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Abu Dhabi's real estate market set new records in 2025, with AED 142 billion in total transactions and AED 8.2 billion in foreign direct investment from more than 100 nationalities, reflecting sustained global confidence in the emirate's property sector.
or investors and developers operating in the off-plan space, however, that growth came with a familiar risk, such as disputes over cancellations, unpredictable refund processes and limited statutory protection when projects stalled. That changed in 2025-26. Law No. (2) of 2025 Amending Certain Provisions of Abu Dhabi Law No. (3) of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi, entered into force in August 2025 (“Law No. 2 of 2025”), and four implementing decisions issued by the Department of Municipalities and Transport (“DMT”) in March 2026 gave it practical effect across escrow management, purchaser default, jointly owned property and compensation on cancellation. What emerged is a regulatory framework that governs off-plan transactions from pre-sale registration through to post-completion governance, replacing contractual uncertainty with statutory clarity.
The Legislative Architecture
The reforms follow a clear legislative hierarchy. At the centre is Law No. (3) of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (the “Real Estate Sector Regulation Law”). Law No. 2 of 2025 introduced significant amendments by expanding the scope of regulated activities, establishing a mandatory Real Estate Development Register, strengthening escrow protections, creating a statutory regime for purchaser default, and replacing the Owners' Union model with a stronger Owners' Committee structure. The implementing decisions issued in 2025-26 then put those amendments into effect:
- Administrative Decision No. (24) of 2025 Regarding the Mechanism and Controls for Disbursing Funds from the Project Escrow Account Prior to the Completion of (20%) of the Project (“Decision 24/2025”) governs early escrow disbursements before the 20% construction threshold;
- Administrative Decision No. (25) of 2025 Regulating Property Ownership Rights and the Management of Jointly Owned Properties and Common Facilities (“Decision 25/2025”) regulates jointly owned property and common areas;
- Administrative Decision No. (26) of 2025 Regarding the Adoption of the Bylaws for Owners' Committees in the Emirate of Abu Dhabi (“Decision 26/2025”) standardises owners' committee bylaws across the emirate; and
- Administrative Decision No. (165) of 2025 Regarding the Determination of Percentages, Procedures, and Timeframes for the Refund of Amounts to Buyers of Units Cancelled and Re-Sold Pursuant to Article (17/3) of Law No. (3) of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi (“Decision 165/2025”) sets compensation levels and refund timelines for off-plan purchaser default.
Together, these measures create a coherent statutory framework covering the full lifecycle of an off-plan project, rather than a set of isolated amendments.
Escrow and Financial Safeguards: The 20% Threshold and Its Exceptions
Every off-plan project must have its own escrow account. Before a developer can sell off- plan units in Abu Dhabi, it must open a project escrow account with an approved bank. All purchaser payments and any project finance loan proceeds must be paid into that account.
The core protection is simple; no money can be withdrawn from the escrow account until the developer has completed at least 20% of the construction works. Law No. 2 of 2025 confirmed this rule and added teeth by also prohibiting escrow funds from being used to pay for the land itself or for broker commissions.
The law accepts that some developers need cash flow before reaching 20% completion. To accommodate this, Article 19(3) of Law No. 2 of 2025 empowers the authorities to issue a framework for early disbursement, and Decision 24/2025 delivers it. A developer can apply to the Abu Dhabi Real Estate Centre (“ADREC”) for permission to draw from the escrow account before the 20% milestone, but only if it provides an unconditional, irrevocable bank guarantee for at least 20% of the total construction cost. The guarantee must be payable immediately on demand by the DMT or ADREC, without involving the developer or the issuing bank.
It must come from a locally licensed bank approved by ADREC, be based on an engineering report dated within 30 days of the application, and remain valid for as long as needed.
The bank guarantee may be released before full completion, but only if both of the following conditions are met:
- the developer has completed at least 60% of the construction works; and
- the funds remaining in the escrow account are sufficient to finance the works needed to achieve full completion.
The Default and Compensation Framework: A Statutory Sliding Scale
Before the 2025 reforms, the consequences were negotiated contract by contract, which led to disputes and uncertainty. The amended law replaces that with a regulated process.
Under Article 17(3) of Law No. 2 of 2025, the developer must first give the purchaser 60 days' notice to pay what is owed. The DMT then facilitates an amicable settlement attempt. Only if that fails can the developer terminate the contract, remove the purchaser's name from the register, and resell the unit after 30 days. The purchaser can still challenge the termination through court or arbitration.
Decision 165/2025 sets a fixed scale based on construction progress:
- Project not yet started (for reasons outside the developer's control): full refund to the purchaser.
- Up to 10% complete: developer keeps 10% of the contract value.
- 10% to 30% complete: developer keeps 15%.
- 30% to 60% complete: developer keeps 25%.
- Over 60% complete: developer keeps 40%.
If the purchaser has paid 60% or more of the price, ADREC can decide the amount on a case-by-case basis instead of using the standard table.
The escrow trustee refunds both parties within 15 working days. Any money the developer collected outside the escrow account in breach of the law must be repaid within 30 days, and that repayment happens before the developer gets anything from the escrow account.
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