Investor Advisory
By Matika Properties  ·  May 2026  ·  Dubai Real Estate

Following this morning's fire at The Residences, Al Habtoor Grand in Dubai Marina, off-plan investors are asking urgent questions. Is my money safe? Can the developer walk away by calling it force majeure? And what compensation am I entitled to if there is a delay? This guide answers all three clearly.

Safe Your capital in escrow is unaffected by a construction fire
Unlikely A construction fire qualifies as force majeure in UAE courts
1% / Qtr Statutory compensation once grace period expires

1. Your Money Is Not on That Building Site

The most important point to understand: a construction fire does not put your invested capital at risk. This is because of Dubai's mandatory escrow system, established under Law No. 8 of 2007. Every dirham you pay goes directly into a dedicated escrow account held by a RERA-approved bank, not into the developer's general operating account. The developer cannot touch those funds freely. Withdrawals are only permitted after an independent engineer verifies specific construction milestones and RERA approves the release.

How Dubai's Escrow System Protects You
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Ring-fenced fundsYour payments are legally isolated to your specific project and cannot be diverted to other developments or operational expenses.
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Milestone-linked releasesDevelopers receive funds only after verified physical progress, not on calendar dates.
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RERA oversightThe Real Estate Regulatory Agency monitors all withdrawals and can freeze accounts if construction stalls or violations are detected.
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5% retention bufferBy law, 5% of the total escrow balance is retained for one full year after project completion as a defect guarantee.
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Creditor protectionIn the event of developer insolvency, escrowed funds cannot be seized by creditors. They remain available for project completion or buyer refunds.
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30% upfront guaranteeBefore selling a single unit, developers must demonstrate 30% construction completion, a bank guarantee, or equivalent cash deposit.

In practical terms, if a fire damages a building under construction, the funds held in escrow are unaffected. The developer bears the physical reconstruction cost, typically covered by their mandatory Construction All-Risk (CAR) insurance, not the buyer.

"A construction fire is a threat to concrete and steel. It is not a threat to the capital sitting in a RERA-regulated escrow account."

2. What Fire Actually Causes: Delays

While your capital is protected, a construction fire can push back the handover date. This is the practical risk investors face: not capital loss, but delayed returns. If you anticipated rental income from a specific date, a delay means foregone yield. So what are your rights when a developer misses the contracted handover date?

The Delay Timeline: Your Rights at Each Stage
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Within the grace period (typically 6 to 12 months)Most SPAs grant developers a buffer beyond the Anticipated Completion Date. During this window the developer is not in breach and compensation cannot yet be claimed. The exact duration is specified in your contract.
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Beyond the grace periodOnce the grace period expires, you may be entitled to 1% of the property value per quarter in statutory compensation. You may also claim direct losses such as temporary accommodation costs or lost rental income.
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If the project is cancelled by RERAFull refund of all escrowed payments is mandated. The Special Tribunal for Cancelled Real Property Projects (Decree No. 33 of 2020) governs orderly liquidation and refund.
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Additional mortgage costsIf you are financing via mortgage and the delay causes additional interest payments, these are claimable as direct losses from the developer.

Compensation is not paid automatically. You must actively pursue it through RERA's free complaint process, available via the Dubai REST app or DLD website. RERA typically reaches a decision within 30 to 90 days. If mediation fails, cases escalate to Dubai Courts or the Rental Disputes Settlement Centre.

3. Can a Developer Call a Fire "Force Majeure"?

This is the critical question, and the one most investors do not know the answer to. When a developer invokes force majeure following a construction fire, they are claiming the event was beyond their control, unforeseeable, and made delivery impossible. Under UAE law, this is a very high legal bar to clear.

Force majeure under the UAE Civil Transactions Law requires all three of the following conditions to be met simultaneously:

The Three Legal Tests for Force Majeure in the UAE
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Beyond all controlThe event must have been entirely outside the party's sphere of influence, not merely difficult to manage.
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UnforeseeableThe event could not reasonably have been anticipated at the time the contract was signed.
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Renders performance impossibleThe event must make completion of the contract genuinely impossible, not merely harder, more expensive, or slower.

Fire is a foreseeable risk. It is among the most documented hazards in the construction industry. The very existence of Construction All-Risk insurance, which developers are required to hold, is proof that fire is a known and anticipated risk. Courts have consistently held that insurable risks cannot simultaneously be unforeseeable.

Developers control their sites. The selection of contractors, enforcement of fire safety protocols, storage of materials, electrical installation standards, and compliance with Dubai Civil Defence regulations are all within the developer's operational domain. A fire resulting from any of these factors is a management failure, not an act of nature.

It does not make completion impossible. A construction fire may damage floors, scaffolding, or cladding, but rarely destroys a reinforced concrete structure to the point of making completion genuinely impossible. Delayed: yes. Impossible: almost never.

"Dubai courts interpret force majeure narrowly. The burden of proof lies entirely with the developer, and a construction fire is one of the weakest arguments they can make."

Event Force Majeure? Reasoning
Construction site fire Unlikely Foreseeable risk; developer controls site safety; completion remains possible
Lightning strike fire Contested Potentially, but developer must still prove adequate safety measures were in place
Government construction ban Likely Externally imposed, unforeseeable, and beyond developer control
Earthquake or natural disaster Likely Unforeseeable act of nature causing genuine impossibility
Contractor insolvency Unlikely Developer is responsible for contractor selection and due diligence

Important: If the Dubai Civil Defence investigation following a fire uncovers any safety violations on site, the developer's force majeure defence collapses entirely. A finding of negligence converts the incident from a potential act of God into a proven act of mismanagement, and the buyer's compensation claim becomes significantly stronger.

4. What Investors Should Do Now

Your Action Checklist
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Read your SPA's force majeure clause before signingThe definition, grace period duration, and penalty structure vary significantly between developers. These clauses determine your rights, not general market assumptions.
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Verify your project on the Dubai REST appConfirm project registration, escrow account number, construction completion percentage, and your payment history are all accurately recorded.
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Keep all documentationPayment receipts, SPA, and all written correspondence with the developer form the evidentiary backbone of any future claim.
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Confirm your developer holds CAR insuranceAsk for confirmation during the purchase process. This is the mechanism that covers physical damage and keeps reconstruction on track.
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Know your complaint pathwayRERA complaints are free, filed via the Dubai REST app, and typically resolved within 30 to 90 days. Beyond that: Rental Disputes Settlement Centre for claims under AED 500,000, and Dubai Courts for larger claims.

The Matika Properties Perspective

Dubai's off-plan regulatory framework is among the strongest in the world for investor protection. A construction fire at a reputable developer's site is alarming to witness, but it is not an investor crisis. Your capital is isolated in escrow. Your physical asset is covered by the developer's construction insurance. And the law provides clear, enforceable remedies if delays extend beyond contracted timelines.

The force majeure argument, the developer's most tempting escape route, faces a high legal bar in UAE courts, and a construction site fire typically does not clear it. Investors who understand this are in a significantly stronger position than those who do not.

As always, the quality of your protection is directly proportional to how carefully you read your SPA before you sign it.

Invest in Dubai With Confidence

Speak with a Matika Properties advisor to review your off-plan investment, SPA terms, and developer track record before you commit. We help investors understand exactly what they are buying and how they are protected.

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This article was prepared by Matika Properties for informational purposes based on data current as of May 2026. UAE property law and RERA regulations are subject to change. This is not legal or financial advice. Always consult a qualified UAE property lawyer before taking action related to your specific circumstances.