IndiaThe builder is using my advance money for other projects. Is this allowed?
No, builders in India cannot use your advance money for other projects. RERA strictly prohibits diverting buyer funds and mandates that 70% of collected amounts be deposited in a separate escrow account.
What the Law Says
The Real Estate (Regulation and Development) Act, 2016 (RERA) explicitly restricts how builders can handle buyer advances. It mandates financial discipline to protect homebuyers from misuse of funds.
Under RERA, any builder who collects advance payment from a buyer must deposit 70% of that amount into a separate bank account — known as the 'escrow account' — designated for that specific project only.
This money can only be used for land cost and construction expenses of the same project. Using it for other projects, office expenses, marketing, or personal purposes is a clear violation.
The law also requires builders to get their projects registered with the respective State RERA Authority before advertising, marketing, or accepting any advance — even ₹10,000.
Statutory TextEvery promoter shall, before he starts to advertise, market, book, sell or offer for sale, or invite persons to purchase any plot, apartment or building, ensure that the said real estate project is registered with the Authority.
— Real Estate (Regulation and Development) Act, 2016, s. 3 — Registration of real estate projects
Statutory TextThe promoter shall not accept more than ten per cent of the cost of an apartment, plot or building, as the case may be, as an advance or application fee from a person without first entering into a written agreement for sale…
— Real Estate (Regulation and Development) Act, 2016, s. 13 — Transfer of title
Statutory TextThe promoter shall deposit seventy per cent of the amount realised from allottees… in a separate account maintained with a scheduled bank… and such amount shall be used only for the purpose of construction and land cost of that particular real estate project.
— Real Estate (Regulation and Development) Act, 2016, s. 4 — Obligations of promoters
What Courts Have Said
Indian courts have consistently upheld RERA’s safeguards and penalised builders for misusing buyer funds.
Court held that diversion of escrow funds violates RERA’s core objective and ordered immediate refund plus interest; directed RERA Authority to initiate disciplinary action.
SC affirmed that using buyer funds for unrelated projects constitutes fraud and breach of trust; upheld RERA Authority’s power to debar defaulting promoters.
What to Do
Check if the project is registered on your State RERA website (e.g., maha-rera.mahaonline.gov.in).
Demand a copy of the builder’s escrow account statement showing deposits and utilisation — legally required under RERA.
File a complaint online via your State RERA portal with proof of payment and communication.
If the builder fails to refund within 90 days of complaint, escalate to RERA Adjudicating Officer for compensation.
Consider filing a criminal complaint under Section 420 IPC (cheating) and Section 406 IPC (criminal breach of trust) if misuse is proven.
Sources
Not legal advice. This article is general information based on publicly available sources, written for educational purposes. Laws change and individual situations vary. Consult a licensed attorney in your jurisdiction before acting on anything you read here. Last reviewed: 2026-06-08.