The UAE has emerged as an outstanding place for real estate investment in recent years. The popularity comes from a variety of factors, including government initiatives and law and order problems. Whether buyers choose a villa or an off-plan property, the authorities have taken steps to protect both buyers and developers’ interests. The use of escrow accounts for off-plan transactions is one such work. Buyers and developers are required to utilize an escrow account until all payments have been made and the property has been handed over to the owner.
We have given comprehensive information about escrow accounts, including how they function and the benefits they bring.
ESCROW ACCOUNT DEFINITION
An escrow account is a safeguarding account into which the funds of buyers are kept until the instalments are paid. These accounts are controlled by government officials until the project is completed. Developers can only request a limited amount of funds from the escrow account, based on the terms of the escrow account management authority.
HOW DOES AN ESCROW ACCOUNT WORK?
When a buyer enters an agreement to acquire an off-plan home, real estate authorities such as RERA Dubai and TAMM Abu Dhabi set up an escrow account. Following the registration of the contract, buyers must deposit the remaining cash in the escrow account in accordance with the payment plan.
The developers are not entitled to utilize any funds from the account other than those necessary for sales, marketing, consultation, construction, and land payments. However, these funds are only delivered to the project consultant and contractor upon completion of each building phase.
Aside from these limitations, the developer may request funds from the account in accordance with the regulatory authority’s terms and conditions.
HOW TO SET UP AN ESCROW ACCOUNT
The developer asked the relevant authority to open an escrow account for an off-plan project. Each Emirate has its own procedure for creating an account.
To elaborate, we have listed the steps required to create an escrow account in Dubai here.
- Log in to the “Oqood” portal and go to the “Escrow Account Link” section.
- Select the needed service and complete the application. Once filed, the application will be forwarded to the account trustee.
- The trustee will review the application, upload the required documentation, and submit it to the TAS system.
- The escrow account department will review the application and either reject or accept it. In the case of approval, the system will be automatically updated.
The payment plan for the project is the sole document necessary to process the application. However, before submitting an application, developers must meet the standards specified by DLD Dubai.
Remember that this approach is only applicable to developers in Dubai; developers in other Emirates should follow the process outlined on the land authorities’ website.
WHY A REAL ESTATE ESCROW ACCOUNT IS REQUIRED
For buying an off-plan property in Dubai or another emirate, there are many things to consider, but worrying about transactions is not one of them. There is an escrow account that is kept secure for this reason.
Here are some additional advantages of utilizing an escrow account when buying off-plan property in the UAE.
RIGHTS PROTECTION
Escrow is a third-party secured account that controls and withholds payments until the transaction is finished. However, with an escrow account, no one holds funds and both parties’ rights are protected, resulting in a seamless transaction process.
PROCESS OF SECURE TRANSACTION
To confirm the sale of an off-plan property, buyers must make a down payment and monthly payments. By placing the funds in an escrow account, the developer is sure that the buyer has the means to pay the complete price, keeping the transaction secure for all parties.
PAYMENT INSURANCE
Because the escrow account is managed by a third party, all financial irregularities are removed. Moreover, both parties know that the funds are secure and can be reversed in the event of a breach of the Sales and Purchase Agreement (SPA).
LEGAL TRACK RECORD
The escrow account is required by law to keep a legal record of the buyer’s payment. However, this legal record might be utilized as proof of money in future legal proceedings.
Everything revolved on the escrow account. The UAE government’s concept of escrow accounts aims to secure off-plan property purchase. This gives investors even another motive to invest in the country’s real estate. If you want to experience the rewards of real estate investing in the UAE, go through these properties for sale in the UAE and discover a suitable unit to invest in.
