In this paper, we consider an open quantum system undergoing imperfect and indirect measurement. For quantum non-demolition (QND) measurement, we show that the system evolves on an appropriately chosen manifold and we express the exact solution of the quantum filter equation in terms of the solution of a lower dimensional stochastic differential equation. In order to further reduce the dimension of the system under study, we consider the projection on the lower dimensional manifold originally introduced in 1 for the case of perfect measurements. An error analysis is performed to evaluate the precision of this approximate quantum filter, focusing on the case of QND measurement. Simulations suggest the efficiency of the proposed quantum projection filter, even in presence of a stabilizing feedback control which depends on the projection filter.