What Is an Escrow Account?

An escrow account is a special bank account where the buyer's funds are held until the developer fulfills all obligations for the project. The money remains locked in this account until construction is completed, ensuring the buyer’s investment is protected — if the property is not built, the funds are returned to the buyer.

This system is highly secure because a developer can only open an escrow account after meeting several strict requirements.

Key Requirements:

• Registration: The developer must be officially registered and licensed by the relevant government authority, such as the Dubai Land Department (DLD) for projects in Dubai.
• Project Documentation: The developer must submit all project documentation, including construction plans, cost estimates, and technical drawings.
• Permits and Licenses: All necessary permits and construction licenses must be obtained from the relevant authorities.
• Insurance: The developer must deposit 50% of the total project cost into the escrow account and freeze the funds to guarantee project completion.
• Financial Reporting: The developer must provide financial statements and proof of financial stability.

The developer can only access the funds after the project is completed and delivered.

Benefits of Escrow Accounts

Escrow accounts offer several advantages for buyers and investors:

• Funds Security: The buyer’s money is protected until the developer meets all obligations.
• Transparency: Buyers can be sure their funds are used strictly for the intended purpose.
• Reduced Risk: Escrow accounts minimize the risk of unfinished projects and protect against fraud.

Escrow accounts are a key protection mechanism in the UAE real estate market, ensuring safe and transparent transactions for buyers.