According to the Central Bank's first-quarter real estate market review, the introduction of escrow accounts in shared construction may initially increase developers' financing costs and lead to a rise in housing prices in Uzbekistan. However, there are no clear assessments yet regarding the impact of this mechanism on prices.

Since April 1, settlements for notarized transactions of real estate and cars in Uzbekistan have been conducted through escrow accounts. The buyer's money is held in a special bank account and transferred to the seller only after the notarization is completed.

The Central Bank estimates that this mechanism aims to reduce financial and legal risks in large transactions, increase transparency of settlements, and decrease the likelihood of disputes after funds are transferred.

In the future, escrow accounts are also planned for use in shared construction. In this case, buyers' funds will be kept in the bank until construction is completed, while the construction itself will be financed through bank loans and the developer's own funds.

This approach should reduce the risk of unfinished projects, protect shareholders' money, and make financing of construction projects more transparent, the review notes.

However, the transition to the new model may increase costs for construction companies. Developers will no longer be able to directly use buyers' prepayments as a cheap source of financing and will become more dependent on bank loans and their own capital.

The introduction of this mechanism may raise concerns about possible increases in housing prices and construction costs. At the same time, the Central Bank emphasizes that studies have not yet formed a unified assessment of the impact of escrow accounts on housing prices.

Long-term price dynamics depend not only on the settlement system but also on mortgage terms, household incomes, urbanization rates, land supply, and overall economic activity.

As market participants adapt to the new conditions, the escrow system could increase trust and financial discipline in the construction industry and strengthen market stability in the long term, the Central Bank believes.

"While there may be an increase in construction costs and prices at the initial stage, market participants will subsequently adapt to the new financing conditions, and the system will help strengthen trust and financial discipline in the construction market and enhance market stability in the long run," the regulator stated.

Mandatory escrow accounts in shared construction have been in effect in Russia since 2019, in Dubai since 2007. In China, homebuyers' funds have been held in special accounts since the 2000s, while Turkey uses bank control mechanisms similar to escrow.

In the first quarter, the number of real estate transactions increased by 48.4% ahead of the transition to escrow accounts. Mortgage volume grew by 29%, and construction by 15.5%. Apartments in new buildings became 8.1% more expensive in dollar terms, while on the secondary market they rose by 9.4% (in soums, growth rates were lower). Land prices in Tashkent decreased.

In September 2024, the president tasked with developing a system to guarantee the protection of citizens' funds when purchasing housing.

According to a presidential decree, from July 1, 2025, to December 31, 2025, it was planned to attract shareholders' funds both through escrow accounts and under the existing shared participation mechanism based on direct attraction.

However, from January 1, 2026, the escrow account system was supposed to become the only method of financing construction, but due to the lack of a law, it was not introduced mandatorily.

President Shavkat Mirziyoyev on June 9 reviewed a draft law on shared construction aimed at protecting buyers' funds and increasing transparency of construction processes. Last year alone, about 3,000 citizens suffered damages amounting to 668 billion soums.

Escrow accounts will become one of the main mechanisms.

"The money paid by citizens will be strictly spent only on construction, and the bank will oversee this. If problems arise during construction, they will fall under the bank's responsibility, and a mechanism will be created where the citizen will not lose out in any case," said Akbar Tashkulov.

The escrow system is based on four rules:

In addition, the new mechanism plans to create a unified register of developers and introduce a system for recording the legality of each object through a declaration.

Source: www.gazeta.uz