An escrow account is a legal account in which an asset or a financial instrument is held by a third party – an individual or entity – on behalf of two other parties that are in the process of completing a business transaction. The escrow agent holds the fund or assets until the final obligation has been fulfilled. An escrow account may hold securities, funds, money or other assets.
Escrow in Dubai
The escrow account law was introduced in Dubai in 2007. It was the much-awaited moment for the government to establish the emirate as a reliable real estate market. The escrow law is monitored by the Real Estate Regulatory Agency (RERA), which is a governing body operating under the Dubai Land Development (DLD). The RERA and escrow laws work closely to make it conducive for people to trade property in Dubai. A more detailed picture of escrow is given below.
Advantages of Escrow
- An escrow account helps the buyer and seller to track their merchandise
- It protects the transaction
- There is substantial security for one’s funds or assets in an escrow account
- Escrow cuts short lengthy sales procedures and saves time
How to Open an Escrow Account in Dubai, UAE?
- Your project status must be active to open an escrow account
- The complete project file must be ready, which is maintained by the Department of Real Estate, Escrow Accounts
- To get an escrow account opened in Dubai, you’d need the following documents:
- A recent technical report copy issued by the Land Department
- A copy of the past financial report
- A letter issued by the escrow agent confirming to open sub-accounts for all real estate projects in the name of the investor
15 Things to Keep in Mind about RERA/Escrow Account in Dubai
- All funds received on the property by real estate developers have to be administered through an escrow account
- Reputed banks and financial institutions, including Standard Chartered, HSBC Bank Middle East, Tamweel, and Amlak, are the certified account trustees or escrow agents
- Through escrow accounts, issues related to real estate developments, such as delays due to lack of funds, are now closely monitored by the RERA
- The strict regulation of RERA enables the cancellation of registered developers if they don’t perform well
- Escrow approval includes the final project budget and architectural drawings, which in return provides investors the relaxation that the vision of their dream building will not change
- The escrow law allows investors to hold back 5% of the total value of the account for a period of one year to cover any flaws arising in the property during that period
- Any developer, before registering in escrow account, must get an approval from Dubai Land Development
- Any project developer without RERA license and escrow account may be subject to large fines and imprisonment
- No media outlets can provide advertisements for unlicensed real estate projects
- Unregistered developers are not permitted to participate in any exhibition for the promotion of their off-plan properties
- According to the RERA law, any developer delaying the commencement of a project for more than 6 months after obtaining the DLD approval can be de-registered
- There is a dedicated team in each approved bank to evaluate the implementation and management of escrow accounts
- No creditors of land developers are allowed to seize any amount in the escrow account
- The RERA registered developers are supposed to open a bank account in one of the accredited banks in the UAE; the bank account must be used only for that particular project
- A buyer should use one’s unique reference number given by the developer during payment to the escrow account
If you’re planning to deal with real estate business in Dubai, you must follow the regulations put forth by RERA. There are expert consultants who can provide you escrow services in Dubai.