The real estate industry of Dubai is an ever-evolving realm, and to ensure a smooth financial journey, you need to deep dive into various mechanisms, including escrow accounts. An escrow account in Dubai is a financial safeguard that serves as a regulatory measure protecting the transactions between buyers and developers.
Introduced in 2007, the escrow account law was a major step by the UAE government to establish Dubai as a reliable real estate market. The Real Estate Regulatory Agency (RERA), a governing body operating under the Dubai Land Development (DLD), was appointed as the regulatory authority to monitor the proper functioning of the escrow law in the emirate.
Escrow account in Dubai: Overview
An Escrow Account in Dubai is a secure source where funds are deposited by a single party or multiple parties in order to pay out to another party/parties, upon fulfilling specific conditions outlined within the Escrow account arrangement.
The operational conditions of escrow accounts are overseen by the regulatory authorities of the respective Emirate. While purchasing off-plan properties within a development, the end user contributes to the Escrow account. These funds are further utilized for project-related expenses such as construction, consultancy, sales and marketing, and land payments.
Upon completion of the construction phase, the payments from the Escrow account are directed to the project contractor and advisor. Other disbursements from the account are subject to the terms outlined in the Escrow Agreement and the regulatory directives.
Benefits of Real Estate Escrow Account in Dubai
There might be numerous checklists for purchasing off-plan properties, however, securing transactions is the most crucial one. An escrow account in Dubai ensures that our funds are protected until the completion of the transaction. Here’s why an escrow account is essential:-
- Protection of rights
An escrow account is a third-party account that manages and withholds funds until the transaction is completed. It not only makes the transaction process smooth but also protects the rights of both parties.
- Secure transactions
While purchasing an off-plan property, the buyer has to deposit a down payment to confirm the sale. Depositing this fund including the monthly installments in an escrow account assures that the buyer has enough money to pay the total amount. This, thus, makes the transaction secure for both.
- Assurance of payment
Since a third party manages the escrow account in Dubai, there are fewer chances of any financial discrepancies. This, thus, assures that the finances of both parties are secured and can be returned in case of any breach in the Sales and Purchase Agreement (SPA).
- Legal track record
According to the law, escrow accounts are required to maintain a legal record of installments paid by the buyer, which can be later used in legal matters as proof of finances.
On the whole, maintaining escrow accounts for off-plan property purchases enhances the real estate investment appeal in the UAE. This gives the buyers peace of mind knowing their funds are protected, thereby ensuring transparency and compliance as well as providing them a clear financial trail for every real estate transaction.
So, connect with the Dubai property experts at Shuraa and turn your real estate dreams into reality.
Key Advantages of Escrow Accounts in Dubai
The key advantages of maintaining an escrow account in Dubai include the following:-
- Reasonable terms and pricing.
- Viable profit rates on account balances.
- Option to establish fixed deposits.
- Strict adherence to Sharia principles.
- Provision of value-added services
- Enables outsourcing of administrative duties to the Bank.
- All-inclusive account-level Management Information Systems (MIS) and easy access to account information.
- Experienced in-house engineers verify payment certificates based on RERA requirements.
- Dedicated customer service center for developers that offers a single point of contact with the Bank.
- Convenient access to services.
- Easy tracking of merchandise of the buyer and seller.
- Substantial security for funds or assets.
- Shortens lengthy sales procedures and saves time.
Documents required for an escrow account in Dubai
The list of documents required for opening an escrow account includes the following:-
- Approval from RERA
- Account Opening forms
- Signed Escrow Account Agreement
- Land Title Deed / Sales & Purchase Agreement
- Trade License/ Commercial Registration & Chamber of Commerce Certificate/ Offshore company documents
- Passport copies of authorized signatories
- Cash Flows/Audited Statements of the Project
- Technical documents for construction and consultancy contracts
- Memorandum/Articles of Association/ Power of Attorney/ Board resolution/ Partnership deed (If applicable)
Things to keep in mind about the escrow account in Dubai
- The funds received on the real estate by the developers have to be managed through an escrow account.
- Some of the certified account trustees or escrow agents in Dubai are Standard Chartered, HSBC Bank Middle East, Tamweel, and Amlak.
- RERA monitors issues related to real estate developments, such as delays due to lack of funds through escrow accounts.
- RERA imposes strict regulations that enable the cancellation of registered developers for their lack of efficiency.
- To get approval for escrow, the developer has to provide the final project budget and architectural drawings which gives investors the relaxation that the vision of their dream building will not change.
- As per the escrow law, investors can hold back 5% of the total value of the account for one year in order to cover any defects or failings arising in the property during that period.
- Developers must get approval from Dubai Land Development before registering an escrow account in Dubai.
- Project developers who don’t possess a RERA license and an escrow account in Dubai would be subject to large fines and imprisonment.
- Media outlets are not allowed to provide advertisements for unlicensed real estate projects.
- Unregistered developers cannot participate or promote their off-plan properties in any exhibition.
- As per the RERA law, developers who delay the commencement of a project for more than 6 months even after obtaining the DLD approval would be subject to de-registration.
- Every RERA-approved bank in Dubai has a dedicated team that evaluates the implementation and management of escrow accounts.
- Moneylenders or creditors of real estate developers are not allowed to seize any amount in the escrow account.
- RERA-registered developers must open a bank account in one of the accredited banks in the UAE and use it only for that particular project.
- The unique reference number provided by the developer to the buyer must be used while making payment to the escrow account.
- The law mandates developers to open separate Escrow Accounts for each project.
Hence, if you are planning to step into the real estate business in Dubai or make dealings in this complicated market, then you need to follow the regulations set forth by RERA. The expert consultants of Shuraa can provide you with escrow account services in Dubai.
Conclusion
Thus, escrow accounts have emerged as a critical component within the financial and real estate realms of Dubai. It offers a trusted device for the transparency and security of a transaction. It acts as a shield and ensures that all parties fulfill their commitments.
Although there is the existence of potential risks, adherence to regulatory standards and practices can remit these concerns. Overall, it fosters trust and bolsters confidence in the market by securing financial transactions. Therefore, it is essential to understand its significance.
For any assistance or information regarding company setup in Dubai, you can contact Shuraa Business Setup at +97144081900 or email at info@shuraa.com.
