Withdrawing from the RERA designated account in Karnataka: the CA certificate and the 70% rule

Short answer: in Karnataka a promoter must deposit 70% of what allottees pay, net of GST and pass-through charges, into a no-lien RERA designated account. Money comes out only against three certificates: the architect's Form-5, the engineer's Form-6 and the chartered accountant's Form-4. The CA's Form-4 sets the cumulative ceiling at total estimated project cost × the lower of the architect's percentage of completion and the CA's percentage of cost incurred. What has already been withdrawn is deducted. Land paid for early does not raise that ceiling on its own.

Where the rule comes from

Section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act 2016 ("the Act") requires the promoter to declare, when registering, that 70% of the amounts realised from allottees will be deposited in a separate account with a scheduled bank. The money is there to cover the cost of construction and the land cost, and may be used only for that purpose. Three provisos follow:

1. Withdrawals must be in proportion to the percentage of completion of the project.
2. Each withdrawal must first be certified by an engineer, an architect and a chartered accountant in practice.
3. The accounts must be audited within six months of each financial year end, and the audit must confirm both points above. In Karnataka that audit is Form-7, covered in the annual audit report.

The Explanation to the clause defines only "scheduled bank". "Land cost" and "cost of construction" are defined in the state rules. The Karnataka mechanics sit in four instruments:

The account: one per project, no lien, no loan

Regulation 29 sets out how the account must be kept:

• One RERA Bank Account for each registered project, opened before the registration application in a scheduled bank's local branch where the project is being built. The account name carries the suffix "RERA Designated Account", e.g. ABC-RERA Designated Account of XYZ.
• It is a no-lien account: no third-party rights or security interests.
• Balances may go into a fixed deposit with the same bank, but only as a no-lien fixed deposit. No loan against it, no charge on it. Where there is a fixed deposit, a no-lien certificate from the bank is obtained every three months and filed with the quarterly return.
• The bank can be changed only with the Authority's prior permission, using the Form-B series of applications and bank certificates.

Collection, designated and current accounts. The Regulations require just one RERA Bank Account per project. K-RERA's published Form-4 and Form-7 templates, though, ask for details of three: a RERA Project Collection Account (100%), the RERA Designated Account (70%) and a RERA Current Account of the Builder (30%). Many banks run exactly that sweep. It is an operating arrangement the forms expect, and it does not replace the designated account. MahaRERA made the three-account structure compulsory from 1 July 2024. Karnataka has not.

Joint developments. Under K-RERA Circular 03/2019 (31 October 2019), a landowner who takes an area or revenue share is treated as a promoter. If a landowner sells units from their share before the completion or occupancy certificate, 70% of those sale proceeds also go into the project's designated account. The developer is expected to make sure this happens. That term belongs in the joint development agreement. See the twelve JDA clauses worth negotiating.

70% or 100%: what goes in

The deposit base is the amount collected from allottees other than pass-through charges and indirect taxes (Regulation 29(3)). GST is excluded. The Regulations do not define "pass-through charges". The workable reading covers amounts collected only to be paid on to a government body or utility, such as stamp duty and registration fees. Record the basis you apply, because the auditor will ask for it.

For ongoing projects (projects already under way when they were registered), Rule 4(5) raises the deposit to 100% where the project's remaining receivables are less than the estimated cost of balance construction. Form-4 runs this test every quarter in its Additional Information section:

A project whose unsold stock is thin and whose costs have overrun can move to 100% partway through. The CA's certificate is where that surfaces first.

What counts as land cost and construction cost

Rule 5 of the Karnataka Rules and the Form-4 line items together give the heads that count towards withdrawal.

Some costs are not on either list and should not go into the Form-4 figure. Marketing and advertising, brokerage and channel-partner commission are not listed. Neither are head-office overheads (Form-4 speaks of costs "directly incurred" to complete the construction), or interest on borrowings not raised for construction. Income-tax, costs of other projects, and land held for phases outside this registration are also excluded.

Form-7, the annual statement, adds two lines: other land-related cost (including interest on land borrowings) and administrative and management expenses. The annual cost table and the quarterly computation will not always match line by line, so keep a reconciliation.

The guidance-value limb is particular to Karnataka and matters most in a joint development, where the developer pays little or no cash for the land. The estimated land cost is fixed at registration and runs through every later Form-4, so decide how it is measured before the project is registered, not in the first withdrawal quarter.

The proportion-of-completion test and a worked example

Form-4 produces two percentages:

• the architect's percentage of completion of construction work (from Form-5), and
• the CA's percentage: total cost incurred ÷ total estimated cost, with land and development taken together.

The cumulative amount that may be withdrawn is total estimated cost × the lower of the two. Everything withdrawn so far is deducted, and the result is the net amount under this certificate. In practice it is also capped by the balance actually lying in the account.

Illustrative figures, ₹ crore, quarter ended 30 September 2026:

The land is fully paid and ₹56.5 crore has been spent, but the account releases only ₹35 crore cumulatively, because the architect's 35% is the lower figure. The rest of the spend is funded from the promoter's 30% share and its own money until construction catches up. If next quarter's Form-5 shows 55% and cost incurred reaches 64%, the ceiling rises to ₹55 crore.

Once the project is complete, Paragraph 6(iii) of the Directions allows the entire remaining balance to be withdrawn, on filing the certificates and completion compliance, including the final quarter's data.

Three certificates, and who may sign them

Two Karnataka rules on who signs:

• The Form-4 CA must be a different entity from the promoter's statutory auditor (Explanation to Regulation 3). The statutory auditor signs the annual Form-7, and the rule stops one firm from certifying its own withdrawals at year end. A firm can act for a promoter in one role or the other, not both.
• The promoter designates its CA, architect and engineer for the project, and none of them can be removed without the Authority's prior concurrence (Regulation 3(1)).

The same three forms serve two purposes in Karnataka: withdrawal, and the quarterly update due within 15 days of each quarter end under Rule 15(1)(D). The CA-certified designated account statement is attached to Form-4 as part of that return. A late quarterly return now carries its own penalty. See the quarterly progress report.

MahaRERA numbering is different: Form 1 (architect), Form 2 (engineer), Form 3 (CA) for withdrawals and Form 5 for the annual report, which is what guidance written for Mumbai projects cites.

What the CA actually checks

A Form-4 depends on the evidence behind it. The CA checks:

• Bills against the engineer's figure. Contractor running bills, material invoices and measurement records, reconciled to Form-6. Where the books and the engineer differ, the lower figure goes in.
• Payment, not just booking. The Directions refer to cost "incurred and paid". Provisions, unpaid retention and bills booked on the last day of the quarter without payment are the usual reasons a figure comes down.
• Land cost evidence. Sale deeds, stamp duty and registration receipts, conversion orders, TDR purchase documents, approval fee challans, and the guidance-value working where that limb is used.
• Every rupee collected. The allottee-wise collection register against the bank statements: did 70% (or 100%) of each receipt reach the designated account? A receipt taken into an operating account and not swept is reported as a deviation. The form requires it.
• The cumulative position. Opening balance agreeing to last quarter's closing balance, total deposits and withdrawals since inception, and each earlier withdrawal traced to a certificate.
• Borrowings and mortgages on the project, and whether any fixed deposit carries a lien.

Why withdrawals get held up

1. Collections outside the designated account. Buyer payments that go to a group account, a channel partner or the landowner, and are not traced and topped up.
2. An out-of-date architect certificate. The lower-of test means a stale Form-5 caps everything, however much has been spent.
3. Cost overruns over the registered estimate. The estimate is the denominator. Overruns raise the CA's percentage without raising the ceiling, and they can push an ongoing project into the 100% band.
4. A books-to-engineer gap. Material advances and unbilled work sit in the books but not in the engineer's certificate.
5. GST mixed into the deposit base, or deposit percentages that do not reconcile quarter to quarter. This also creates the gaps described in RERA filings against GST returns.
6. A new professional appointed without the Authority's concurrence, or a bank account changed without permission.
7. A lien or sweep-to-loan on a fixed deposit made from the account.

If money is diverted

The 70% commitment is a declaration made under section 4. Breaching it attracts a penalty under section 60 of up to 5% of the estimated cost of the project, as determined by the Authority. Section 61 carries the same ceiling for contravening the rules or regulations. Section 63 adds a penalty for every day that a breach of the Authority's orders or directions continues, again up to 5%. The Bank Account Directions are issued under the Authority's section 37 power to give directions.

The Authority can also revoke registration under section 7 and have the bank freeze the account. Under Regulation 3(2), where the annual Form-7 shows that a Form-4, Form-5 or Form-6 contained false or incorrect information, the Authority refers the professional who signed it to their regulator.

For the dates that run alongside this, see the Karnataka RERA compliance calendar. Certificates for a specific project are handled under RERA compliance and certification.

This is a working note on the Karnataka position as of 29 September 2026. It is not the text of the Act, Rules, Regulations or K-RERA circulars, and not advice on any particular project. The figures in the example are illustrative. K-RERA revises its templates and issues circulars without much notice. Before any withdrawal, confirm the current Form-4, Form-5 and Form-6 on the K-RERA downloads page, and read the project's registration details, its joint development agreement and any lender documents.