Asma Siddiqui and Ahmed Labib, litigation senior associates at BSA Law in Dubai, put it plainly: a judicial ruling from Dubai’s Court of Cassation has changed the rules for anyone who puts money into an off-plan property.
The court has mandated that any financial institution lending money secured by a mortgage on an under-development project must deposit the loan proceeds into the project’s escrow account. For investors, that distinction matters enormously. Off-plan buyers commit capital to properties that do not yet exist, trusting that borrowed funds will flow into construction rather than disappear into a developer’s personal account or unrelated business expenses. When that trust breaks down, projects stall, and investors lose.
The escrow account, overseen by the Dubai Land Department, acts as a control mechanism. It ensures money moves only toward project development, that spending is monitored, and that both investor capital and project viability stay protected. The court attached a sharp enforcement consequence to the requirement: a lender that skips the escrow deposit forfeits its priority claim over the project if the developer defaults. That lender cannot enforce the mortgage, liquidate the project through public auction, or claim priority rights over the assets.
A recent judgment shows how this plays out in practice. The case involved a mortgage held by a major financial institution over an off-plan project valued at AED 246 million, roughly USD 67 million. Court proceedings established that only AED 93 million of the loan had been deposited into the project’s escrow account. The remaining funds, worth approximately USD 25 million, had been transferred to the developer’s personal account instead.
The court ruled that the mortgage could be enforced only against the AED 93 million properly deposited into escrow. The institution’s claim over the diverted portion was dismissed outright. In one judgment, the court protected the project, shielded its investors, and sent an unambiguous signal about compliance.
Off-plan development has long drawn international buyers to Dubai, attracted by the sector’s scale and the city’s reputation for ambitious construction. The risk, though, has always been structural: investors are betting on a future building, and the misallocation of developer financing is among the most consequential threats they face.
By establishing and enforcing the escrow requirement, the Court of Cassation has added a robust layer of protection that sits above the contractual relationship between developer and lender. Siddiqui and Labib have highlighted how this judicial principle reshapes the financing landscape for off-plan projects, placing the interests of investors and project integrity ahead of a non-compliant lender’s claim to priority.
The question now is how consistently the principle will be applied as Dubai’s off-plan market continues to attract capital from across the world.