Out of the box

Escrow account.. Escrow

Ismail Al Hammadi

October 19, 2021

A few days ago, I read an article by a colleague of mine in the profession, about changing the percentage of the value of the amount required to open an escrow account for a real estate project, and its role in an expected rise in real estate prices in the coming periods.

This subject made me look again at the Real Estate Regulatory Agency’s decision to require the developer to put 50% of the project value into the escrow account, instead of 20%, as it was previously, and to deduce the motive factors for that, and the results that the sector reaped from this decision, and its role in reducing The volume of launching new projects in the market, in addition to extending the time period between one project to another.

I agree with this opinion, but if we look from another angle, from my point of view, this decision indirectly contributed to a wide “sifting” process for more than 700 real estate developers registered in the market, as if the decision says in another way: “Survival of the strongest and confident developer in his abilities.” And its potential is more.” It also increased the level of competition among active developers, and encouraged them to redouble their efforts to achieve the highest sales rates and attract buyers.

The most important aspect of this step is to strengthen the protection of buyers’ rights, because the escrow account is considered as the financial solvency of the project, and as the mechanism by which the buyer’s right is preserved to retrieve the amounts deposited for the purchase of a real estate unit in the event that the project is canceled, the completion stages stop, or any problems Others obstruct the way of completion, and prevent the buyer from receiving his unit, and to ensure the guarantee of this right, the buyer is always advised to make sure that there is an escrow account for the project before purchasing the property.

The Real Estate Regulatory Agency stresses that buyers must deposit all purchase payments in this account, and it is prohibited to deposit them directly into the developer’s account or the broker’s account, for example, or any other account.. From another perspective, the investor or the real estate unit purchaser is considered a partner in the real estate project completion through the escrow account, as The payments deposited by the buyer in this account, contribute to the availability of liquidity to continue the construction process, in addition to the 50% deposited by the developer.

On the other hand, the currently approved procedure for opening an escrow account helps the developer keep pace with supply and demand in the market, and set a budget for it. more organized than it was before.

Therefore, from my point of view, raising the percentage of the value deposited in the escrow account and the recommended payments to be deposited in it, is a guarantee of the investor's rights and the market's rights in balancing the equation of supply and demand, and testing the strongest developer to stay in the market.

“The investor or the buyer is considered a partner in the real estate project through the escrow account.”

To read the previous articles of the writer please click on its name.

Keywords: escrow account, escrowismail al hammadioctober, percentage, developer, value, article, account, real estate project, decision, developers, point of view, role, amount, profession, real estate prices