RERA Financial Compliance and Valuation in Rajasthan — Form R-4, Escrow Certification, and Unsold Inventory under Ind AS 115

Maharashtra RERA and Rajasthan RERA — while both implementing the same central Act — have developed distinct compliance cultures and administrative frameworks. For real estate developers operating across both states, and for professionals advising them, the differences in how each authority administers project account certification, annual reporting, and escrow adequacy assessment are operationally significant. This post addresses the financial compliance and valuation dimensions of RERA certification with particular focus on what developers and their CAs need to understand about the intersection of regulatory reporting and accounting methodology.

The 70% escrow obligation under Section 4(2)(l)(D) of RERA requires that not less than 70% of amounts collected from allottees be deposited in a separate bank account and used exclusively for the relevant project. The percentage of withdrawals is tied to the certified stage of construction and proportionate cost incurred. The CA certifying withdrawal eligibility must assess the cost of land recognised in the project accounts, the cost of construction incurred to date, and the proportionate relationship between costs incurred and total projected costs — a forward-looking judgment that is effectively valuation-adjacent in its analytical demands.

RERA Financial Compliance and the Valuation Obligations That Developers Miss

Revenue recognition under Ind AS 115 adds complexity for developers who are also Ind AS reporters. Revenue from under-construction flats is recognised over the construction period proportionate to stage of completion, typically measured by the cost-to-complete method. The total estimated project cost — including unsold inventory — is a critical financial statement input whose determination requires disciplined cost modelling. For Mumbai-based developers with large project portfolios under MahaRERA, and for developers with projects registered across multiple state RERA authorities, maintaining consistent methodology across project-level financial statements and RERA filings simultaneously is a significant professional challenge.

The MahaRERA framework has issued specific circulars on the format and content of CA certifications required under Maharashtra’s RERA administration. These certifications go beyond the central Act’s requirements in certain respects — particularly around project-specific financial disclosure and the treatment of common amenity costs across multiple phases. Professionals certifying Maharashtra RERA project accounts must be familiar with these state-specific overlays, which are not replicated in all other state frameworks.

From a valuation perspective, the most significant question for any RERA-registered project is the valuation of unsold inventory. Financial statements must account for unsold inventory at the lower of cost and net realisable value. NRV is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling costs — which is effectively a project-level discounted cash flow. Where the prevailing market price has declined below carrying cost, an impairment provision is required. For Mumbai developers in segments where market absorption has slowed, or where construction costs have escalated beyond original estimates, this impairment analysis requires professional valuation input — not just auditor judgment.

MahaRERA has developed one of the more demanding compliance frameworks among India’s state RERA authorities. In addition to the central Act’s requirements, Maharashtra has issued specific circulars on CA certification formats, the treatment of common amenity costs, and the methodology for calculating project completion percentages. For CAs certifying Maharashtra RERA project accounts, familiarity with these state-specific overlays is essential — and the distinction between complying with the central Act and complying with MahaRERA’s additional requirements is one that regulators enforce actively.

For Rajasthan RERA (RERA RAJ), the Form R-4 Annual Report process requires the CA to certify specific financial data at the project level, including the opening and closing balances of the designated account, amounts collected from allottees during the year, amounts withdrawn, and the basis for the withdrawal eligibility calculation. Any shortfall in the designated account relative to the pending construction cost is a RERA violation, and the CA’s certificate is the primary document on which the authority relies. Professionals certifying RERA accounts must understand not just the accounting, but the regulatory enforcement context that makes these certifications consequential.

The interaction between RERA and GST compliance in real estate development is a dimension that many developers and their advisors underestimate, and it creates a structural complexity in the project accounting that directly affects how Form R-4 and the escrow withdrawal certification should be prepared. Under the GST framework, the supply of under-construction flats is taxable at an effective rate of 5% on the entire consideration (without input tax credit) for affordable housing, and at higher rates for other residential projects — but this rate applies only to consideration received before the issuance of the occupancy certificate. Once the OC is issued, subsequent sale of the completed unit is treated as a sale of immovable property, which falls outside GST. This distinction creates a milestone — the OC — that simultaneously affects GST applicability, RERA project closure conditions, and Ind AS 115 revenue recognition. The CA certifying RERA compliance must understand how the project sits relative to this milestone, because it affects the calculation of the RERA-compliant revenue recognised, the GST liability provisioned, and the net amount available from the separate escrow account.

The 70% escrow mechanism under RERA contains a nuance that is frequently misapplied in the context of projects with commercial components. Section 4(2)(l)(D) of RERA mandates the 70% deposit for residential projects, but the treatment of mixed-use projects — where a developer is building both residential apartments and commercial units in the same project — requires careful analysis of how collections from different components are treated. If the commercial component is registered under a separate RERA registration, it has its own escrow obligation. If it is included in the same registration, the aggregate collections and the aggregate cost basis must be maintained at the project level. Developers who maintain a single bank account for mixed receipts without separate tracking create a compliance exposure that the certifying CA must assess and document.

For Rajasthan developers with projects registered under RERA RAJ, the Rajasthan Real Estate Regulatory Authority has issued state-specific administrative guidance on certain aspects of Form R-4 certification that differ from the central RERA framework’s minimum requirements. The Rajasthan authority has been particularly active in enforcing the completeness and accuracy of project-level financial disclosures, and certifying CAs who have signed Form R-4 without properly reconciling escrow account statements against project financial records have faced scrutiny. The professional responsibility of the certifying CA under Rajasthan RERA is therefore both a regulatory obligation and a significant professional liability matter — it requires the same analytical rigour as any other financial statement certification, not a cursory review of bank statements.

Harshul Mangal & Associates provides RERA compliance certification services for developers registered under RERA RAJ, combining our CA practice and IBBI Registered Valuer expertise (Reg. No. IBBI/RV/16/2025/16044) to support Form R-4 annual reports, escrow account certifications, and Ind AS 115 accounting for residential and commercial projects.

For further reading on the regulatory framework governing this area, refer to the Rajasthan Real Estate Regulatory Authority (RERA RAJ), which provides the primary regulatory foundation for the analysis discussed here.

Our valuation services cover the full range of SFA assignments described in this post — from regulatory compliance to transaction support. If you need professional valuation assistance, we would be pleased to assist. You can reach out to us here or write to harshulmangal.ca@gmail.com.

Rajasthan RERA’s Form R-4 Certification Requirements in Practice

The Rajasthan Real Estate Regulatory Authority has issued administrative guidance that supplements the central RERA framework’s minimum requirements for Form R-4 certification, with particular emphasis on the reconciliation of collections and costs at the project level rather than the developer entity level. This distinction matters for developers with multiple RERA-registered projects — the 70% escrow obligation is project-specific, and the certifying CA must verify that collections received against each project have been deposited in the correct project-specific escrow account rather than pooled at the entity level. Developers who maintain centralised treasury functions and sweep collections into a master account before distributing to project accounts create a documentation challenge for the certifying CA, who must trace each collection receipt to its project of origin and verify the timing of escrow deposit against the 15-day deposit requirement.

The treatment of unsold inventory in Form R-4 is another area where Rajasthan RERA’s expectations have become more specific over recent years. The NRV of unsold inventory — which is a key input to the cost certification — must reflect current market conditions rather than the launch price or the developer’s internal pricing model. For projects in Jaipur’s peripheral residential markets where absorption has been slow and comparable transactions show prices below launch prices, the certifying CA must exercise professional judgment in assessing whether the developer’s stated NRV is supportable against market evidence. A Form R-4 that certifies NRV at launch prices for a project that is observably trading at 15-20% discount in the resale market exposes the certifying CA to the risk of having certified inaccurate financial information — a professional liability that is not adequately appreciated by all practitioners who take on RERA certification work.