Construction & DevelopmentOff-Plan Sale
Synonyms: Off-Plan Purchase، Pre-Construction Sale، Sale Off the Plan، Wafi Sale
Last updated: 2026-09-25
Short Definition
An off-plan sale is the sale of developed land or a real estate unit — an apartment, villa or office — before construction starts or during construction, based on approved designs and drawings, with the price paid in instalments deposited into a project-specific escrow account.
Overview
An off-plan sale is the sale of developed land or a real estate unit — an apartment, villa or office — before construction starts or during construction, based on approved designs and drawings, with the price paid in instalments deposited into a project-specific escrow account. Saudi law also covers off-plan leasing.
In Saudi Arabia it is governed by the Off-Plan Sale and Lease of Real Estate Projects Law, issued by Royal Decree No. M/44 dated 10/3/1445H, published on 5 January 2024 and in force 90 days after publication, which replaced the earlier controls issued by Cabinet Decision No. 536 of 1437H, together with its implementing regulations issued by the board of the Real Estate General Authority (REGA). REGA supervises the sector through the "Wafi" program: registering developers in a dedicated register, licensing each project, and monitoring and inspection. Units may be sold, advertised or exhibited only for a licensed project, and licensing requires a valid building permit, a title deed annotated against disposal, an approved consulting office and chartered accountant, a feasibility study, a contract template with delivery dates specified to the day, and an escrow account with a licensed bank. Before the project licence, a developer may obtain a "marketing licence" for up to 180 days and collect a reservation of no more than 5% of the unit value, deposited in escrow and refunded if the project is not licensed.
The law protects buyers through mechanisms including: the escrow account cannot be attached by the developer's creditors; funds are released only with the signatures of the developer, consulting office and chartered accountant; non-construction expenses may not exceed 20% of the value of units sold; and 5% of construction cost is retained for one year after completion. If delivery is late without a cause beyond the developer's control, the buyer is entitled to compensation of at least the unit's fair rent, and selling without a licence or failing to deposit money in escrow is punishable by up to five years in prison or a fine of up to SAR 10 million. A lower price than for completed units is not guaranteed; it depends on the market and project risk.
⚖️ Legal Basis
The basis is the Off-Plan Sale and Lease of Real Estate Projects Law issued by Royal Decree No. M/44 dated 10/3/1445H and Cabinet Decision No. 196 dated 4/3/1445H: registration and licensing as a condition for selling and advertising (Art. 3), licence requirements (Art. 6), annotation of the title deed (Art. 8), the escrow account and its protection from attachment (Arts. 9–10), three-way signature for disbursements (Art. 11), the 20% cap on non-construction expenses (Art. 12), the 5% one-year retention after completion (Art. 14), compensation for delay (Art. 20), committee fines of up to SAR 1 million (Art. 21), and imprisonment of up to five years or a fine of up to SAR 10 million (Art. 24). The implementing regulations issued by REGA board decision dated 20/10/1445H detail the marketing licence (Arts. 8 and 10) and minimum compensation (Art. 35).
💡 Practical Example
A buyer reserves an off-plan flat in Riyadh for SAR 850,000 during the marketing-licence period and pays a SAR 42,500 (5%) reservation into the escrow account. Sixty days later the project receives its REGA licence, and she signs a contract with a delivery date of 15 March 2028 and a milestone-based payment schedule, all paid into escrow. The developer is six months late without a cause beyond its control, and an accredited valuer sets the flat's fair rent at SAR 4,000 a month, so she is entitled to compensation of at least SAR 24,000. Had the project not been licensed within the marketing-licence period, REGA would have refunded the reservation from the escrow account.
⚠️ Common Mistakes
- ✗Paying an unregistered developer or an unlicensed project, or transferring to the company's account instead of the project escrow account.
- ✗Paying a reservation above 5% of the unit value during the marketing-licence period.
- ✗Accepting a contract without delivery dates specified to the day, or without a clear payment schedule and compensation terms.
- ✗Relying on showroom images and adverts without reviewing the approved drawings and specifications attached to the contract.
- ✗Assuming the off-plan price is always lower than a completed unit, or ignoring delay and market risks.
🌍 International Differences
In Dubai, developers must deposit off-plan payments into project escrow accounts supervised by the real estate regulator, a model close to Wafi. In Egypt, off-plan sales with long instalment plans are widespread and buyers rely on the contract and developer reputation. In Turkey the practice is known as "topraktan satış" and is regulated under consumer-protection law as "pre-paid housing sales", with buyer guarantees in certain projects. The Saudi system is distinctive for its 5% cap on pre-licence reservations, its 20% cap on non-construction expenses, its 5% post-completion retention and a statutory minimum compensation for delay.
FAQs
Which authority regulates off-plan sales in Saudi Arabia?▾
The Real Estate General Authority (REGA) through the "Wafi" program, under the Off-Plan Sale and Lease of Real Estate Projects Law issued by Royal Decree No. M/44 of 1445H and its implementing regulations.
How much may a developer collect as a reservation before the project is licensed?▾
During the marketing-licence period (up to 180 days) the reservation may not exceed 5% of the unit value; it must be deposited in the escrow account and is refunded if the project is not licensed.
Is my money safe if the developer goes bankrupt?▾
Amounts in the escrow account are dedicated to the project and cannot be attached by the developer's creditors, and REGA can take measures to complete the project, bring in a substitute developer or refund the money.
What compensation applies if delivery is late?▾
If the developer is late without a cause beyond its control, compensation is at least the unit's fair rent as set by an accredited valuer, and for developed land at least 2% of the sale value per year.
What is the penalty for selling off-plan without a licence?▾
Imprisonment of up to five years, a fine of up to SAR 10 million, or both; the penalty also covers anyone who collects money without a licence or fails to deposit it in the escrow account.
