Tamil Nadu RERA Mandates Three-Bank-Account System for Real Estate Projects

A prominent step towards reforming and strengthening homebuyer protections and enhancing financial discipline in the real estate sector in Tamil Nadu has been mandated by the Tamil Nadu Real Estate Regulatory Authority (TNRERA). They have introduced a three-bank-account regime for all registered real estate projects that will be effective from January 01, 2026. This new regime bridges a critical gap in the regulatory system with the aim of ensuring that the funds for the projects are strictly used for their intended purposes. This aims to reduce misuse and address long-standing concerns about project delays and transparency among developers.

Under the updated framework, developers must operate through three bank accounts for every project with the same bank and branch. The accounts include a 100 per cent collection account, 70 per cent reserved for the construction and land costs, and 30 per cent for project expenses. This structure enables a clear, no-confusion segregation of funds that limits the misuse that developers and promoters can potentially cause.

Enhanced Fund Security and Transparency

The first of three accounts, ‘RERA Designated Collection Account (100 per cent)’, will be designated for the payments collected from homebuyers. This will ensure that there is no discrepancy in multiple accounts hosting multi-segmented payments. Once this is done, 70 per cent of this amount will be moved to a separate account, and the remaining 30 per cent will move to the transaction account. This automation brings regulatory control to the funds collected by any developer for their projects, in turn, safeguarding the money collected from homebuyers. This reduces the risk of the money being spent on external developer expenses.

The account holding the 70 per cent amount will be for the core project costs, like land acquisition and construction. Withdrawals from this account will be based on documentation provided by the developer, validated by an architect, engineer, or chartered accountant. This certification-based mechanism aligns with project progress and helps establish financial accountability. This way, a lot of misuse can be curbed.

The RERA-designated transaction account that holds the rest of the amount, 30 per cent of the funds, is designated for safeguarding homebuyers' rights. In cases where developers have to refund, compensate, or provide penalties imposed by TNRERA, this account is to be used.

Before this reform took effect, developers often maintained collection accounts with minimal monitoring, and in some cases, they had a single account that served multiple ongoing projects. TNRERA recognised this gap and has now mandated a fund segregation mechanism. The system before this threatened the funds provided by the homebuyers and was too big a gamble on their behalf. This three-account rule holds people accountable by intent and plans thoroughly for them, also making compliance traceable.