Developers urge interest-free access to escrow funds to avoid housing cost hikes

At a July 17 meeting held at the Chamber of Commerce and Industry, Mansur Niyazmukhamedov, Chairman of the Uzbekistan Developers Association, expressed concern over the potential consequences of introducing an escrow system without simultaneous access to cheap financing for developers.

He warned that such a system could stall construction projects, drive up the cost of housing, and disrupt state housing programs.

“We are concerned because, according to the government program approved by the President, we are expected to deliver 135,000 apartments this year. But if the escrow system is only launched in 2026, developers may face a shortage of working capital. This would directly affect the cost of housing,” Niyazmukhamedov stated.

Demand pressures and limited supply could trigger housing price hikes

The association proposed allowing developers to access client funds held in escrow accounts at zero or low interest rates.

“If this issue can be raised to the leadership level, client funds could be issued to developers interest-free. Currently, commercial banks act as oversight bodies – the money is held in escrow accounts, and then project financing is opened. But the interest rate is still unknown. Developers are worried: will it be 7% or 10%?” said Niyazmukhamedov.

Regional developers face greater risk due to liquidity issues

The association also raised concerns about developers in Uzbekistan’s regions, where banks may reject financing due to low liquidity and lack of sufficient collateral.

“While Tashkent’s market is developing more systematically, construction is also active in the regions. But due to liquidity issues, banks may refuse to provide project financing or working capital. A bank’s credit committee might conclude that a company building in the provinces lacks the collateral or potential,” he explained.

According to Niyazmukhamedov, this could lead to construction stoppages, job losses, and failure to fulfill government housing programs.

“Some developers are already saying: ‘We can’t get a loan, so we’ll build with our own money – and if that doesn’t work, we’ll stop construction,’” he added.

Developers call for closer cooperation with banks

Niyazmukhamedov encouraged banks to actively cooperate with developers.

“If banks jointly develop financial models with developers, analyze projects instead of simply issuing loans – then the projects can succeed. It would be helpful if banks received methodological guidance to support developers, improve their financial literacy, help with calculations, and establish real partnerships,” he noted.

Escrow system aims to protect buyers, says chamber head

Davron Vakhobov, head of the Chamber of Commerce and Industry, emphasized that the escrow system was introduced in response to a growing number of conflicts between developers and homebuyers over unfinished projects.

“Conflicts started to emerge between citizens and developers about two years ago. The Prime Minister had to resolve many of these cases on the President’s instructions. Entrepreneurial overreach left some people without homes or money. As such cases increased, the idea of escrow was introduced and supported by the President,” Vakhobov said.

Developers raise concerns over marketing costs and lack of access to funds

Niyazmukhamedov also argued that developers will be burdened with marketing and sales team expenses while lacking access to client funds in escrow.

“As a developer, I already incur expenses to attract clients. I spend money on marketing, set up sales departments, hire staff. These costs are already sunk. The bank, however, bears none of these expenses,” he stressed.

The association proposed adopting a post factum project financing model – releasing funds after completion of construction phases – at zero or minimal interest, similar to practices in some other countries.