Selling Off-Plan in Saudi Arabia as a Developer: Escrow and the Route to Sell

How a developer gets from a permitted project to legally selling units before completion, what escrow does to your cash flow, and the gates along the way.

Selling units before a building is finished is regulated in Saudi Arabia through the off-plan sales framework known as Wafi, administered through REGA, and it centres on a project escrow account into which buyer payments go and out of which construction is funded against progress. For a developer this changes the cash flow model: buyer money is available to build with, but only as the building rises. Requirements and procedures are set by the authority and are updated, so confirm the current position with REGA before you plan around any step.

Before stage one

Off-plan selling assumes a project that is defined, permitted and costed, because you are asking buyers to pay for something they cannot inspect. Before approaching the framework at all, make sure the project itself would survive scrutiny from a buyer, a valuer and a regulator.

• Title to the land registered in the name of the entity that will sell, with no unresolved encumbrances.
• A complete design, a building permit obtained through the municipal process, and a costed construction contract.
• An entity with the licensed activities the project needs, confirmed against its commercial registration.
• A funding plan that works even if sales are slower than hoped, so escrow timing does not stop the build.
• A licensed adviser engaged on the contract documentation buyers will be asked to sign.

Stage 1: Confirm the project is eligible and the entity is right

Establish which entity will sell, that it holds the land and the necessary licensed activities, and that the project as designed and permitted is the project you intend to sell. Eligibility conditions for off-plan sale are set by the authority and cover the project, the developer and the documentation, so check them at source rather than working from a summary. Fix any mismatch between the permitted scheme and your sales material before it is printed.

• Deliverable: An eligibility note listing each requirement and how your project meets it.
• Owner: Developer with a licensed adviser.
• Approval gate: No marketing of units until eligibility is confirmed and any approval obtained.

Stage 2: Prepare the project documentation pack

Assemble the drawings, specifications, unit schedule with areas, the construction contract, the programme, the cost plan and the technical reports the framework requires. This pack is also what a buyer adviser will read, so inconsistencies between the unit schedule, the drawings and the sales brochure become objections at the worst moment. Areas in particular must be defined on a stated basis and used consistently everywhere.

• Deliverable: One consistent documentation set, with a single unit and area schedule used by everyone.
• Owner: Design team and development manager.
• Approval gate: Sales material cannot be issued until it matches the permitted drawings and the unit schedule.

Stage 3: Set up the project escrow arrangements

Off-plan sales run through a project account, with buyer payments deposited and withdrawals tied to verified construction progress, typically certified by an engineer appointed for the purpose. Model your cash flow on that basis: your own equity and any facility must cover the gap between spending and the release of buyer funds. Confirm the operating rules, the certification arrangements and the reporting with the bank and the authority.

• Deliverable: An escrow account opened with the operating and release rules written down.
• Owner: Developer, bank and appointed certifier.
• Approval gate: No buyer payment accepted outside the escrow arrangement.

Stage 4: Write the buyer contract and the disclosures

The sale contract has to state what is being sold, the area basis, the specification, the payment schedule against milestones, the expected completion, what happens on delay, the warranty position after handover and how the buyer is protected if the project does not proceed. Vague specifications invite disputes at handover, and generous completion promises create liabilities you cannot manage. Have the documents reviewed by a licensed Saudi adviser.

• Deliverable: An approved sale contract and disclosure pack, consistent with the project documentation.
• Owner: Licensed adviser with the developer.
• Approval gate: One contract template only, with deviations requiring written approval.

Stage 5: Price the units and publish one price list

Set prices per unit on a defined basis, with a floor price below which nobody may sell, and a discount policy that is written rather than negotiated case by case. Off-plan buyers compare notes, and inconsistent pricing damages later sales more than it gains early ones. Decide what payment plan you offer and what it costs you in delayed cash.

• Deliverable: A signed price list with floor prices and a written discount policy.
• Owner: Developer.
• Approval gate: Any sale below the floor price requires the owner written approval.

Stage 6: Appoint and brief the sales channel

Decide whether you sell through your own team, an exclusive agency or a panel of brokers, and brief whoever sells with the approved material only. Brokers must be properly licensed to market real estate, and their statements become your problem if a buyer relies on them. Give them a written question and answer sheet so nobody invents an answer about specification, completion or payment terms.

• Deliverable: A signed agency agreement plus an approved sales briefing pack.
• Owner: Developer with the sales agent.
• Approval gate: No agent markets the project before the briefing pack is issued and acknowledged.

Stage 7: Build, certify and draw against progress

During construction, progress is certified and funds are released from escrow accordingly, while your reporting obligations continue. Keep the certification rhythm aligned with your contractor payment schedule, otherwise you fund a timing gap every month. Report honestly on delay: buyers discover slipping programmes and an unmanaged rumour costs more sales than the delay itself.

• Deliverable: A monthly certification and release record reconciled with contractor payments.
• Owner: Appointed certifier, development manager and bank.
• Approval gate: Contractor payments never released ahead of certified progress.

Stage 8: Complete, hand over and close the account

On completion, obtain the completion and occupancy approvals, hand over units against a documented process, register transfers, and close the escrow arrangement in accordance with its rules. Defects, warranties and the handover of operating documents belong to this stage, and getting it organised protects your reputation for the next project.

• Deliverable: Registered transfers, handover records per unit, and a closed project account.
• Owner: Developer with the adviser and the bank.
• Approval gate: Final release only when the framework requirements for completion are satisfied.

Handovers between stages

The eligibility note determines the documentation pack, the documentation pack drives the contract, the contract drives the payment milestones, and the milestones drive the escrow release pattern that your cash flow depends on. If the sales team gets ahead of this chain and starts taking reservations, everything behind it has to be reverse engineered under pressure.

How you know it is finished

You are running an off-plan sale properly when every buyer payment has entered the project account, every release is supported by certified progress, every unit sold matches the approved price list and contract, and the completion and registration steps are on a checklist rather than in somebody memory. Confirm each procedural requirement with REGA, because the framework is administered by the authority and its details change.

Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.