Escrow Accounts: The Protection Off-Plan Buyers Need

Off-plan sales have powered Dubai's property boom, but they rest on an act of trust: buyers pay large sums to developers for homes that do not yet exist. At present, there is no general legal requirement for those payments to be held separately and used only for the project concerned. Escrow accounts would change that, and they are increasingly seen as essential.

How escrow works

An escrow account is a bank account dedicated to a single project. Buyers' payments go into it, and the developer can withdraw funds only to pay for construction of that project, usually as certified progress is made. The bank acts as a gatekeeper, protecting buyers' money from being used elsewhere.

Why it matters

• Protection against misuse: payments cannot be diverted to other projects or purposes.
• Better chance of completion: funds are available for the project buyers paid for.
• Recovery if projects fail: money remaining in escrow can be returned or used to complete the project.

What it means for developers

Escrow requires developers to fund projects more carefully, since they cannot use one project's sales to finance another. That may slow some launches and favour developers with stronger balance sheets. In the long run, it should improve the quality of the market.

What buyers should ask now

Even before escrow becomes mandatory, some developers may offer project-specific accounts. Buyers should ask where their payments are held, whether they are used solely for the project and how progress is certified.

The wider benefits

Escrow would make Dubai's off-plan market more attractive to cautious international buyers and institutions. It would also reduce the risk that a failure by one developer damages confidence across the market.

Our view

Escrow is one of the most important protections a property market can offer off-plan buyers. We encourage clients to favour projects where payments are ring-fenced and look forward to the day when this becomes standard practice in Dubai.