Off-Plan Development In Dubai: RERA Escrow, Oqood, And Compliance Obligations

What must a developer do before selling off-plan in Dubai?

• Register the project with the Dubai Land Department (DLD) and obtain RERA approval before signing any sale purchase agreements or collecting payments. Selling without prior registration is prohibited.
• Open a project-specific escrow account with a RERA-approved bank. All buyer payments must be deposited into this account, not into the developer's general operating accounts.
• Deposit at least 20% of the project's construction cost in cash or via a bank guarantee before marketing or sales begin, under Law No. 9 of 2007.

Who this applies to

This article is for property developers launching or managing off-plan residential or mixed-use projects in Dubai. It is also relevant to development managers, project finance teams, and legal advisers involved in structuring off-plan sales programmes.

Buyers seeking to understand their rights should see our separate guide on red flags in Dubai off-plan property and how to verify developer registration. This article focuses on the developer's regulatory obligations, not the buyer's due diligence process.

The framework described here applies to projects within the Emirate of Dubai regulated by RERA under the DLD. Off-plan developments in Abu Dhabi are regulated separately by the Abu Dhabi Department of Municipalities and Transport (DMT). DIFC and ADGM do not typically involve off-plan residential development.

The legislative framework

Three laws form the regulatory backbone for off-plan development in Dubai. They operate together, and non-compliance with any one of them can result in fines, project suspension, licence revocation, or criminal liability.

Law No. 8 of 2007 (Escrow Account Law) establishes the mandatory escrow system. It requires developers to open a dedicated, project-specific escrow account with a DLD-approved bank, deposit all buyer payments into that account, and withdraw funds only in stages linked to verified construction milestones. The law was introduced after several high-profile project failures during Dubai's pre-2009 building cycle, where developers collected buyer funds, diverted them to other projects or operating expenses, and left investors with unfinished buildings and no recourse.

Law No. 13 of 2008 (Off-Plan Registration Law), as supplemented by Executive Council Resolution No. 6 of 2010, governs the registration of off-plan projects and the sale of units before completion. It requires developers to register projects with the DLD before marketing, establishes the Oqood system for registering interim property interests, and sets conditions for advertising and selling off-plan units.

Law No. 19 of 2017 (Contract Cancellation Law) defines the procedures for terminating off-plan sale purchase agreements and caps the amounts developers can retain if buyers default. It protects both parties by providing a structured cancellation process rather than leaving termination to ad hoc negotiation.

For real estate lawyers in the UAE, these three laws are the starting point for every off-plan transaction. Developers who fail to comply with any of them face regulatory action that can halt an entire project.

Escrow account obligations

The escrow account is the central compliance mechanism for off-plan development in Dubai. Every dirham collected from buyers must pass through the escrow account, and every withdrawal must be justified by verified construction progress.

Opening the account

Before the developer can market or sell any units, it must open an escrow account with a bank approved by RERA for escrow services. The account is project-specific: a developer with three projects must maintain three separate escrow accounts. Funds cannot be transferred between project accounts or used for the developer's general business expenses.

Controlled disbursement

The developer can only draw on the escrow account in stages that correspond to construction milestones verified by an independent engineer. The sequence typically follows foundation completion, structural completion of each floor or phase, mechanical and electrical installation, finishing works, and handover. At each stage, the escrow agent (the bank) requires a completion certificate from the independent engineer and RERA approval before releasing funds. This prevents developers from accessing the full pool of buyer capital before the corresponding work is done.

The 20% capital requirement

Under Law No. 9 of 2007, the developer must deposit at least 20% of the total estimated construction cost into the escrow account (or provide an equivalent bank guarantee) before launching sales. This "skin in the game" requirement ensures that the developer has committed its own capital to the project, rather than relying entirely on buyer payments to fund construction. Developers who cannot meet this threshold cannot commence off-plan sales.

Annual escrow audits

RERA requires developers to submit annual audited reports on each escrow account, prepared by a RERA-approved audit firm. The audit covers inflows (buyer payments received), outflows (disbursements to contractors and suppliers), the reconciliation between reported construction progress and fund releases, and the current escrow balance relative to outstanding construction costs. Failure to submit the annual escrow audit on time, or submission of an audit that reveals discrepancies, can trigger RERA investigation, including freezing the escrow account, suspending sales, or revoking the developer's licence.

Penalties for escrow violations

Violations of the escrow law carry serious consequences. These include fines (which can be substantial), suspension or cancellation of the developer's RERA licence, project freezing (preventing further sales or construction), and in cases of fund diversion or fraud, criminal prosecution of the developer's directors and officers. RERA has demonstrated a willingness to enforce these provisions. In recent years, developers have been fined, had projects reassigned to new management, and in extreme cases, had their developments cancelled and liquidated through the Special Tribunal established under Decree No. 33 of 2020.

Project registration and Oqood

Registering the project with DLD

Under Law No. 13 of 2008 and Article 4 of Executive Council Resolution No. 6 of 2010, a developer is strictly prohibited from entering into sale purchase agreements or collecting any payments before the project is registered with the DLD. Registration requires proof that the developer owns the land (or holds a valid development right), the project has received the necessary planning and building approvals, an escrow account has been opened with a RERA-approved bank, and the 20% capital deposit (or bank guarantee) is in place.

The DLD issues a project registration number upon approval. This number must appear on all marketing materials, sale purchase agreements, and Oqood registrations.

Oqood: the interim property register

When a buyer signs an off-plan sale purchase agreement (SPA), the transaction must be registered through the Oqood system managed by the DLD. Oqood registration creates an interim record of the buyer's interest in the unit, bridging the gap between the SPA and the issuance of a title deed upon project completion and handover.

Oqood registration protects both parties. It prevents the developer from selling the same unit twice. It gives the buyer an officially recorded interest that can be used as evidence of ownership in disputes. And it creates a centralised record that RERA can monitor for compliance with sales restrictions and payment obligations.

The developer is responsible for ensuring that every SPA is registered on Oqood promptly after execution. Selling units without Oqood registration is a regulatory violation and undermines the buyer's legal position.

Advertising and marketing restrictions

RERA imposes strict rules on how developers market off-plan projects. These rules exist to prevent developers from generating buyer interest (and collecting deposits) before the project has received all necessary approvals.

RERA advertising permit. Developers must obtain a RERA advertising permit before marketing any off-plan project, whether through print, digital, social media, outdoor, or broker channels. The permit number must appear on all advertising materials. Marketing without a valid permit, or marketing a project that has not yet been registered with the DLD, is a finable offence.

Content restrictions. All marketing materials must accurately reflect the approved project specifications. Renders, floor plans, and descriptions must align with the technical specifications approved by the relevant authorities (Dubai Municipality, master developer, or free zone authority). Discrepancies between advertised features and the actual delivered product are one of the most common sources of buyer complaints and RDC disputes. RERA has fined developers and brokers millions of dirhams for misleading advertising, including a 2024 enforcement action against 30 companies for unauthorised promotions and a separate action against 256 brokers for advertising violations.

Broker obligations. Brokers marketing off-plan units on behalf of developers must also hold valid RERA broker registration and display the project's RERA permit number. Developers are responsible for ensuring that their authorised brokers comply with advertising rules, and RERA may take enforcement action against both the developer and the broker.

Sale purchase agreements and payment structures

The sale purchase agreement (SPA) for off-plan units must comply with RERA's standardised requirements. The SPA must be registered through Oqood and should clearly set out the unit description, purchase price, payment schedule linked to construction milestones, estimated completion date, handover conditions, and the consequences of delay or default by either party.

Payment schedules. Off-plan payment plans in Dubai typically require an initial deposit (often 5% to 20% of the purchase price), followed by milestone-linked instalments during construction, with the balance due on handover. The payment schedule must align with the escrow disbursement framework: the developer cannot require the buyer to pay ahead of the construction stage that the funds will finance. This protects the buyer from over-funding a project that has not reached the corresponding milestone.

Handover and completion. The SPA must state the expected completion date. If the developer fails to complete the project by the contracted date (subject to any permitted extensions for force majeure or government-imposed delays), the buyer may have a right to claim compensation or terminate the agreement. Law No. 19 of 2017 governs the termination process and caps the developer's retention in the event of buyer-initiated cancellation.

Buyer default and contract cancellation

When a buyer defaults on payment, the developer cannot simply cancel the contract and resell the unit without following the statutory procedure.

Law No. 19 of 2017 establishes the framework. If the project is more than 80% complete, the developer may retain the full amount paid by the defaulting buyer, but must apply for a court order to resell the unit. The proceeds of the resale (after deducting costs) must be returned to the buyer to the extent they exceed what the buyer owed. If the project is 60% to 80% complete, the developer may retain up to 40% of the purchase price, with the balance returned to the buyer. If the project is less than 60% complete, the developer may retain up to 25% of the purchase price.

The developer must issue a 30-day written notice to the defaulting buyer before cancellation through the notary public. If the buyer fails to cure the default within the notice period, the developer can proceed with the cancellation, but must follow the DLD's administrative process.

Practical implications for developers. The retention caps in Law No. 19 mean that developers cannot use cancellation as a windfall. If the market has risen since the original sale, the developer benefits from reselling at a higher price, but must account to the buyer for the surplus. If the market has fallen, the developer's retention may not cover the gap between the original price and the resale price, exposing the developer to a shortfall. Structuring SPAs that align with the Law No. 19 framework from the outset avoids disputes and ensures that cancellation proceeds in a predictable manner.

Ongoing compliance obligations

Beyond the initial registration and escrow setup, developers carry ongoing obligations throughout the construction and sales period.

Construction progress reporting. Developers must report construction progress to RERA at defined intervals. Independent engineers verify actual progress against reported progress. If RERA identifies a significant discrepancy between reported completion and actual site conditions, it can suspend sales, freeze the escrow account, or require the developer to submit a remediation plan.

Financial reporting. Developers must submit annual audited financial statements to the Ministry of Economy. Since the introduction of UAE corporate tax in 2023, these same financials form the basis for corporate tax calculations. The interaction between escrow accounting (where revenue is recognised as construction milestones are reached) and corporate tax obligations requires careful treatment in the developer's financial statements. For a practical guide, see our article on transfer pricing documentation for the UAE FTA.

Service charge obligations. For projects that include common areas and shared facilities, the developer must establish an owners' association and implement the Mollak system for service charge management once units are handed over. RERA oversees the transition from developer-managed to association-managed common areas, and developers are required to provide transparent accounting of service charge funds during the transition.

Enforcement and the Special Tribunal

RERA's enforcement toolkit includes administrative fines and penalties, suspension or cancellation of the developer's RERA licence, project freeze orders (preventing further sales, construction, or fund releases), referral to the Dubai Public Prosecution for criminal investigation in cases of fraud or fund diversion, and referral to the Special Tribunal for Liquidation of Cancelled Real Property Projects.

The Special Tribunal, established under Decree No. 33 of 2020, is a specialised judicial body designed to efficiently resolve disputes related to cancelled or stalled off-plan projects. It handles the liquidation of projects that RERA has ordered cancelled, the determination and distribution of buyer claims, and the recovery of assets and funds from non-compliant developers. The Tribunal's existence is a meaningful deterrent. Developers who divert escrow funds or abandon projects face not just regulatory action but a structured judicial process designed to maximise recovery for affected buyers.

Compliance checklist for developers

What developers should do now

Confirm escrow account compliance. Review each active project's escrow account to verify that all buyer payments have been deposited, that disbursements align with verified construction milestones, and that annual audits are current. Any discrepancy should be resolved before RERA identifies it.

Audit advertising materials. Ensure that every piece of marketing (including broker-produced materials, social media content, and third-party listings) carries a valid RERA permit number and accurately reflects approved project specifications. RERA's enforcement of advertising rules has intensified, and the fines are not trivial.

Review SPAs against Law No. 19. Sale purchase agreements drafted before the 2017 cancellation law may contain termination provisions that conflict with the statutory retention caps. SPAs should be reviewed and, where necessary, updated to align with the current framework. Non-compliant termination clauses expose the developer to buyer claims and RDC disputes.

Plan for post-handover obligations. The transition from developer-managed to owners' association-managed common areas is a regulatory requirement, not an option. Developers should budget for the Mollak registration process, the initial service charge fund, and the administrative handover well before the project reaches completion.

Legal advice may be required to structure off-plan sales programmes, review escrow compliance, and ensure that marketing, SPA documentation, and cancellation procedures meet current RERA requirements.

Update note: This article reflects the position as of March 2026. RERA continues to strengthen enforcement of escrow and advertising rules, with stricter monitoring of developer escrow accounts and increased use of fines and licence suspension for non-compliance. The DLD's planned integration of blockchain technology for escrow transaction tracking is expected by 2026 and may introduce additional reporting requirements.

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