A third-party account that holds funds until predetermined conditions are met between a buyer and seller.
An Escrow Account is managed by a neutral third party (escrow agent — typically a bank or legal firm) that holds money or assets until both parties in a transaction fulfill their obligations. Common uses: real estate transactions (holding buyer's deposit until registration), M&A deals (holding purchase price until conditions are met), e-commerce (holding payment until delivery is confirmed), and SaaS contracts (holding prepaid amounts released monthly). It protects both parties from fraud or non-performance.
In a ₹1.5 crore property purchase: Buyer deposits ₹1.5 crore into escrow. Escrow agent verifies: property title is clear, no encumbrances, seller provides possession. Once all conditions met, escrow agent releases funds to seller and title documents to buyer. If conditions aren't met within 90 days, money returns to buyer.
glossaryTermPage.reasons.accuracy
glossaryTermPage.reasons.compliance
glossaryTermPage.reasons.decisions
glossaryTermPage.reasons.efficiency
It varies by transaction type and jurisdiction. In real estate, it's typically split between buyer and seller or paid by the buyer. In M&A, the party requesting escrow protection usually pays. Fees range from 0.25%–1% of the escrow amount or a flat fee of ₹5,000–₹50,000 depending on complexity.
Under RERA (Real Estate Regulation Act 2016), developers must deposit 70% of buyer payments into a designated escrow account, released only for construction costs. This protects buyers from fund diversion. For resale properties, escrow isn't mandatory but highly recommended for high-value transactions.
A promise by a bank to cover a financial obligation if the borrower (applicant) fails to fulfill their contractual duties.
A written guarantee from a bank (on behalf of the buyer) promising payment to the seller upon presentation of specified documents proving shipment of goods.
A technology service that processes online payment transactions by securely transmitting data between the merchant, customer's bank, and the acquiring bank.
The transfer of money from one party to another, particularly the sending of funds by foreign workers to their home countries or cross-border business payments.
glossaryTermPage.cta.subtitle