Abu Dhabi’s real estate sector continues to evolve through a series of regulatory measures designed to balance developer flexibility with purchaser protection. A central feature of this framework is the escrow account regime established under Law No. (3) of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (the “Real Estate Law“), which requires developers to deposit off-plan sale proceeds into dedicated project guarantee accounts and restricts access to those funds until prescribed construction milestones are met. Under the existing escrow regime developers are generally restricted from accessing project funds until 20% construction completion is achieved. Administrative Resolution No. (24) of 2025 (the “Resolution“), issued by the Abu Dhabi Department of Municipalities and Transport (“DMT“), introduces a mechanism allowing earlier access in escrow funds, subject to the provision of an unconditional bank guarantee of equivalent value. This Resolution allows eligible developers to access escrow funds earlier than previously permitted, subject to strict conditions designed to protect purchasers.
Developer Eligibility
To qualify, a developer must have been registered in the Emirate for at least four years, hold a valid licence at the time of application, and have completed and delivered at least three real estate development projects in Abu Dhabi on or before the scheduled timeline. Additionally, the applicant must not have been subject to any violations or administrative penalties under the Real Estate Law within the preceding 12 months. The Head of DMT retains discretion to exempt any developer from one or more of these conditions.
Application Requirements
The developer must submit an application to ADREC accompanied by details of the completion status of its prior projects, the payment plan contained in sales contracts, a reconciliation statement showing that amounts in the escrow account match payments made under registered off-plan sale contracts, and a technical report from a centre-accredited engineering office estimating the cost of construction works.
Bank Guarantee Conditions
The bank guarantee must be issued by a licensed local bank approved by ADREC, with a value of no less than 20% of the total expected cost of construction and construction works as determined by an approved engineering report issued no more than 30 days before the application date. Critically, the guarantee must be unconditional, immediately payable in whole or in part on first demand by DMT or ADREC, irrevocable, and free from any restrictions, conditions, deductions, fees, or taxes. Neither the developer, the guarantor bank, nor any third party may refuse, restrict, or delay payment of the guaranteed amount for any reason.
Adjustments and Safeguards
Where subsequent engineering reports reveal that the expected cost materially exceeds the initial estimate, the developer must provide an additional bank guarantee to cover the difference. The same obligation arises in the event of partial liquidation or any reduction in the guarantee’s value. The original of the bank guarantee must remain with the escrow account trustee for the duration of its application, and the trustee is prohibited from returning it to the developer without written authorisation from ADREC.
Return of the Bank Guarantee
ADREC may approve the return of the bank guarantee after 100% project completion and issuance of a completion certificate, or earlier where at least 60% of construction works have been completed and the escrow account balance is sufficient to cover the remaining construction costs to reach full completion.
Implications for Stakeholders
For developers, this resolution provides a meaningful mechanism to improve project cash flow during the early stages of construction, which can be instrumental in accelerating project timelines. For financial institutions, the resolution creates a new category of demand for bank guarantee products tailored to real estate development, while imposing strict requirements regarding the unconditional and irrevocable nature of such instruments. For buyers and investors who have paid into escrow accounts, the bank guarantee mechanism serves as an additional layer of protection, ensuring that funds released to developers before the 20% milestone are backed by a guarantee of equivalent value.
In practical terms, the Resolution introduces a more flexible funding model for off-plan developments, particularly benefiting established developers with access to bank guarantee facilities. As Abu Dhabi’s real estate regulatory landscape continues to mature, this Resolution signals a willingness on the part of the authorities to adopt more nuanced, risk-based approaches to escrow fund management while maintaining robust oversight of the development process.
Key Contacts
David Bowman, Of Counsel, d.bowman@tamimi.com
Kirsty de Sousa, Senior Knowledge Lawyer, K.Sousa@tamimi.com