A real estate developer audit checks three things: that customer money is kept and used as RERA requires, that revenue and cost are recognised by the right method and in the right year, and that unsold stock, land and approvals are real and recorded in full. Each project is its own account, and mixing money between projects is the central risk.
Last reviewed: 17 October 2026. Facts checked. We ran a web search on the RERA separate account rule. It returned law-firm and practitioner pages, an ICAI regional council study material PDF and state regulator documents. We read the search summaries and did not open the Act, any state rule or any regulator circular in full. The search indicated that section 4(2)(l)(D) of the Real Estate (Regulation and Development) Act, 2016 requires a separate project account and certified withdrawals, and that an annual project-wise audit is required. State regulators add their own forms and circulars, so check the current text for the state concerned. We did not verify any revenue recognition guidance in the original and give method only.
What is distinctive about a developer
- Revenue arrives in stages, often years before handover, from buyers who also use bank loans.
- Costs are large and lumpy: land, approvals, construction, finance cost and marketing.
- Each project has its own RERA registration, bank account, completion percentage and quarterly or annual filings.
- Land is often held through joint development agreements or in related-party entities.
- Unsold flats, parking and commercial units form inventory worth more than the rest of the balance sheet combined.
- Cancellations, delays and disputes with buyers affect both revenue and provisions.
Key risks
- Project money mixed. Collections from one project used for another project or for land in a new one.
- Withdrawals not matching progress. Money taken from the project account ahead of work done.
- Revenue booked too early. Revenue recognised at booking or on receipt instead of by the applicable accounting standard.
- Cost allocation. Common costs pushed to the wrong project, or completion cost estimates not updated.
- Inventory overstated. Sold units still carried as stock, or stock not matching the booking register.
- Approvals and compliance. Delays, penalties and unresolved buyer complaints not provided for.
- Related-party deals. Land, construction or marketing from group entities on unclear terms.
Audit programme in steps
Step 1: Map projects and entities
List every project with its RERA registration number, state, entity, promoter, land holding structure and stage. Obtain the registration certificates, extensions and sanctioned plans. For each project note the dedicated bank account.
Step 2: Test the RERA project account
Obtain statements for the designated project account for the year. Trace a sample of buyer receipts from the booking register and demand letters into this account. Check that collections meant for the project did not land in a general account. Review withdrawals one by one: the certificate of engineer, architect and practising chartered accountant that the law asks for should be on file for each, and the amount withdrawn should line up with the certified stage of completion. Check whether any transfers went to other projects or group entities.
Step 3: Perform the annual project-wise review
Where the law requires an annual audit of each project, do it project by project. Test that money received was used for that project and that withdrawals matched completion. The report format is set by the regulator in many states. Obtain it before starting.
Step 4: Test revenue recognition
Understand the accounting framework in force for the entity. For Ind AS entities, the five-step approach applies and our Ind AS 115 audit guide and worked contract example show the tests. For each project check:
- Agreements for sale are signed and dated within the year recognised.
- The method chosen (over time or at a point in time) is supported by the contract terms and applied the same way each year.
- Where revenue is recognised over time, the percentage of completion is computed from actual and estimated cost, and the estimate is current.
- Revenue is not recognised on units cancelled after year end if the cancellation was already in process.
Step 5: Test project costs
Vouch land cost with registered deeds, stamp duty and approval fees. For construction, trace contractor bills to measured progress. The construction contractor audit post covers billing and certification tests. Review borrowing cost capitalised on qualifying projects and check the rate and period. Test allocation keys for common costs such as marketing or site overheads.
Step 6: Count and verify inventory
Build the inventory from the unit-level register: unsold units, their cost per unit and their status. Reconcile to booking data, agreements and possession records. Verify a sample of units physically. Check that units sold but not yet recognised as revenue are classified correctly and not both in stock and in sales.
Step 7: Test advances, deposits and customer balances
Check customer advances against agreements and demand letters. Review refunds on cancelled bookings for approval and the deduction made. Confirm balances with a sample of buyers, and with the bank where home loans are linked to disbursement stages.
Step 8: Review provisions and compliance
List complaints and orders before the regulator and consumer forums. Check delay interest, penalties and rectification costs for provision. Read the status of occupation or completion certificates and extension orders. See our going concern post if cash flow depends on future launches.
Step 9: Test related parties and joint development
List land owners and joint development partners, their share of area or revenue and the settlement of consideration. Use the related-party procedures. Check that area share and cash share agree to the agreement and that any revenue share is recorded correctly.
Step 10: Review GST, TDS and statutory dues
Check GST treatment on sales, input credit on construction and the treatment of land. Confirm TDS on property purchase and contractor payments. We did not verify current rates, so confirm them against notifications.
Common findings
- Withdrawals from the project account with no certificate or one that does not match the work.
- Collections credited to a general account.
- Revenue recognised for bookings with no signed agreement.
- Completion estimates not updated for several quarters.
- Unsold stock lists that do not match the booking register.
- Penalties and delay interest not provided.
- Inter-project transfers without documentation.
Which Indian rules to check
Name only. Verify current text for each:
- The Real Estate (Regulation and Development) Act, 2016, and the rules and circulars of the state regulator.
- The Companies Act, 2013 and CARO for company developers.
- Ind AS 115, Ind AS 2 and Ind AS 23, or the corresponding accounting framework for non-Ind AS entities.
- ICAI guidance on real estate accounting, for the version in force.
- GST law and the Income-tax Act for sales and project costs.
- State stamp duty and registration laws.
FAQs
Is the RERA annual audit the same as the statutory audit?
No. It is project-wise and follows the regulator's format. It may be done by the same firm or a different one, subject to the rules and independence.
What is the biggest red flag?
Money from one project funding another with no documentation.
Does every project need its own account?
The Act requires a separate account for each registered project. Check the state rules for details.
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Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error