The real estate market of Uzbekistan is preparing for a transition to the escrow account system, a mechanism aimed at increasing transaction transparency and protecting the rights of buyers in shared-equity construction projects.
This initiative was introduced under the Presidential Decree No. UP-11 dated 27 January 2025 “On measures for the further development of the housing construction sector and improvement of regulatory mechanisms for shared-equity construction.” The Decree provides for the enhancement of financing mechanisms in construction projects involving shared participation.
Since its adoption, the escrow concept has undergone several rounds of discussion, refinement, and adjustment, taking into account the positions of market participants and regulators. At present, the reform is in the stage of practical implementation, and the introduction of escrow mechanisms is widely regarded as an inevitable step in the development of the sector.
The new model предусматривает that buyers’ funds will be placed in dedicated bank accounts and blocked until the developer fulfills its obligations. Accordingly, access to these funds will only be granted upon confirmation of actual construction progress.
Project Financing Through Banks
Under the escrow system, banks will play a central role in financing construction projects. Buyers’ funds will be released to developers in stages, in the form of tranches linked to specific phases of project implementation. The developer’s profit will only become accessible upon completion of construction and receipt of cadastral registration documents, significantly limiting the possibility of misuse of funds.
Enhanced Construction Control
The escrow mechanism also strengthens control over compliance with approved project documentation. Financing will be provided strictly within the parameters of the approved project, reducing the risk of unauthorized changes such as additional floors or other alterations. In the event that a developer is unable to complete a project, the bank, as a participant in the transaction, will ensure completion using the accumulated funds.
Rights of Buyers
An additional protective element is the expansion of buyers’ rights. In particular, buyers will be able to freely dispose of their rights to property under construction, including transferring such rights, without requiring the developer’s consent.
Impact on the Market and Pricing
The transition to escrow accounts may affect the economics of construction projects. According to market participants, the cost of bank financing remains high, which may increase overall construction costs. At the same time, it is expected that market forces will restrain any sharp increase in prices. The primary impact is likely to be on developers’ profit structures: the transition to a more transparent business model will reduce excess margins and increase tax compliance.
Implementation Timeline
Mandatory use of escrow accounts in shared-equity construction was initially planned for January 1, 2026. Currently, the timeline has been shifted, with July 1, 2026 serving as the new reference point. However, the final date will depend on the adoption of the relevant legislation and may be subject to further adjustments. At the same time, the transition to the escrow system itself is not in question and is considered an inevitable stage in the reform of the real estate market.
International Practice
Escrow-like mechanisms are already widely used in a number of jurisdictions and have proven to be an effective tool for protecting buyers and improving developers’ financial discipline.
In Russia, the escrow system in shared-equity construction was introduced in 2019. Since then, buyers’ funds have been held in banks and are not transferred to developers until project completion. Developers finance construction through bank loans and gain access to buyers’ funds only after commissioning of the building.
In India, the RERA (Real Estate Regulation and Development Act) framework requires developers to deposit up to 70% of buyers’ funds into dedicated accounts. These funds are used strictly for the specific project and are released in stages, reducing the risk of cross-project fund allocation and enhancing transparency.
In Europe and the United States, escrow mechanisms are also widely used, albeit in a slightly different form. In real estate transactions, buyers’ funds are typically held by an independent escrow agent or notary and are released to the seller only upon fulfillment of all transaction conditions.
Overall, international experience demonstrates that escrow mechanisms contribute to a more stable and transparent real estate market, reduce risks for end buyers, and strengthen control over the use of funds in construction projects.
Overall Assessment
The introduction of escrow accounts can be viewed as a systemically important этап in the transformation of Uzbekistan’s real estate market, marking a shift from a trust-based model toward one built on institutional guarantees and financial oversight. In essence, this reform redistributes risk. Whereas previously the primary risks associated with project completion were borne by buyers, under the new system a significant portion of these risks is transferred to the banking sector and developers themselves.
From a practical standpoint, this entails a fundamental change in developers’ business models. Access to buyers’ funds will be restricted, and project financing will depend on the developer’s ability to secure bank financing and demonstrate financial sustainability. At the same time, a natural consolidation of the market is expected. Developers lacking sufficient capitalization or experience in operating under structured financial controls may face challenges in adapting to the new environment. As a result, the market is likely to gradually be очищен of financially unstable or non-compliant participants.