Real estate developers in the city Friday made a last minute rush to the Dubai Land Department to meet the deadline for opening escrow accounts. The account, the first-of-its-kind in the region for real estate transactions, has been described by the Real Estate Regulatory Agency (RERA) as a trust account designed to provide a fillip for more investors to enter the market, according to Marwan bin Ghalita, Chief Executive Officer of RERA. The agency had set yesterday as the last date for opening the account.
A total of 375 property developers had met the deadline for registering with RERA for the account, the agency said Friday, and the number was expected to go up to 385 after the paperwork of the applications being processed was complete. The agency has approved 20 banks for operating the trust accounts.
“Now investors in other countries [will be] confident their money is in the trust account and that the developers cannot take the money before completing the project,” Bin Ghalita said, and added there will be no extension of the deadline, and penalties in the form of fines, and even imprisonment, will be imposed next year on those who have failed to meet it.
Mohammed Sultan Thani, director for development and marketing administration at the Dubai Land Department, said: “Of the estimated 500 developers in Dubai, around 400 have so far registered with the agency. We had a rush of developers who came to register yesterday, and I expect more.”
The department will remain closed today but will reopen for business tomorrow to register those who have missed the deadline. Confirming that there will be no extension of the deadline, Thani added: “We will not turn away developers who come to us to register from tomorrow Sunday onwards, but we will impose a penalty on them from the first of January.” He explained the penalties, as per law No 8 which governs the escrow account, will include imprisonment or payment of a fine not less than Dh200,000 or both.
The department will also publish full-page advertisements in local newspapers to name and shame developers who have failed to meet the deadline for registration for the escrow account. Akhilesh Bahl, corporate communications head of a real estate company in Dubai, said the escrow account is a positive thing for the market as it will assure investors that their money is safe.
“Those who failed to register with the department and open the account will not be allowed to operate.
“This is also a very good thing for the market in the UAE as it will show who is really serious about conducting business and in around one year’s time the market will only have credible developers,” he added.
Need for escrow account
- All developers in the city must apply to the Dubai Land Department to open an escrow account before launching any new project.
- Developers must submit detailed documents, including the title deed of the plot being developed, approved architectural designs and layouts, a letter of approval from a master developer and a trade licence.
- The account will then be opened according to a written agreement between the developer and the department.
- Money paid by financiers or buyers towards properties will be deposited in the account opened under the name of the property developer in an approved bank.
- Developers must apply to the escrow account manager to release money from the account after producing a certificate from a consultant working on the property that an agreed stage of construction has been reached.
- The account manager must then informs the Land Department about the sums being released to the developer.
- Even after a project is complete the developer will still not be given access to all the payments.
- The department will keep 10 per cent of the project value for one year after completion until all units are registered in the names of buyers and title deeds are issued.