Housing and car sales drop after mandatory escrow system introduced in Uzbekistan

Starting 1 April this year, property and vehicle transactions in Uzbekistan must be conducted exclusively through cashless means using bank escrow accounts. Following the implementation of this requirement, trading volumes in both markets shifted into a downward trend.

Shift in the automobile market

A total of 18,960 vehicle transactions were completed via escrow accounts in April, dropping further to 16,584 in May. Data from the Center for Economic Research and Reforms shows that in January, when cash transactions were still unrestricted, 28.6 thousand newly manufactured passenger cars alone were sold.

By February, overall sales across all types of motor vehicles reached 84.2 thousand units. At the end of March, combined sales in the primary and secondary markets exceeded 78 thousand passenger cars. This means the transaction volume in March alone was more than twice the combined total of April and May.

Real estate market also cooling down

The real estate sector experienced a similar slowdown. Central Bank data reveals that 12,797 real estate transactions were recorded in April, which ticked down to 12,439 in May. For comparison, 28.6 thousand housing units were bought and sold in January, and 29.7 thousand in February.

Property sales spiked sharply in March right after the transition to cashless payments was announced, with nearly 43.6 thousand sales contracts signed during that month. This pre-mandate surge represents a volume nearly 3.5 times higher than the figures recorded in May.

Understanding the escrow system

An escrow account is a specialized bank account designed to secure transactions between a buyer and a seller. Since April, payments for real estate and vehicle sales are verified through electronic data exchange between banks and notary offices.

When a citizen purchases a home or a vehicle through this system, the process follows three distinct steps. First, the buyer transfers the funds into the bank escrow account rather than directly to the seller. The money is temporarily held by the bank, meaning the seller cannot access it immediately.

Next, the notary verifies the presence of the funds through the integrated banking system. If all terms of the agreement are met and the documentation is correct, the notary approves the transaction.

Finally, as soon as the deal is authorized, the bank automatically releases and transfers the funds to the seller. For buyers who hold physical cash, the money can be deposited into the escrow account at any bank branch or through cash-in terminals.