How does escrow release actually work on a UAE development, and where does it fall behind the build?

Of the units forecast for delivery in Dubai in the first quarter of 2026, 42.3% actually completed. Across 2022 to 2024, 97,000 of 174,000 projected units arrived — 56%. Between two-fifths and just over half of forecast completions turn up on time, and that has held across a market at both ends of a cycle.

There are many reasons for that, but one of them is structural and almost nobody writes it down. Escrow release runs on an administrative clock. The construction contract runs on a contractual clock. The two are unrelated, and the developer funds the difference.

What is a real estate escrow account, and what does it actually control?

A project escrow account holds off-plan purchaser payments and project finance proceeds, ring-fenced from the developer's own creditors and dedicated exclusively to that project's construction. It controls when a developer may reach buyer money, and it makes that access conditional on certified construction progress rather than on how well the launch went.

The Dubai regime sits in Law No. 8 of 2007. Article 9 dedicates the account exclusively to construction of that project and provides that no attachment may be imposed on the deposits for the benefit of the developer's creditors. Article 13 requires mortgage proceeds to be deposited into the same account. Article 16 carries imprisonment and fines of not less than AED 100,000.

All of that is written as buyer protection, and it works as buyer protection. This article reads it the other way round — as the cash-flow constraint a development programme has to be built around, because that is the reading a developer needs and the one nobody publishes.

When can a developer actually draw money from escrow?

Not at the start. Registration requires a 30% guarantee before off-plan sales begin. Escrow activation is then sized to a bank guarantee or to the developer's own deposits until 20% completion, and only after that to a percentage of certified construction works. The first fifth of the build is self-funded regardless of sales.

DLD's project registration terms are explicit: submission of a 30% guarantee, satisfied by completion of 30% of construction, a bank guarantee covering 30% of construction, or a cash deposit equivalent to 30%. Registration fee AED 150,000.

Escrow activation is a separate gate with four routes, and the service terms set them out plainly. The account activates against the value of the bank guarantee for construction works until 20% completion. It activates against amounts the developer has deposited from its own account. It activates against amounts deposited by the mortgaging bank. And after 20% completion, it activates against a percentage of the construction works, on a recent DLD technical report.

Read that properly. Below 20% completion, the developer draws against its own guarantee, its own equity, or the lender's money. However strong the launch, the first fifth is funded by the developer.

Two corrections worth making, because both are in wide circulation. The escrow law is Law No. 8 of 2007; a different 2007 law number appears in professional commentary and carries no escrow deposit requirement. And the 20% figure quoted everywhere as the registration threshold traces to a 2018 position — DLD's current registration terms say 30%. Both numbers are live. They gate different things.

Who calculates the completion percentage, and how?

Four parties certify progress for four purposes, and the method by which the governing percentage is calculated is not published. DLD issues the technical report. RERA sets the calculation standards. A RERA-approved consultant certifies for termination purposes. The trustee bank's own engineer inspects the site before funds are released.

That percentage governs more than the drawdown. It gates escrow activation, the drawdown proportion, profit withdrawal, and — through the interim register law as amended — how much a developer may retain when a buyer defaults: up to 25% of unit value below 60% completion, up to 40% between 60% and 80%, and all payments received above 80%.

For a number carrying that much weight, the derivation is not in the public domain. The official Explanatory Notes to the 2017 amendment record that DLD issues the completion-percentage document calculated in accordance with the relevant standards and rules adopted by RERA. Those standards and rules are not published. DLD does list a 2022 guide to calculating developers' completion rates on its regulations register; the file behind it is a 27-page scanned survey manual with no machine-readable text. We looked, and that is what is there.

The practical consequence is that a developer cannot govern against a number whose derivation is not public. The governance has to be built into its own contracts and its own records instead.

There is a further point that most developers have never had put to them. RERA requires every approved escrow trustee to maintain a dedicated escrow unit and either a project-monitoring capability or a contracted consultancy for it, and DLD confirms the practice: the account trustee's engineer visits the site and checks that the construction phase is complete. So there is already a monitor on the project. But the international standard for that role — the RICS professional standard for the Lender's Independent Monitoring Surveyor, reissued in September 2025 — is explicit about its boundaries. The monitor should ensure that they are not (nor potentially seen to be) certifying the value of the works to be paid to the borrower's contractor(s), and owes no duty of care to others, nor can reliance be placed by others.

There is a monitor on the site. It works for the lender. It expressly declines to certify what the contractor is owed. The developer has nobody performing that function on its own side of the table.

Why does escrow release fall behind the construction contract's payment dates?

Because the two run on unrelated clocks. Under the FIDIC forms used across this market the engineer certifies within 28 days and payment falls due 56 days from the statement. Escrow release depends on a technical report with a three-month life, an activation request, and a trustee engineer's site verification with no published turnaround.

The contractor's entitlement crystallises on a fixed contractual date. The money to satisfy it moves through a sequence containing two unpublished steps and a certificate that expires. No regulator, bank, consultancy or trade body publishes the resulting delta, so we will not assert a number for it — but every developer can measure its own, and most have never tried.

It matters more now than it did five years ago. The Dubai construction cost index rose 5.2% year on year in the first quarter of 2026; block works are up around 25%; mechanical and air-conditioning works run more than 40% above 2021 levels. The margin benchmark for mid-to-large UAE projects is 8% to 12%, while one listed Dubai contractor group reported a 6.8% gross margin in its building division in the first quarter of 2026. Roughly 40% of UAE business-to-business invoices are paid late, with construction among the most affected sectors. At those margins a contractor cannot absorb a certification-to-cash lag. A slipped escrow release is now a programme risk, not a treasury inconvenience.

Which puts weight on the draw pack itself — the payment application, the progress certificate, the supporting invoices and the contract documents, assembled against a technical report with a three-month life and verified on site. Running that on a fixed monthly cycle with the document trail intact is document control and cost reporting, and it is why we run it on a controlled platform rather than in email and spreadsheets. In our engagements it sits in Zepth Core, which handles document control, quality and site operations from design through handover. Disclosure: PRASOON's founder is also the founder of Zepth; the platform figures cited here are Zepth's own — more than 100 projects delivered and over 50 million square feet under management.

What happens if the escrow runs short of the cost to complete?

In Dubai the regulator can stop the developer taking profit out, but nothing compels an equity injection. The cost-to-complete test sits on profit withdrawal, not on construction drawdown. Abu Dhabi imposes a top-up obligation. Dubai does not.

DLD's profit withdrawal terms require that the available balance in the main escrow covers remaining construction costs. Note precisely what that gates: money leaving the project as profit, not money entering the project as funding. The regulator's levers on a shortfall are refusal of profit withdrawal, refusal of activation against a red-flagged technical report, fines, and ultimately cancellation. None of them puts money in.

The distinction that matters here is one lenders make routinely and developers often do not. Published lending guidance records that most lenders calculate advances on a cost-to-complete basis rather than cost-to-date. Cost-to-date says you have spent 40%, so take 40%. Cost-to-complete asks what remains to be spent and whether the remaining facility plus remaining collections covers it. Dubai's profit gate is a cost-to-complete test. Its activation gate is a progress test. The developer sits between two tests running on different logics, and only one of them is asking the question that predicts failure.

One more cash point, because it is consistently mis-stated. The statutory 5% escrow retention sits on top of the construction contract's own retention and defects security, against substantially the same defects — two instruments, two triggers, one exposure. And the statutory release trigger is not what most people say it is. Article 14 releases the retained amount one year from the registration of units in the names of purchasers, not one year from completion. Where unit registration lags handover, that is real money held for real additional time.

How do Dubai and Abu Dhabi differ, and does it matter?

Materially, and on exactly the things a developer relies on. Abu Dhabi reformed comprehensively through 2025; Dubai's escrow law stands unamended since 2007. The differences bite on the retention base, when the retention clock starts, whether there is an audit as of right, and what happens to the money if the project fails.

The last row deserves reading twice. Under Abu Dhabi's published waterfall, contractors and suppliers rank third — behind the trustee's fees, behind financiers and buyers, ahead only of the developer. If a project fails, the contractor you were slow to pay is third in the queue for the money you were slow to release.

Dubai publishes no waterfall at all. Distribution on a cancelled project runs through the Special Tribunal, whose awards are final and not subject to ordinary appeal. A developer operating in both emirates is operating under two different sets of protections, and that is not a footnote.

Worth noting what has and has not changed recently. Dubai's most recent escrow instrument, a January 2026 circular from RERA's control department, requires that no off-plan project be marketed unless it is verified as registered, that it hold an approved escrow account, and that a permit be obtained before any promotional activity. It regulates who may market a project. It says nothing about how the money moves once they have.

What should a developer run on every draw cycle?

A single register, reconciled before each application, recording what each gate requires, who certifies it, when that certificate expires, and which contractual payment date it has to beat. Everything in this regime is a document with an owner and a deadline. Most escrow delay is a document that was not ready.

Six disciplines follow from it:

1. Reconcile the technical report's expiry against the next two draw cycles, not the current one.
2. Model the first 20% as self-funded, whatever the launch achieved.
3. Instruct your own progress certification. The trustee's engineer owes its duty to the bank and declines to certify contractor value.
4. Run a cost-to-complete forecast every cycle, not a cost-to-date report.
5. Track the two retentions separately. They have different triggers and different release dates.
6. Sequence the draw pack backwards from the contractual payment date, not forwards from the site meeting.