Term Of The Day: Escrow
Escrow account is a temporary account in which money is held by a third party to facilitate the transaction.
PropTiger Explains Escrow
If your money is kept in an escrow account while buying apartments in a residential project, it means that the amount might not be transferred to the developer till the construction is complete. But, at times, to ensure that construction is completed on time, funds from the escrow account are channelled to the seller.
According to the amended Real Estate Regulatory Bill, 2015, developers should maintain 50% of the advances they receive from home buyers in an escrow account within 15 days. But, the Bill proposed by the UPA had proposed keeping 70% of the receivables from home buyers in the escrow account.
Many believe that lowering the requirement would lead to misappropriation of funds. But, some real estate experts tend to think that diverting money to other projects are normal market practices that facilitate greater activity in real estate markets. According to them, the requirement of 50% would be enough to ensure that construction is completed in the specified period of time. They believe that when the % of receivables kept in an escrow account rises, that would hinder the construction process.
Check out PropGuide's comprehensive guide to real estate terms here.
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