Muscat, JAN 19 - The Oman Real Estate Association (ORA), the umbrella grouping of leading property developers, investors and brokers in the Sultanate, has broadly welcomed the new Escrow Law that seeks to safeguard funds paid by investors in off-plan properties.
Royal Decree 30/2108 promulgating the Law on Escrow Accounts for Real Estate Development Projects was issued last November — setting in place legislation to protect funds received by developers in off-plan properties. Units offered for sale in real estate projects before they are constructed are known as off-plan properties.
According to Hassan Mohammed Juma al Lawati, Chairman of the Oman Real Estate Association, the new legislation effectively meets a long-standing plea by property developers for escrow guidelines designed to safeguard the interests of investors purchasing property in off-plan projects.
Speaking at an industry forum held in the city recently, Al Lawati said the new law will bolster investor confidence in Oman’s real estate sector. “We see a lot of projects coming up off-plan, (but until the new law came to pass) there was no escrow account to protect the buyers,” he noted.
Explaining the rationale behind escrow accounts, ORA’s Chairman stated: “When you develop a real estate project, all the receivables, such as the advance payments and instalments, should be deposited in an escrow account, thereby ensuring that the funds can only be utilized for the project in question, and not diverted for some other purpose.”
The new escrow law, Al Lawati said, was also a testament to the success of ongoing, constructive engagement between real estate industry stakeholders and the government. Several long-standing initiatives championed by the Association have been embraced and implemented by the government as part of this engagement, he said. Notable is the Real Estate Development Law, which enshrines a number of provisions long proposed by the body. Likewise, Integrated Housing Developments — the first of which is coming up at Barka — were also mooted by ORA as an antidote to the growing waiting lists of eligible Omanis registering for their land entitlements.
According to legal experts, the new Escrow Law will cover a broad range of properties, including residential, commercial, industrial and hospitality related. The Law is set to come into force in May 2019, six months after it was issued last November. The Executive Regulations will be issued by the Ministry of Housing in coordination with the Ministry of Tourism and Central Bank of Oman.
To ensure that the developer does not divert funds from an escrow account to an unrelated project, the local bank — in its capacity as the escrow agent — will have to approve every withdrawal from the account.
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