Escrow account in the UAE – What is it

An escrow account is a regulated bank account that holds buyer payments with an independent trustee bank rather than in the developer’s own account and releases funds only once construction reaches specific milestones.

This guide defines the meaning of escrow in the context of the UAE property market. Additionally, it will look at how the system is regulated in Abu Dhabi, and how buyers can check that a project complies before signing a sales and purchase agreement.

Key takeaways

An escrow account holds off-plan payments with an ADREC-approved trustee bank, not the developer, until construction milestones are verified
The UAE requires escrow accounts for off-plan sales under Abu Dhabi’s Law No. 3 of 2015 (as amended by Law No. 2 of 2025)
Regulators such as ADREC and RERA release escrow funds only against certified construction progress, typically after 20% completion
Buyers can verify a project’s escrow status through ADREC’s DARI platform or Dubai’s RERA project registry before signing a sales agreement
Modon’s off-plan developments on Hudayriyat Island and Al Reem Island operate under fully ADREC-compliant escrow accounts

What is an escrow account?

An escrow account is a neutral holding account managed by a licensed escrow agent, typically a bank, that receives and safeguards buyer payments for an off-plan development. It is not linked to the developer’s own bank account, so the developer cannot access the money until an independent consultant confirms the agreed construction stage.

Every escrow payment made into the account is ring-fenced, meaning it cannot be seized by the developer’s creditors even if the company runs into financial difficulty (Abu Dhabi Real Estate Centre, n.d.).

Why are escrow accounts mandatory for off-plan purchases in the UAE?

Escrow accounts are mandatory in the UAE for various reasons, the main one being that they prevent developers from using one project’s buyer payments to fund a different, unrelated project. They are also mandatory for these factors:

Ring-fenced funds: Money in an escrow account is separate from the developer’s own accounts and creditors
Milestone-based release: The trustee bank releases funds only after a construction stage is certified
Licensed developer requirements: Only developers registered with ADREC or RERA may collect off-plan payments
Buyer refund rights: Buyers have a defined legal route to reclaim funds if a project stalls or defaults
Market confidence: Mandatory escrow underpins the UAE’s reputation among international investors

How does an escrow account work in the UAE?

An escrow account in the UAE works through a fixed sequence, repeated at every construction stage:

Project registration: The developer registers with ADREC in Abu Dhabi before marketing any units
Escrow account opening: The developer opens a dedicated, project-specific escrow account with an approved trustee bank
Buyer payments: Every installment a buyer pays goes directly into this account, not the developer
Milestone verification: An independent consultant certifies each completed construction stage
Fund release: The trustee bank releases the certified portion of funds to the developer
Handover and closure: Once the unit is handed over and final obligations are met, the account for that unit is closed

Who regulates escrow accounts in the UAE?

Escrow accounts in the UAE are regulated at the emirate level, not the federal level, so the escrow account framework is essentially two separate systems: Abu Dhabi’s ADREC and Dubai’s RERA. The table below compares how each emirate applies the rules.

Aspect	Abu Dhabi	Dubai
Regulator	Abu Dhabi Real Estate Centre (ADREC)	Real Estate Regulatory Agency (RERA), Dubai Land Department (DLD)
Governing law	Law No. 3 of 2015, as amended by Law No. 2 of 2025	Law No. 8 of 2007 (Escrow Account Law)
Standard release threshold	No withdrawals before 20% construction completion, with a narrow bank-guarantee exception under Decision No. 24 of 2025	Funds released in stages against milestones certified by the escrow trustee
Upfront developer capital	Assessed on a case-by-case basis by ADREC	At least 20% of the construction cost must be paid in cash or secured by a bank guarantee before marketing, in accordance with Law No. 9 of 2007
Buyer verification tool	DARI digital platform	RERA project registry via the DLD

What are the benefits of escrow accounts for off-plan buyers?

The benefits of an escrow account for off-plan buyers are beyond holding money safely. They reshape the risk profile of buying off-plan, giving buyers leverage and protection at every stage of a purchase.

Financial protection: Your money cannot be diverted to another project or seized by the developer’s creditors
Construction-linked payments: You only fund work that has actually been completed and certified
Regulatory oversight: ADREC and RERA monitor progress reports and can intervene if construction stalls
Clear refund pathway: Defined rules set out what portion of your payment you can recover if a project is delayed or cancelled
Increased transparency: Digital tools such as DARI let you check a project’s registration and escrow status before you commit

How to verify an escrow account before buying off-plan property in the UAE?

You can verify an escrow account before buying off-plan property by checking the developer’s license, the project registration, and the trustee bank details, in this order:

Confirm the developer’s license: Check registration with ADREC or RERA before making any payment
Check the project registration: Look up the project on ADREC’s DARI platform to confirm it is listed
Ask for the escrow account details: Request the trustee bank’s name and account number in writing
Review the payment plan: Match every installment to a specific construction milestone
Confirm that each escrow payment goes to the trustee: Never pay into a developer’s general company account
Keep records: Retain payment receipts and escrow confirmations for any future dispute

What happens to escrow funds if a developer defaults?

If a developer defaults, ADREC investigates the project, and buyers can generally reclaim a proportion of their payments still held in the escrow account once the process concludes.

ADREC can review amounts owed to buyers and determine how the remaining escrow balance is distributed, with compensation graduated according to how far construction has progressed.

This process varies by project and by how far construction has progressed, so buyers facing a defaulted project should seek independent legal advice specific to their contract.

Escrow accounts and Modon’s off-plan developments

Modon’s off-plan developments in Abu Dhabi operate under fully ADREC-compliant escrow account structures. That means every payment you make for a Modon unit is held by an approved trustee bank and only gets released against certified construction progress.

This applies across all Modon’s residential portfolio on Hudayriyat Island and Reem Island.

What this means for your off-plan purchase

An escrow account is the strongest legal protection available to off-plan buyers in Abu Dhabi. Under ADREC’s framework, your payments sit with an independent trustee bank and only reach the developer once real construction progress is verified.

Before you sign an off-plan sales and purchase agreement, confirm the escrow account, check the developer’s license, and read the payment schedule against each milestone. Understanding the escrow account rules for your specific emirate is the single most important step before you commit.

For Abu Dhabi buyers, Modon’s escrow-compliant communities on Hudayriyat Island and Al Reem Island include that protection from day one. Explore the Modon real estate portfolio to find a community that fits your budget and timeline.

FAQs for escrow accounts in the UAE

What is an escrow account in UAE real estate?

An escrow account in UAE real estate is a licensed trustee bank account that holds off-plan buyer payments separately from the developer, releasing funds only against certified construction milestones.

Is an escrow account mandatory for off-plan purchases in the UAE?

Yes. In Abu Dhabi, escrow accounts are mandatory for off-plan purchases under Law No. 3 of 2015, and a developer cannot legally collect off-plan payments without one.

How do I confirm if an off-plan project has an escrow account?

You can check a project’s escrow status through ADREC’s DARI platform or by asking the developer directly for the trustee bank name and escrow account number.

Can a developer access escrow funds at any time?

No. A developer can only access escrow funds after an independent consultant certifies a construction milestone. In Abu Dhabi, no withdrawals are permitted before 20% completion except under the narrow bank-guarantee exception in Decision No. 24 of 2025.

Disclaimer: Modon does not warrant the accuracy, completeness, or suitability of this content. This content does not constitute commercial, financial, investment, tax, accounting, or legal advice. It is your responsibility to obtain independent advice and ensure that any products, services, or information meet your specific requirements. Any reliance on this content shall be at your sole risk and Modon accepts no liability whatsoever for any such reliance.

Escrow account in the UAE: What is it and how does it protect off-plan buyers?