MaBV Lessons: What Germany's Developer Wave Showed

What did Germany's developer insolvency wave test in the MaBV?#

The wave tested one instrument above all others, and it showed what a payment-sequencing rule can and cannot do. The Makler- und Bauträgerverordnung (MaBV) is the German ordinance that governs when a property developer may accept money from a buyer before the building exists. Its § 3 sets four gates and a payment schedule. Its purpose is narrow. It decides how much the buyer has paid at each point of the build. It does not decide whether the developer finishes.

A German principal buying abroad carries this instrument in the head, whether or not the ordinance is named. Since 2023 the German market has produced a large number of developer failures. The principal has seen, in domestic terms, what happens to a buyer when a sponsor stops. The ordinance gave German buyers a measurable floor. Few off-plan markets offer a comparable floor in a single document, and the comparison is the useful part.

This article uses the MaBV as a ruler, not as a boast. Germany's rule is not a guarantee of outcomes, and the wave is the evidence. The question for the allocator is which of the ordinance's tests a foreign regime passes, which it fails, and which it never poses. The answer differs by market and by date. Where a regime is still moving, the reading is dated.

The evidence base has limits, and they come first. Insolvency counts are measured. Buyer losses are not. We found no published dataset that counts how many German buyers lost money when a developer failed, or how much. Everything below on the protective effect of the MaBV is therefore reasoned from the text of the rules and from notarial commentary, and is graded directional.

How many German property developers failed after 2023, and how reliable is the count?#

The measured count is below its early-2024 level on the developer side, and the damage has moved downstream. Falkensteg, a restructuring advisory firm, counted 554 insolvencies in the German real estate sector in Q1 2026, across all turnover classes. That is 13.5 percent above the 488 of Q4 2025. In Q1 2024 the same series stood at 630, reported by the property managers' association VDIV on 6 May 2024 as the highest level since early 2018.

The composition changed more than the headline. Falkensteg splits the sector in two. The category covering work up to the shell, where developers sit, moved from 239 to 243 cases, plus 1.6 percent. The category covering fit-out through facility management moved from 249 to 311, plus 24.9 percent. Cases among firms above 10 million euros of turnover fell from 13 to 9. Falkensteg's head of real estate says the shell segment has largely finished its clean-up, with weaker developers exiting in 2023 and 2024.

The developer-side category is now about a quarter below its Q1 2024 level. VDIV reported 326 cases for construction and developers in Q1 2024. The Q1 2026 figure is 243. The arithmetic is simple. The comparison is directional, because the category boundaries may differ between releases and we read both through secondary outlets.

The count is a count of firms, not of buyers. One insolvency can leave a handful of buyers or hundreds. A rise in cases says nothing about how many principals held a registered priority notice and how many held only a deposit receipt. Falkensteg publishes the numbers by firm. No source we found converts them into buyer exposure.

The wider economy gives context, not causation. Destatis reported 24,064 requested business insolvencies in Germany in 2025, up 10.3 percent, and 104 cases per 10,000 firms in construction against 69 for the whole economy (press release of 13 March 2026, as relayed by trade press). Falkensteg attributes the developer stress to thin equity underwritten in the low-rate years, to build cost increases of up to 45 percent against 2020, and to refinancing gaps as old low-rate debt matures. For the second half of 2026 it expects a rise of around 5 percent in the category up to the shell and around 15 percent in the fit-out-to-facility category. That last figure is a forecast, graded industry estimate.

What does § 3 MaBV require before a German developer may take a euro?#

Four gates must be open before the developer may accept any money, and all four are checkable in documents. The contract must be valid, with the required approvals confirmed in writing by the notary and no withdrawal right left to the developer. A Vormerkung, a priority notice in the land register that protects the buyer's claim to the property, must be entered at the agreed rank. The property must be secured free of prior mortgages, including for the case that the building is never completed. And the building permit must be issued or deemed granted.

The gates move the buyer's risk from promise to record. Each is evidence held by a third party. The notary certifies the contract, the land registry holds the notice, the bank gives the lien release, the authority holds the permit. The developer's say-so counts for none of them. That is the structural idea worth exporting as a test to any market.

The lien release deserves the closest reading. Without it, a bank with a mortgage ranking ahead could enforce against the plot and the unfinished building, and the buyer's notice would sit behind it. The ordinance asks for release assurance that holds even if the project is not completed. That wording, from § 3(1), is the clause that matters in a failure.

The permit gate is quieter, but it blocks a known pattern. In some off-plan markets a developer sells before permission exists and collects deposits against a project that may never be allowed. In Germany that pattern cannot generate payments. The buyer's money cannot be spent on a scheme that has no right to be built.

The German text is public and short, so the test is portable. § 3 MaBV sits in the original on the federal legal portal. A principal reading a foreign regime can carry four questions across. Is there a registered interest in the buyer's name. What ranks ahead of it. Who certifies the contract. And is the permit in hand before the first payment. The schedule of payments comes next.

How does the MaBV's seven-instalment schedule limit what a German buyer has paid?#

The ordinance permits up to seven instalments tied to the construction sequence, and the first may not exceed 30 percent of the contract sum. For a plot-and-building contract that first slice falls due at the start of earthworks, and for a heritable building right the figure is 20 percent. The rest is spread over named milestones, from shell completion through roof, installations, windows, plaster, screed, tiling and façade to final completion. Payments follow work, not calendar dates. Unused percentages are redistributed proportionally across the other instalments.

The effect is a ceiling on over-payment. If the schedule is respected, the buyer has paid no more than the value of the stage reached, plus the first slice. A developer who stops at roof level has been paid for the shell and the roof. In principle the buyer's loss on the money side is bounded by that front-loaded slice and by any dispute over whether a stage was truly reached. That is a real protection, and it is also the whole of what the schedule does.

The Civil Code makes the schedule the only lawful route to instalments. § 650v BGB says a contractor may demand instalment payments from the client only to the extent they are agreed under an ordinance issued on Article 244 of the Introductory Act to the Civil Code. In practice that ordinance is the MaBV. § 650u BGB treats the developer contract as a hybrid, construction law for the building and sale law for the transfer of land. The rule is therefore not market custom. It is statute.

§ 7 offers the alternative route, a guarantee in place of the schedule. Under § 7 a developer can be relieved of the § 3 mechanics if it gives security for all claims the buyer may have for repayment of the buyer's assets, kept in place until the § 3(1) conditions are met and the object is fully finished. Instead of limiting what is paid, the guarantee returns what was paid. The text secures repayment claims and says nothing about completing the building. It returns money. It does not finish the house.

What did the MaBV not protect in Germany's developer wave?#

The ordinance protects the money paid, not the building promised. The Bundesnotarkammer's position paper of 3 March 2023 states that neither the § 3(2) payment schedule nor the priority notice and lien-release declaration give sufficient protection when a developer fails, and that buyers who do not withdraw must have the project finished by another firm, usually at a considerably higher price. We read that as directional. It matches the text of the rules.

The residual risk sits in four places. The first is cost to complete. If a developer stops at 60 percent of the build, the buyer holds a priority notice on a half-built structure and must find a new contractor, who prices the remaining work at today's rate, not at the old contract rate. The second is defects. Work already built may be defective, and the party who warranted it is insolvent. The third is delay, which no instalment table insures. The fourth is valuation. A half-finished asset in a stressed submarket is hard to sell and harder to finance.

The cost-to-complete gap is why the 45 percent figure matters. Falkensteg reports build cost increases of up to 45 percent against 2020, as relayed by a secondary outlet. A fixed-price contract written before that move was priced on a cost level that no longer existed. The buyer's schedule held. The developer's margin did not. This is reasoning from the reported figures, not a measured loss, and it is graded directional.

A fair ruler measures five things, and the MaBV answers four of them cleanly. The five are who holds the money, what releases it, what is registered, what survives insolvency, and who verifies progress. The MaBV answers the first four through the developer's limited access, the schedule, the Vormerkung and the lien release. It answers the fifth only through the stage names in the schedule. In the text we reviewed there is no independent certifier of stages. That is the gap the escrow regimes below try to fill, and where they pay for it with other weaknesses.

How does Italian law for off-plan homes on Lake Como compare with the MaBV?#

Italy limits the consequence of failure, where Germany limits the sequence of payment. Legislative Decree 122/2005 obliges a developer of a property under construction to hand the buyer a surety (fideiussione) at the preliminary contract, covering the sums received, and a ten-year latent-defect insurance policy at transfer. A ministerial decree (n. 125 of 6 June 2022) fixed a standard model for the surety, applicable to guarantees from 23 September 2022. The principal reading Lake Como is reading this regime.

Against the five tests, Italy answers differently. The developer holds the money, as in Germany. In the decree text we reviewed we found no statutory instalment table of the MaBV kind, so release follows the contract. What survives insolvency is a bank's or insurer's repayment promise. The buyer's recovery therefore depends on the surety's counterparty rather than on a register entry.

The two designs fail in different places. The German design fails on completion cost, as described above. The Italian design returns money, but it ends the build. A principal who is refunded has no villa and a lost holding period. For the detail of what the Italian surety and the ten-year policy cover, see what a completion guarantee actually covers. This article does not repeat that analysis.

The German reflex is still the right question in Italy. Ask the Italian notary what is registered in the buyer's name, what ranks ahead of it, and whether prior mortgages on the plot are released as the building proceeds. Those questions are the MaBV's gates in Italian dress. Whether the answers are favourable is a matter for local counsel, not for this article, and it varies by transaction.

Do Dubai and Ras Al Khaimah escrow rules pass the German test?#

Dubai takes custody of the money away from the developer, which the MaBV never does. Dubai's Law No. 8 of 2007 requires a project-specific escrow account for off-plan sales. Buyer payments go to an account opened with a registered escrow agent in the name of the project, not to the developer. Article 9 dedicates the account exclusively to the construction of that project and bars attachment by the developer's creditors. The law text does not itself set a milestone schedule for releases, so how progress is verified before a release is not read here from the statute.

Against the five tests, Dubai passes custody and ring-fencing, and meets the same arithmetic as Germany. The money sits with an agent, its use is restricted to construction of the project, and the account is ring-fenced. But as the building rises the account empties. In a mid-build failure the buyer's protection is what remains in the account and the work already built. The German schedule has the same arithmetic, which is the point. Both make paid track built. Neither makes built reach finished.

Ras Al Khaimah (RAK) has its own law, and the Dubai statute is not it. RAK Decree No. 12 of 2023, issued by the Ruler on 21 August 2023, requires escrow accounts run by RERA-registered trustees, with a main account and a sub-account for each unit. Withdrawals for construction costs need RERA approval. Five percent of construction cost is retained for one year after the completion certificate. The developer may obtain mortgage financing only once the project has passed 50 percent of projected construction works. This is reported by a law-firm note, graded industry estimate, not read from the decree itself.

The developer-equity rule is the one provision the MaBV has no equivalent for. The RAK decree requires the developer to contribute at least 20 percent of construction cost and not to rely only on off-plan sales. German law caps what the buyer pays by stage. RAK additionally asks the sponsor to carry equity. Thin equity is the central cause of the German wave on Falkensteg's account. As of 6 October 2026 we have not tested how the contribution rule is enforced in practice, and a rule on paper is not an enforced rule.

What protects a buyer on Bali, Gili Air and in Zanzibar?#

Indonesia asks for a notarial contract but, in the sources reviewed, imposes no escrow and no instalment ceiling. Under Government Regulation 12 of 2021, which amends the 2016 housing implementation regulation, the PPJB, the binding sale-and-purchase agreement signed before the deed of transfer, must be made before a notary, and pre-sale requirements are set. Academic commentary finds those requirements weakly followed where developers sell before permits or construction exist. We grade that directional. It describes practice, not the whole market.

Against the five tests, the Indonesian answer rests on contract drafting. The developer holds the money. The payment clause releases it. What is registered in the buyer's name depends on the title route chosen, and the foreign holder's right is a separate question handled in other Victaura Research pieces. What survives insolvency depends on what security was actually granted. Nothing in the regime supplies a certifier of stages.

Tanzania has no German-style rule that we could find, and a proposal is moving. As of 6 October 2026, Global Law Experts reports a proposal, announced in mid-2026, for a Real Estate Regulatory Authority. It is expected to require buyer disclosures and escrow arrangements for advance payments, with drawdown linked to construction milestones. The report does not say whether it reaches Zanzibar, and the enabling legislation is not confirmed. Until it is gazetted, it is a proposal, not protection.

In both markets the German instrument has to be rebuilt by contract. A principal can ask for the MaBV's logic on paper. Staged payments tied to a named list of milestones. An independent engineer. Money in a segregated account. A registered interest in the buyer's name. That is contract engineering. It is enforceable only as far as the counterparty and the local courts allow, and in an insolvency a buyer without granted security ranks as an unsecured creditor. The drafting is the protection, so the drafting is what the principal reads.

What should a German allocator ask a foreign sponsor after the MaBV wave?#

Start with equity, because the German wave was an equity story. Ask how much cash the sponsor has put into the project, in what form, and whether it ranks behind the buyer's money. Falkensteg's account of the wave centres on thin equity and refinancing gaps. The RAK rule on a 20 percent contribution is the same issue turned into law. Where no such rule exists, the contract has to carry it.

Ask what is registered in the buyer's name and what ranks ahead of it. The German reflex, a Vormerkung and a lien release, translates into one question in every market. Which document, held by which third party, shows that the buyer's claim survives the sponsor. Request the document, not the description of it.

Ask who certifies each stage, and who pays the certifier. An independent engineer paid from the escrow agent's side differs from one appointed and paid by the sponsor. The MaBV text we reviewed names stages but not a certifier. A foreign regime that adds one has closed a gap Germany left open.

Ask what the contractor has actually delivered, read as documents. Reading a contractor's track record is a diligence method, not an argument for any builder. It looks at handovers, open claims and subcontractor payment, and it applies to the sponsor and the builder separately. A reading that finds no delivered project is a finding, and it is reported as one.

Ask whether the principal is buying a promise or holding a thing built. Off-plan versus direct development sets out the difference in exposure between paying ahead of construction and holding an asset that exists. The German wave is the case for pricing that difference explicitly rather than assuming the schedule has priced it.

Weaknesses honestly disclosed#

The central weakness is that buyer losses are unmeasured. We counted firms, not buyers. We found no dataset linking the 2023-to-2026 developer failures to the money German buyers did or did not recover. The statement that the schedule bounded losses is reasoned from the statute and from notarial commentary, and a reader should treat it as a hypothesis with a mechanism, not as a finding.

The Falkensteg figures were read through secondary outlets. We did not obtain the firm's primary release. The numbers we use match the trade-press summary we could open, dated 1 June 2026. Category boundaries may differ between the 2024 and 2026 releases, so the comparison of 326 and 243 is directional. The figure of up to 45 percent for build costs is as relayed, not independently verified.

The legal texts were read unevenly. §§ 3 and 7 MaBV and §§ 650u and 650v BGB were read on the federal legal portal. The notarial papers of the Bundesnotarkammer and the Deutscher Notarverein, both of 3 March 2023, were used only for the direction of their conclusions, never for numbers. The Italian, Dubai, RAK and Indonesian readings rest on law-firm, trade and academic commentary rather than on each primary text. This is not legal advice in any jurisdiction, and we are not German, Italian, Emirati or Indonesian counsel.

Regimes move, so every reading is a photograph. The Tanzanian proposal is unenacted as of 6 October 2026 and may change shape or die. RAK's enforcement is untested here. Any of these statements should be re-verified at the moment of use. A non-existence claim, such as no escrow rule found, is the most fragile kind, because a law can be gazetted tomorrow.

Ranking regimes by design is not ranking projects by safety. A regime that passes more of the five tests does not make any project inside it safe, and no project is assessed here. The method Victaura Research applies to read a deal is described on our approach page. It starts from the documents and ends with what the documents do not cover.

Skin in the game disclosure. Victaura, through its parent Greystone B.V. (Netherlands), develops projects on Lake Como (Italy), in Nungwi, Zanzibar (Tanzania), on Gili Air and in Uluwatu, Bali (Indonesia), and holds an off-plan capital position on Al Marjan Island, Ras Al Khaimah (UAE). Readers should assume commentary may be influenced by, or benefit, these positions. This document is classified as marketing material under MiFID II Article 24(3). It is not investment advice.