Updates to Real Estate Development laws in Ras Al Khaimah, United Arab Emirates


On 21 August 2023, Decree No.12 of 2023 regulating the Real Estate Development sector in Ras Al Khaimah was issued by the Ruler of Ras Al Khaimah ("Decree 12"). 

The enactment of Decree 12 is significant, as it is symbolic of Ras Al Khaimah's economic ambitions, and confirms that the emirate has no intention of being left behind in the real estate sphere following the announcement of a number of mega-projects. The timing is therefore poignant, with Decree 12 seeking to address a diverse array of key issues, including but not limited to the establishment of a Committee for the Development of Real Estate Projects, outlining the responsibilities of the Ras Al Khaimah Real Estate Regulation Authority (RERA), regulation of projects and developments, the sale of off-plan developments and all new Escrow reforms. The overall sentiment is to instil high levels of consumer confidence by putting into place robust regulations that attract investors far and wide, is a priority. 

Whilst the entirety of Decree 12 will undoubtedly become a major consideration for developers and industry professionals, this article will focus on five key areas.

  1. The Regulation of Developers and Projects – the establishment of a Real Estate Project Development Committee which will be made up of various real estate sector heads, to whom a number of bespoke powers shall be granted, including but not limited to assessing future applications for large-scale projects. There shall also be the establishment of two registers, the first of which is a Real Estate Development Register, whereby any entity wishing to engage in real estate development in the Emirate must be registered and shall be required to prove their financial capacity as a pre-requisite to registration. Following this there will be a Real Estate Development Projects Register, for the registration of new development projects without which, a developer cannot commence implementation of the infrastructure or construction works, or offer a unit for sale until such registration is confirmed. The introduction of these steps will instil a high level of consumer confidence, given that stringent regulation of both developers and their projects.
  2. Financing – the regulatory purview of Decree 12 continues as it has set out a number of provisions in respect of the financial contingencies that developers must have in place and how finances relating to a development project are to be handled. At the outset of a development project, developers will be required to submit a financial plan to RERA, which must ensure that the developer contributes no less than 20% of the cost of the construction and that the overall construction shall not be solely reliable on the sale of off-plan units to fund it. In order to complete construction, developers shall also be permitted to obtain mortgage financing (if required) provided that (a) the project has surpassed 50% of the projected construction works, (b) the mortgage is made against units that remain in the name of the developer, (c) the full amount of any third-party financing is deposited directly into the escrow account, (d) the developer ensures it is expressly noted in the sale contracts of any mortgaged units that these are mortgaged and (e) the mortgaged unit is registered in the name of the purchaser into the Interim Real Estate Register and encumbered by the mortgage in favour of the lender.
  3. Escrow Arrangements – a big focus of Decree 12 is in relation to escrow accounts with a number of detailed provisions governing various aspects of their creation, management and closure. All projects shall require an escrow account in the name of the project, with an escrow account trustee that is registered with RERA. Each project will have a main account, and a sub-account for each unit in the project, the governance of which shall be by reference to an escrow account agreement to be entered into by the developer and the escrow account trustee. The form of the agreement shall be subject to the approval of the Ras Al Khaimah Municipality Department. All receipts in relation to the purchase price shall be deposited into the sub-account for that particular unit, and all withdrawals for payment towards construction costs shall be subject to RERA's approval on receipt of a payment voucher from the developer, which is a mechanism commonly seen across the region to ensure an added level of scrutiny on the use of investor funds. The escrow account trustee shall ensure that 5% of the total construction cost is retained for a period of one year from the date of issue of the construction completion certificate to cost of maintenance in respect of any defects that may arise.
  4. Joint Property – the joint property regime across the GCC is a topic of conversation for many, with differing opinions on how aspects of each regime may be beneficial for different types of project. Decree 12 has made a clear statement with regards to developer's obligations stating that in the case of any development that is classified by RERA as a Major Real Estate Development Project, the developer is responsible for establishing a Master Community Management System prior to any legal act taking place in respect of units within the project, which one can infer would include dispositions. The Master Community Management System shall include the governance of the development and operation of the project, any jointly owned properties and the common facilities therein. The same principal shall apply in respect of sub-developments whereby sub-developers shall be responsible for the implementation of a Building Management System.
  5. Off-plan developments – it was always important that any large scale reform addresses the off-plan market given that this has proven to be such a vital tool for developers in the wider UAE to press ahead with ambitious projects, and a source of great success. As such, to instil a greater level of consumer confidence in the off-plan regime in Ras Al Khaimah, Decree 12 has added a layer of regulation for those developers intending to sell off-plan. From the outset, developers are required to obtain an Off Plan Sale Permit from RERA, and the conditions for obtaining this are as follows: the project shall be registered on the Real Estate Development Projects Register, an escrow account shall be opened for the project, RERA will have had sight of and approved the form of the reservation forms and sale contracts, as well as any other condition that RERA may stipulate. There is also a restriction on advertising or marketing any off-plan project without first having obtained the Off Plan Sale Permit. 

The arrival of Decree 12 serves as a timely indicator of the direction in which the leadership intends to take the Emirate of Ras Al Khaimah. Many will be aware of the pipeline of mega-projects heading to the sandy shores of Ras Al Khaimah, and by putting into place clear and robust legislation, one cannot foresee anything but a surge of interest from international investors. 

Please feel free to reach out should you or your company want to discuss Decree 12 or your development plans in the UAE or wider GCC in any detail.


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