Dubai's escrow law is the single most important buyer protection in the UAE real estate market. Before it existed, several developer failures in the mid-2000s wiped out buyer deposits. Law No. 8 of 2007 was enacted to structurally prevent that.
How escrow works, step by step
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Pre-sale prerequisites. Before marketing a single unit, a developer must hold a RERA-approved escrow account at a DLD-approved bank, and prove land ownership or hold a master developer NOC. Selling off-plan without an escrow account is a criminal offence.
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Buyer payments flow into escrow. Every dirham — booking deposit, instalments — goes directly into the project-specific escrow account. The developer cannot withdraw funds freely.
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Milestone-linked releases. Funds are released to the developer only after a RERA-appointed project consultant certifies defined construction milestones (foundations complete, 20% structural, 40%, etc.).
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5% retention. A minimum 5% of total project escrow is withheld until handover and defect-liability sign-off. This protects buyers from developers who abandon finishing works.
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Marketing carve-out. Developers may use up to 5% of collected funds for marketing and sales — a tightly defined exception.
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Audit and enforcement. RERA conducts unannounced escrow audits. Banks are prohibited from allowing drawdowns not authorised by the project consultant.
What happens if a developer defaults
RERA's powers include:
- Appointing a substitute developer to complete the project using remaining escrow funds.
- Liquidating the escrow account and distributing funds pro rata to registered buyers — Oqood-registered buyers are protected; unregistered are not, which is why Oqood registration is critical.
- Revoking the developer's licence, preventing further sales in Dubai.
- Referring the matter to the RDSC for compensation orders.
In cases of deliberate misappropriation, criminal prosecution under the UAE Penal Code is available.
Why this protects you
In a properly structured Dubai off-plan transaction, your money never sits in the developer's operating accounts. The developer cannot fund other projects with it, cannot use it as working capital, and cannot walk away with it. The only path to release is verified construction progress. That structural separation is what makes the UAE off-plan market workable for foreign buyers.
The Abu Dhabi equivalent
Abu Dhabi's Law No. 3 of 2015, as amended by Law No. 2 of 2025, establishes a comparable escrow regime regulated by ADREC. The 2025 reform added mandatory developer financial guarantees as an alternative or supplement to escrow, stricter milestone verification, and enhanced SPA disclosure requirements. King & Spalding described the 2025 reform as "reshaping the risk allocation around off-plan real estate in Abu Dhabi."
What to check before signing
- The project has a RERA-approved escrow account at a DLD-approved bank.
- Oqood registration is completed at SPA signing — not "later".
- The payment plan ties instalments to genuine construction milestones, not to time.
We verify all of this before any client transaction. Get in touch.