EXCLUSIVE: Two billion dirhams spent from Dubai escrow accounts – RERA boss Bin Ghalaita

“I have about five billion in escrow accounts” says regulator

(ITP Images)

(ITP Images)

Two billion dirhams ($545m) have gone from the escrow or trust accounts into which investors in Dubai’s real estate sector place their deposits, CEO of RERA, Dubai’s real estate watchdog, Marwan bin Ghalaita has said.

Speaking exclusively to Arabian Business, bin Ghalaita said: “When we started the escrow account [at the end of 2007], in the first few months I used to have AED7 billion in my escrow accounts. AED7 billion. Imagine how much I will have if it had started from the beginning [of the real estate boom]. I will be the wealthiest agency in the world, I think.”

He said that figure had now diminished to AED5 billion: “I have about five billion in the escrow accounts. Five billion…. Yes. And how this two billion has gone? For construction.”

Bin Ghalaita said that in Dubai until recently, developers had been able to tap escrow account funds to pay for costs related to construction.

“So you [the developer] open the escrow account, and you start launching the project. Once you launch the project, you take five percent as an initial deposit. All these five percents will go to the escrow account. So all peoples’ money will go to the escrow account. In the beginning, the rule was that it is ok to pay from this five percent [for] the remaining land payment. And to pay up to five percent for management, and marketing, and real estate agent and whatever.

“But since the crisis happened, we stopped all the payment except for contractor. So that is why you will see in Dubai a lot of developments are moving, because of the trust account money. But [now] we don’t give a developer [escrow account money for] a land payment, we don’t give him [escrow account money for] advertisement, we don’t give him [escrow account money] for agents, or admin fees, or marketing. Nothing. Only [for] contractors’ payments.”

An escrow account is generally accepted to be an account whereby an independent trusted third party receives and disburses money between two parties upon completion of a contractually agreed upon task. They were made mandatory for investors and developers in Dubai real estate at the end of 2007. 

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Posted by: Lilouti

The unit was Jermiah village, in 06 when monies paid and contracted. Now 2010 I have no refund. Minc property had sold and used the money for my apt. They changed the name to Apex, changed the price and size.,,,Since minc has no money how come they are still building? who is paying the contractors?.. Can rera and bin Ghalaita demand that minc return my money now?

I did get your emails, thanx.

Posted by: Worried Investor 2007

To: CEO of RERA, Marwan bin Ghalaita
Dear Sir,
When are the 450-500 investors in High Rise Properties going to get refunds for the cancelled off-plan developments they invested in over three years ago ? We move towards 2011 - and the fourth year of waiting to hear from the developer and the authorities - we grow increasingly anxious as to what is going on and when we are going to get our refunds. As nothing appears to have been developed, and the company appear to have folded or been closed down by the authorities, when are we going to receive refunds ?
Sure there are a lot of cases and issues to be resolved, but after more than three years you would expect that the investors would be told SOMETHING by now. Please look into this case and try and speed things up please !

Posted by: Sonja

I think we all cannot found the clause in our contracts:

The developer ( seller) is eligable to use from the buyers installments, deposit on escrow accounts for the development:

...five percent [for] the remaining land payment. And to pay up to five percent for management, and marketing, and real estate agent and whatever.

Definition: Whatever.... is meaning for the personal .......??????
Definaton: Marketing ????? for the buyer ?????
Definition: Why does a buyer need a real estate agent ?????
Definition: The buyer has to pay for the management of the Developer ????????

Posted by: No justice

I was advised that my money would be safe because of escrow prior to purchase. This was also confirmed in writing to me in July 2007. Escrow was officially declared law 28 June 2007 and developers all had to comply starting from day one and during that six months all monies should have been deposited into escrow. It doesn't mean it was after the 6 month period as is being repeatedly suggested in this article.

I was also informed by the agent that my monies would also be used only for construction. Instead it was used to purchase the land, pay advertising, admin fees etc- There was a transition period meaning they had to comply within that six month period and not after 2007 as is suggested

Posted by: James L

I've paid 20% to Al Masah International towards a project in Downtown Jebel Ali. The money is in Escrow. At least the fact that fact that there is no construction on the project site should entitle us to our money that lies under the rightful supervision of Marwan bin Ghalaita, CEO - RERA.
Will Mr. Marwan bin Ghalaita tell us, when he will return our money back, some of that AED5 billion belongs to me, and some belong to my other brothers and sisters who are going through very tough times right now.

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