Escrow account in Dubai
An Escrow account in Dubai is a specialized bank account that serves as a financial safeguard in real estate transactions, particularly for off-plan (under-construction) properties. It was introduced as part of Dubai's real estate regulations under Law No. 8 of 2007 to protect the interests of property buyers and ensure developers complete their projects as promised.
Here's how the escrow account works in Dubai:
1. Developer Registration: Developers must be registered with the Dubai Land Department (DLD) and receive approval before opening an escrow account.
2. Dedicated Account: Each project requires its own separate escrow account, which is managed by a bank approved by the DLD. The developer cannot use the funds in this account for anything other than expenses related to that specific project.
3. Buyer Payments: When a buyer makes payments toward an off-plan property, these funds are deposited into the escrow account. The buyer's money is protected here until certain milestones of the construction are met.
4. Funds Disbursement: The developer can only withdraw funds from the escrow account in stages, according to the progress of the construction. The release of funds is subject to inspection by an independent auditor appointed by the DLD to verify that the project is advancing as per schedule.
5. Buyer Protection: In case of project delays, cancellation, or insolvency of the developer, the funds in the escrow account ensure that buyers have recourse to claim back their money or have the project completed.
The escrow account system adds a layer of security to Dubai’s real estate market, promoting transparency and protecting both buyers and developers in property transactions.