How to protect yourself when buying an off-plan property

The concept of buying real estate off-plan is well known in the UAE. The main advantage of purchasing off-plan or under-construction property is a lower purchase price. As the construction of the project progresses, more often than not, the cost of the property increases. Typically, a buyer pays the purchase price for an off-plan property in installments, whereas for the purchase of a completed property the full purchase price is usually paid as a lump sum.

Off-plan buyers are, however, not without risk. One of the concerns off-plan purchasers have is that the developer will use their money correctly to carry out the construction work and complete their property. In the past, this has been an issue in the UAE, where some developers have sold property off-plan and received partial or full payment for the sale, but never commenced or completed construction of the project. To guard against this, the real estate market regulators have had to bring in regulations to protect the monies paid by off-plan investors.


Another concern has been delay by developers in completing projects. Some developers include in their sale and purchase agreements (SPAs) estimated milestones for completion of particular construction phases of their projects. These developers then link the dates for payment of installments of the purchase price in their SPAs to these estimated milestones. Those estimates are not, however, always realistic; delays may occur due to failures by developers or for reasons beyond their control.

To mitigate these risks, both Dubai and Abu Dhabi have introduced legal requirements for opening project escrow accounts. An escrow account is a designated bank account for a real estate development project in which all money paid by off-plan buyers and financiers is ring-fenced and then only used by the developer to construct and complete the specific project. A bank licensed by the relevant authorities to act as an escrow account trustee manages the escrow account.

It is also a legal requirement in both Dubai and Abu Dhabi that developers link installments to actual completion of construction milestones.

Dubai developers have been required to open separate escrow accounts for each off-plan project since 2007. Abu Dhabi introduced similar requirements in 2016. It is crucial for an off-plan purchaser to get details of the project escrow account from the developer. The purchaser should deposit all payments towards the property directly into that escrow account.

It is also a legal requirement in both Dubai and Abu Dhabi that developers link installments to actual completion of construction milestones. The bank acting as trustee for the project has the responsibility to oversee the escrow account. Each time the developer submits certificates of progress and request for withdrawals from the escrow account, the account trustee must tally all the money received from the purchasers and financiers with the payments to the developer, contractor, and consultants.


In Abu Dhabi, the Abu Dhabi Municipality (ADM) oversees the opening and management of escrow accounts. For each real estate development project in Abu Dhabi, ADM signs an escrow account agreement with the developer and account trustee. Similar arrangements apply in Dubai where the Real Estate Regulatory Agency oversees escrow accounts. The escrow account agreements set out the conditions for the disbursement by the account trustee of all payments to the developer, contractor and consultants.

Banks acting as account trustees have a legal obligation to provide periodic statements of the revenues and payments for every escrow account they supervise. Banks must submit annual reports issued by an accredited auditor on the escrow accounts they manage and confirm that payments from the escrow accounts are compliant with the law, all regulations and the escrow account agreements.

The introduction of the escrow account requirement in Dubai and Abu Dhabi has brought greater protection for buyers of off-plan property.

Source: Gulf News, 2018

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1 Response
  1. Buying off plan property has its risks and rewards. The main benefit is typically a lower price. My friend was in idea to buy a off plan in UAE Developers usually offer between 10 and 30 per cent lower prices for off-plan and under-construction properties. The closer to completion, the higher the price becomes. Here, day’s developers are luring buyers with increasingly attractive payment plans. Dubai is the most populous city in the UAE. So everyone will plan to buy a property it’s their dream too… Though the city started its early development based on oil export revenue, it is now known for its skyscrapers and high-rise buildings especially the world’s tallest building, the Burj Khalifa. So your blog says to beware of property before buying..Thanks for your information about off plan property….

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