Three leading banks have launched escrow accounts following amendments in Dubai’s property law in a bid to increase transparency levels within the emirate’s real estate sector.
HSBC, Dubai Islamic Bank (DIB) and Badr Al-Islami, the Islamic banking division of Mashreq, opened the trust accounts as a result of Law No.8 which now asserts mandatory use of the account when buying an off-plan property in Dubai.
Speaking exclusively to Arabian Business, Mubashar Khokhar, CEO of Badr Al-Islami, said that the account would not only be “stringent” but would also make buying off-plan “more transparent”.
“The real estate and construction sector today represents 22% of the non-oil GDP of the UAE. In my opinion this law will be a big catalyst to the industry and will carry on the momentum of growth for the next few years,” he said. “Escrow will make buying off-plan more transparent. From a developer’s point of view all of the accounts will be monitored, while buyers will have the knowledge that their money will not be diverted for any other purpose.”
Despite the recent surge in bank mergers, Khokhar said he didn’t think it was an unstable time to launch a new account. “The important thing is that this is a government initiative.Any mergers will have absolutely no impact on it at all.
“If anything, I think it will be a good support to the entire industry,” he added.
DIB was the first bank to announce an escrow account. In a statement Saad Abdul Razak, CEO of the DIB Group, said: “Developers will be able to benefit from our expertise in managing their project receivables. The service will offer guidance on completion of Land Department formalities, opening account services as well as balance management services.”
Property developers have already praised the launch of escrow.
Mehdi Amjad, president and CEO of Omniyat Holdings and Omniyat Properties, which is already working with HSBC to set up escrow’s for its developments, added: “I believe that the market will see a new wave of investors in the real estate sector, which has a completely different demographic profile from the buyers who have been investing in the emirate for the last five years.”
Last week it was also announced that Dubai would create a real estate watchdog to oversee the operations of property developers, management companies, financing institutions, brokers and owners associations.
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