the amount is transferred to the RERA designated separate account. The details of the amount received and transactions in the RERA Designated Separate Account are provided in the Quarterly Progress Report.
TNRERA points out that there is no mechanism to monitor the collection account.
TNRERA said: “Further, in some cases, promoters maintain a separate collection account for each project whereas in some cases, the collection account may serve multiple projects.”
The above issue has been discussed in detail by the TNRERA Authority and the directions are issued under the powers vested with the Authority in Section 37 of the Real Estate (Regulation and Development) Act, 2016, regarding maintenance of three bank accounts.
How homebuyers will benefit
B. Shravanth Shanker, Advocate-on-Record, Supreme Court of India, said to ET Wealth Online: “Funds are automatically split by the bank itself, ensuring that the statutorily protected portion is ring-fenced before the promoter can access it.”
In practical terms, the buyer’s payment is insulated from cross project siphoning, lender set-offs, and ad hoc cash flow decisions of the promoter. Refund rights in case of delay are also strengthened, as the protected account remains solvent in proportion to project progress.
Shanker says: “For homebuyers, the assurance is no longer based on trust in the promoter but on a bank enforced compliance architecture.”
According to Alay Razvi, Managing Partner, Accord Juris, the Tamil Nadu RERA circular ring-fences every rupee paid by homebuyers by making a three account structure mandatory for each registered project, namely a 100% collection account, a 70% separate account and a 30% transaction account, all maintained in the same scheduled bank and branch.
According to Razvi, homebuyers payments must first be credited to the monitored Collection Account from which daily auto sweeps transfer 70% to the separate account reserved exclusively for land and construction costs and 30% to the transaction account.
No direct withdrawals are allowed from the collection account.
Withdrawals from the separate account are allowed only upon submission and uploading of architect engineer and QR coded chartered accountant certificates on the TNRERA portal.
Razvi says: “This mechanism sharply reduces fund diversion, improves traceability through periodic disclosures and materially enhances the likelihood of timely project completion.”
Full details of Tamil Nadu RERA three bank rule from January 1, 2026
1. Opening of RERA Project Accounts:
The promoters shall open the following three bank accounts in a single Scheduled Bank and branch for a real estate project. The details of these accounts shall be furnished while filing application for registration of a real estate project.
- A. RERA Designated Collection Account (100%)
- B. RERA Designated Separate Account (70%)
- C. RERA Designated Transaction Account (30%)
TNRERA said that in case of the real estate projects developed based on Joint Development Agreement (JDA) two sets of the above 3 accounts to be opened i.e. one set for the land owner and another set for the promoter, irrespective of number of land owners and promoters.
A) RERA Designated Collection Account (100%):
The entire amount (100%) collected from the allottees from time to time should be first deposited in the ‘RERA Designated Collection Account’.
The account name shall be as follows: “RERA Designated Collection Account (100%) — (Name of the project) (Name of the promoter)”.
The bank where the RERA Designated Collection Account is opened shall ensure that no debits or withdrawals are permitted by means of cheque, debit card, credit card, internet banking facility or any other payment methods or any means of instruments from this account.
TNRERA said that the promoter shall furnish particulars of the ‘RERA Designated Collection Account’ of the project in the allotment letter and in the agreement with the existing/prospective home buyers for the purpose of receiving payments towards allotment in the registered project.
TNRERA said in the circular: “Once the amount is received in the ‘RERA Designated Collection Account’, 70% of the amount shall be transferred to the ‘RERA Designated Separate Account’ and the balance 30% to the ‘RERA Designated Transaction Account’ through auto sweep facility at the end of the same day.”
B) RERA Designated Separate Account (70%):
The promoter shall open and maintain “RERA Designated Separate Account” for the project in the same bank and branch for each registered project separately wherein 70% of the amount received in “RERA Designated Collection Account” from the allottees shall be transferred through auto sweep facility to the RERA Designated Separate Account at the end of the same day.
The account name shall be as follows: “RERA Designated Separate Account (70%) – (Name of the project) – (Name of the promoter)”.
The above account shall be free from all encumbrances and should not be an escrow account. This account shall be free from lien, loans, third party control i.e. lender / bank / financial institution and cannot be attached by any other Government Authority / body unless any direction is given by Tamil Nadu Real Estate Regulatory Authority (TNRERA).
The amount from the ‘RERA Designated Separate Account’ shall be withdrawn by the promoter only after submission of Form 1 (Architect Certificate), Form (Engineer Certificate) and Form 3 (Certificate by Chartered Accountant in practice) as prescribed in Regulation 7, to the bank and should be uploaded on TNRERA’s portal.
All the Certificates issued by Chartered Accountant shall contain QR Code. The money withdrawn from the separate account shall be credited to the ‘RERA Designated Transaction Account’ and shall be utilized only for meeting the following expenditure incurred on the project.
- Land Cost
- Cost of Construction / Development cost
- Refund of the principal amount, if any, to the allottees subject to maximum of 70% of the total refund.
C) RERA Designated Transaction Account (30%):
The promoter shall open and maintain a project transaction account and all transactions relating to project development shall be from this account only. Only up to 30% of the amount realized for the real estate project from the allottees from time time in ‘RERA Designated Collection Account’ of the project shall be transferred to the ‘RERA Designated Transaction Account’.
The account name shall be as follows: “RERA Designated Transaction Account (30%) – (Name of the project) – (Name of the promoter)” Funds mobilized by the promoter from sources other than the allottees such as project loan, promoter’s contribution, etc. shall also be credited in the ‘RERA Designated Transaction Account’.
This amount can be utilized for meeting expenses towards refund (subject to maximum of 30% of the total refund), compensation, interest on refund / compensation, marketing, repayment including interest on project loans, project administrative and overhead expenses and the penalty, if any, imposed by TNRERA.
2. Report to the Authority / What the builder needs to report to Authority:
TNRERA in its circular has said that the builder (promoter) needs to submit following disclosure for existing secured/ unsecured finances availed for the real estate project by mortgaging land or building/flat or both and serve the loan and interest thereon from RERA Designated Transaction Account’.
- Name of the lender
- Address of the lender or lender branch
- Date of borrowing/ disbursement
- Sanctioned amount
- Disbursed amount
- Outstanding amount
- Details of mortgage (If any)
- Declaration of Chartered Accountant certifying that loan amount is used for this project only.
TNRERA said that if the builder is availing project loan after registration with the RERA authority then the builder shall disclose the details as mentioned above, then and there, immediately.
Change of three Bank Accounts of the Project:
Any change in the above three bank accounts of the project, after registration of the real estate project with the TNRERA will be permitted for valid reasons only with the prior written approval of the Authority. The promoter shall submit an affidavit cum declaration, Form RA1, RA2, RA3 & RA4 as per the format available in the Authority’s website for change of bank accounts.
Closure of Bank Accounts:
On completion of the project, the promoter shall file an application for completion of the real estate project as per the checklist as hosted in the Authority’s website along with the prescribed fee. On issue of completion report by TNRERA, and on receipt of the said completion report by the bank, the bank may permit the promoter to withdraw the balance amount from all the three accounts.
TNRERA said that they will also notify about the completion of the project on the Authority’s website.
v) Obligations of the Bank:
The banks shall be obliged to follow the provisions of opening, operating and closing of all three accounts. All the three TNRERA Designated Bank Accounts shall be opened in the same bank and branch.
The bank and branch where the three accounts are opened shall ensure that no debits or withdrawal are permitted from the ‘RERA Designated Collection Account (100%)’ by means of cheque, debit card, credit card, internet banking facility or any other payment methods or any means of instruments except through an auto sweep facility to transfer the 70% of the amount from the ‘RERA Designated Collection Account’ to the ‘RERA Designated Separate Account’ and 30% to the ‘RERA Designated Transaction Account’.
The banks shall strictly follow the nomenclature prescribed by TNRERA.
The bank shall take a written standing advice from the promoters at the time of opening of the three accounts for auto transfer of funds deposited in the ‘RERA Designated Collection Account’ of the real estate project in the proportion of 70% and 30% to the ‘RERA Designated Separate Account’ and ‘RERA Designated Transaction Account’ respectively.
The banks shall issue the certificate in the prescribed format, (Form-A) as hosted in this Authority’s website to the promoter and the promoter shall upload the bank certificate while filing of application for project registration.
The bank shall suspend withdrawals/transfers from all the three accounts of the project upon lapse of registration as mentioned in Form-C issued by TNRERA. However, the bank accounts shall remain operational only in the event where TNRERA has granted extension of the project validity which is uploaded in the Authority’s website.
In the event of any orders of the Authority for freezing/de-freezing of any of the project accounts, the banks shall immediately comply with such orders of the Authority and shall accordingly freeze/de-freeze the concerned accounts.
vi) Transfer of amount from ‘RERA Designated Separate Account (70%) to Fixed Deposit:
The promoters may transfer the amount available in the ‘RERA Designated Separate Account (70%)’ to Fixed Deposit through Auto sweep facility subject to the following conditions:
- i) The amount collected in the ‘RERA Designated Separate Account’ may be transferred to the Fixed Deposit attached to the ‘RERA Designated Separate Account’ and shall not be transferred to any other account in the same branch or to any other bank/branch.
- On maturity of the Fixed Deposit or on pre-mature closure of the Fixed Deposit, the principal amount along with interest shall be credited to the ‘RERA Designated Separate Account’ only.
- The Fixed Deposit will be “No Lien” fixed Deposit.
- No loan can be obtained against or on such fixed Deposit.
- No charge can be created on such Fixed Deposit.
TNRERA said that this will come into effect for all the applications received from January 1, 2026 including resubmission applications.
What does this circular aim to do?
According to Shanker, this circular is designed to convert the statutory promise of fund protection under RERA into a real time preventive regime. Its core aim is to eliminate the collection stage abuse through which promoters diverted buyer monies before they entered the protected account.
Shanker says: “By mandating automated segregation at source, it removes promoter discretion from the financial flow of a project. The circular operationalises Section 4(2)(l)(D) by supplying the procedural machinery that the Act left undefined.”
According to Shanker, this circular also shifts regulatory responsibility onto banks, transforming them from passive custodians into compliance gatekeepers. Equally, it seeks to ensure liquidity for refunds under Section 18 by keeping the protected account solvent in proportion to project progress.
“In effect, the circular targets systemic misuse rather than isolated violations, closing the structural avenues through which diversion historically occurred,” says Shankar.
What should builders do now as per this circular?
According to Hingmire, builders must immediately redesign their banking operations by opening three RERA-mandated accounts in the same bank with same-day auto-sweep and operate strictly through certificate-based withdrawals.
Hingmire points out non-compliance will freeze cash flows, delay registrations and expose promoters to regulatory action, directly affecting project credibility. A clear scenario would be opening collection, separate and transaction accounts in one bank.
Hingmire says: “A practical instance is setting auto-sweep to 70–30 before accepting any payment. Compliance is no longer optional; it protects buyers and preserves the project’s legal standing.”
According to Shanker, builders must treat this circular as a deadline driven restructuring exercise rather than a routine compliance filing.
Shanker says that builders are now required to re-engineer their project level banking by opening three designated accounts in a single branch and hard wiring an automated end of day sweep that removes all manual control at the collection stage.
All customer payment channels must be realigned to route funds only through the designated collection account, failing which, the receipt itself becomes non-compliant. In joint development projects, the landowner must be contractually bound to an identical account structure before any revenue share is released.
Shanker says that existing project loans must be disclosed and ring fenced so that servicing occurs only from the permitted transaction account.
Shanker says: “Going forward, withdrawals and refunds must be cash flow planned around certified construction milestones, as inter project fund rotation is no longer legally or technologically possible.”
