What is a developer’s escrow account? An escrow account is a special type of bank account, similar to a notary safekeeping account, designed to protect the funds of buyers purchasing off-plan properties (i.e., properties under construction). This account is regulated by the Dubai Land Department (DLD) and serves to ensure that payments from buyers are used exclusively for financing the specific development project.
How does an escrow account work?
- Buyer’s Payment – Once a client makes the first payment, the money is not transferred directly to the developer but is deposited into the escrow account.
- Phased Release of Funds – The developer can only draw funds after completing specific construction milestones, which are verified by an independent auditing firm approved by the DLD.
- Investment Protection – If the developer fails to complete the project or goes bankrupt, the funds in the escrow account are returned to the buyers or used to complete the construction by another developer.
Why is an escrow account important?
- Buyer Protection – The developer cannot freely access the money until they demonstrate progress in the construction.
- Regulation and Transparency – All transactions are monitored by the DLD and are governed by strict regulations.
- Risk Minimisation – The buyer has the assurance that their investment is protected and will not be misused for other purposes.
Therefore, the escrow account is a key security feature when purchasing off-plan property in Dubai, as it ensures that your money will be used correctly and that the project will actually be completed.