Escrow Overhaul: Bank Guarantees Now Required Before 20% Completion in Abu Dhabi Projects
Abu Dhabi tightens rules to protect investors — what UAE real estate buyers need to know
UAE real estate buyers, investors and developers are facing a clearer, tougher regulatory regime in Abu Dhabi after the Department of Municipalities and Transport (DMT) issued four administrative decisions to implement Law No. (3) of 2015 (as amended by Law 2 of 2025). The headline change is straightforward and immediate: disbursements from project escrow accounts before 20% completion will be subject to stricter controls, including the submission of bank guarantees and approved cost estimates.
That sounds technical, and it is. But the impact is practical: it affects how developers access cash, how buyers’ funds are protected on off‑plan purchases, and how jointly owned properties are governed once completed. In our analysis, these measures bring Abu Dhabi closer to international real estate governance norms while creating new compliance work for developers and governance responsibilities for owners and managers.
What the four decisions cover — a plain summary
The DMT package comprises four administrative decisions that operationalise the amended real estate law. They address stages across the lifecycle of a development project from construction funding to long‑term property management. The four pillars are:
- Decision No. (24) of 2025: Controls on disbursements from project escrow accounts prior to reaching 20% completion — now tied to bank guarantees and approved cost estimates.
- Decision No. (25) of 2025: Regulation of jointly owned property, including common parts and shared facilities, clarifying roles for owners, developers and property management companies under ADREC supervision.
- Decision No. (26) of 2025: Adoption of a unified bylaw for Owners’ Committees, standardising formation, competencies and interaction with authorities and managers.
- Decision No. (165) of 2025: Defines compensation ratios and refund procedures where purchasers breach off‑plan purchase agreements or when units are cancelled and resold under Article (3/17) of the law.
Together these decisions aim to increase transparency, clarify contractual roles and reduce disputes between developers and buyers while strengthening ADREC’s supervisory role.
Decision 24: Escrow withdrawals before 20% completion — why this matters
Escrow accounts are central to buyer protection in off‑plan transactions. Abu Dhabi’s new control on pre‑20% withdrawals is the most consequential immediate change for market liquidity and buyer security.
Key points of Decision No. (24) of 2025:
- Withdrawals from a project’s escrow account before the project reaches 20% completion will require:
- Submission of bank guarantees covering the requested disbursement; and
- Approved cost estimates justifying the withdrawal.
- The measure is intended to prevent misdirection of buyer funds and to ensure that monies deposited in escrow serve construction and project‑related costs.
What this means in practice:
- For buyers: stronger protection of funds paid on off‑plan contracts. Developers cannot freely extract money from escrow early in construction without backing guarantees and documented, approved budgets.
- For developers: a new compliance hurdle that can affect short‑term cash flow. They will need to secure bank guarantees and prepare more rigorous cost approvals before accessing funds below the 20% completion threshold.
- For lenders and banks: greater demand for guarantees and increased scrutiny on escrow withdrawal approvals could change lending appetite or terms for certain developers.
We expect larger, well‑capitalised developers to adapt quickly. Smaller developers working on tight margins may feel pressure, particularly where their business model relies on early-stage access to escrow funds.
Decision 25 and 26: Governance of jointly owned property and Owners’ Committees
Managing apartment blocks and mixed‑use communities is as important as building them. The DMT’s two decisions on jointly owned property and Owners’ Committees are about governance, operational clarity and long‑term asset quality.
Decision No. (25) of 2025 sets out a comprehensive framework for jointly owned properties and shared facilities. It:
- Defines roles and responsibilities for owners, developers and property management companies; and
- Strengthens supervisory oversight by the Abu Dhabi Real Estate Centre (ADREC) to harmonise controls and standards across the emirate.
Decision No. (26) of 2025 adopts a unified bylaw for Owners’ Committees. It:
- Standardises procedures to form the committee;
- Clarifies the committee’s powers and interaction with management companies and local authorities; and
- Seeks to improve residents’ participation in operational and financial decisions for common facilities.
Why this is significant:
- Owners’ Committees will operate to a common rulebook across Abu Dhabi, reducing ambiguity in governance and providing a faster dispute‑resolution pathway.
- Property management companies will have clearly defined obligations, which can improve service levels and the maintenance of common parts.
- ADREC’s supervisory role should create a single point of accountability when standards fall short, which helps preserve long‑term asset values.
For investors this means clearer expectations about service charges, reserves and how major works will be approved and financed. For developers, it reduces post‑handover friction but increases the need for accurate handover documentation and transparent accounting.
Decision 165: Compensation and refund rules on off‑plan breaches
Decision No.
1
49
1
69
28
400
225
20
1200
The decision:
- Sets compensation percentages due to developers where purchasers fail to meet contractual obligations; and
- Prescribes timeframes and procedures for refunding buyers when cancelled units are resold.
Compensation ratios are linked to the status of project completion and the level of incurred costs. The intention is to balance the interests of developers and purchasers — to avoid punitive penalties for buyers while ensuring developers are compensated for legitimate costs.
Practical implications:
- Buyers should examine the sales and purchase agreement (SPA) carefully to understand the compensation formula tied to project stage.
- Developers benefit from a predictable framework to quantify losses and process resale refunds in a transparent manner.
- Dispute resolution should be faster where both parties follow the established compensation and refund matrices.
What this means for investors, buyers and developers — our analysis
We view the package as a calibrated attempt to bring Abu Dhabi’s regulatory framework closer to international standards. There are winners and challenges.
Winners:
- Buyers and retail investors gain stronger protection of funds and clearer post‑handover governance.
- Institutional investors seeking transparent markets will find the regulatory clarity attractive for long‑term holdings.
- Reputable developers with strong balance sheets will find the rules manageable and may benefit from improved market confidence.
Challenges and risks:
- Smaller developers may face cash‑flow constraints if they must secure bank guarantees to access escrow funds early in construction.
- Costs of compliance (bank guarantees, more rigorous cost approvals, enhanced governance documentation) could be passed to buyers through higher prices or service charges.
- Timescales for project delivery could be affected while developers adjust their financing and procurement processes.
From an investor’s standpoint, the net effect is likely positive for market integrity. But we advise caution: enhanced protection often shifts some costs and operational burdens elsewhere in the chain. Expect tighter underwriting from banks and more demand for pre‑construction risk analysis by buyers.
Practical steps buyers and investors should take now
If you are buying in Abu Dhabi or hold property there, take these steps to protect your position:
- Check the SPA for explicit references to the new administrative decisions and the compensation matrix in Decision No. (165) of 2025.
- Insist on documentary proof of escrow arrangements and any bank guarantees that support early withdrawals where relevant.
- Verify the developer’s track record and financial capacity to bridge early‑stage financing needs without relying on unrestricted escrow access.
- Review the proposed Owners’ Committee bylaw for your community and ask for a copy of the unified template adopted under Decision No. (26).
- For investors: factor in potential short‑term impacts on developer cash flow when modelling returns for projects that are pre‑20% complete.
- Consult legal counsel experienced in Abu Dhabi property law and ADREC procedures when negotiating or reviewing off‑plan contracts.
We recommend that buyers secure written assurances about the management of common facilities and reserve funds when purchasing in new communities.
How the regulator frames the changes
H.E. Rashed Al Omaira, Director General of ADREC, framed the package as a step to implement the amended law through flexible executive tools that match market dynamics. He said the decisions ensure efficiency, transparency and balanced contractual relationships while reinforcing investor confidence and Abu Dhabi’s position as a leading real estate destination.
The message from the regulator is consistent: safeguard buyer funds, standardise governance, and reduce disputes through clearer rules. ADREC’s enhanced supervisory role is central to enforcement and to ensuring the decisions operate as intended.
Market outlook: stability over speculation
These decisions favour stability and governance over speculative ease. Expect a few market effects:
- A modest tightening in developer liquidity in the short term as new compliance processes are embedded.
- Improved buyer confidence in the medium term, which could support higher demand for well‑managed, transparent developments.
- Increased due diligence by lenders and investors, which could raise the bar for new entrants and smaller developers.
For international buyers and institutional capital, the clearer framework reduces legal ambiguity — a quality many investors prize when comparing regional markets.
Frequently Asked Questions
Q: Do the new rules stop developers from accessing escrow funds entirely before 20% completion?
A: No. Decision No. (24) of 2025 does not prohibit withdrawals before 20% completion; it requires that withdrawals be supported by bank guarantees and approved cost estimates. This makes such disbursements conditional and more transparent.
Q: How will the unified Owners’ Committee bylaw affect service charges and reserves?
A: The unified bylaw in Decision No. (26) standardises how committees are formed and operate, which should improve transparency around budgets, service charge allocations and reserve funding. It does not itself set charge levels, but it clarifies approval and oversight mechanisms.
Q: If I cancel an off‑plan purchase, how will refunds be handled?
A: Decision No. (165) of 2025 outlines timeframes and procedures for refunds when cancelled units are resold, and sets compensation ratios tied to project stage. Buyers should refer to the SPA and the decision’s compensation matrix to understand exact calculations.
Q: Will these decisions affect housing prices in Abu Dhabi?
A: The decisions focus on governance and protection rather than price controls. There may be indirect effects — for example, compliance costs could influence pricing strategies for some developers — but the decisions are not a direct price policy.
Final takeaway for buyers and investors
The DMT and ADREC have tightened the regulatory framework to protect purchasers and to standardise governance across Abu Dhabi’s property market. For buyers the clearest practical change is that early withdrawals from escrow before 20% completion will require bank guarantees and approved cost estimates. This is a specific protection you can verify in your SPA and with your lawyer — and it is the single most concrete action investors should confirm when transacting off‑plan.
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