A real estate escrow account is a special bank account created for a real estate project. When buyers purchase off-plan properties (properties still under construction), the money they pay is deposited into this account instead of being freely used by the developer.

In a recent Administrative Decision No. 24 of 2025 issued by the Chairman of the Department of Municipalities and Transport (“DMT”) on 21 November 2025, new regulations were introduced pursuant to Abu Dhabi Law No. 3 of 2015.

What was the original 20% rule under Abu Dhabi law?

Article 19 of Abu Dhabi Law No. 3 of 2015 stated that a developer could only withdraw money from the escrow account after twenty percent of the construction work was completed. This rule was imposed to ensure that the developer was serious, and that actual construction had commenced.

Practical problem with the old rule

The practical problem with the old rule was that developers required a substantial amount of money during the initial stages of construction for permits, contractor advances, materials, infrastructure preparation, etc. Under the old system, the buyers’ funds were locked, and the developer had to independently arrange financing to complete twenty percent of the project before being able to withdraw money from the escrow account. This created cash flow pressure even for reputable developers.

Purpose of the Decision

  1. The Law allowed the Chairman of the DMT to issue regulations creating a mechanism for early disbursement before 20% completion.
  2. The latest Decision allows reputed developers to withdraw money from the escrow account and commence work using those funds instead of raising finances independently.

Role of ADREC

  1. Abu Dhabi Real Estate Centre (“ADREC” or the “Centre”) has the discretion to approve or reject applications.
  2. ADREC supervises the process and determines the required amount of the bank guarantee.
  3. The Centre may impose additional conditions where necessary.

Early Withdrawal Mechanism

  1. Developers may request ADREC to allow them access to escrow funds before completing twenty percent of the project.
  2. The most important condition is that this will only be permitted if the developer provides an alternative bank guarantee approved by the Centre.
  3. The guaranteed amount cannot be less than 20% of the value of the project’s construction works.

Eligibility Conditions for Developers

  1. They should be registered as developers in Abu Dhabi for at least four years.
  2. They must hold a valid licence at the time of application.
  3. They should have completed and delivered at least three real estate projects in Abu Dhabi within or before the scheduled timelines.
  4. They must not have committed violations or received administrative penalties under the Law during the twelve months preceding the application.

Requirements of the Bank Guarantee

  1. It must be issued by a licensed bank in the UAE.
  2. It must be at least equal to 20% of the project construction cost.
  3. It must be unconditional and irrevocable.
  4. It must be payable immediately upon first written demand by the DMT or ADREC.
  5. It must remain valid for the required period.

Additional Obligations

The additional obligations include:

  1. If the project costs increase, the developer must provide an additional guarantee covering the increase.
  2. The original guarantee remains with the escrow trustee.
  3. The trustee cannot return or dispose of the guarantee without written consent.
  4. The guarantee may only be returned after 100% project completion and issuance of the completion certificate.

Conclusion

Administrative Decision No. 24 of 2025 represents a significant development in Abu Dhabi’s real estate sector by balancing developer liquidity with purchaser protection. While it provides reputed developers with greater financial flexibility during the early stages of construction, the strict bank guarantee requirements continue to safeguard investors’ interests and maintain confidence in the off-plan property market.

We at Ayesha Aldaheri Advocates & Legal Consultants closely monitor developments in the UAE real estate sector and regularly advise clients on regulatory compliance, escrow account requirements, and off-plan property matters.