The Capital Market Authority requires financial institutions licensed to engage in real estate investment activities to publish a summary of the main risks involved in investing in real estate contributions, while emphasizing that investing in real estate contributions does not guarantee a profit or protect against losses.
The Authority also clarified that financial institutions licensed to engage in this activity undertake to comply with the regulations governing real estate ownership and investment by non-Saudis.
A few days ago, the Capital Market Authority’s Board approved guidelines for the offering of real estate contributions, as well as amendments to the rules for offering securities, ongoing obligations, and the glossary of terms used in the Capital Market Authority’s regulations and rules, to take effect as of the date of their publication.
Real Estate Contribution System
These instructions were adopted based on the roles of the Capital Market Authority as defined by the Real Estate Contributions System, specifically regarding the regulation of the real estate contribution shareholders“ register and the issuance of real estate contribution certificates attesting to a shareholder’s ownership of a share in the real estate contribution, as well as in coordination with the General Real Estate Authority regarding the regulation of fundraising for the purpose of offering real estate contributions, in order to keep pace with the significant development the real estate sector is witnessing and to open new financing and investment channels.
These instructions aim to regulate the registration and offering of real estate share certificates, including specifying the requirements that must be met before such certificates are offered, marketed, advertised, or funds are raised for them, as well as the requirements for private and public offerings of these certificates, as well as regulating the obligations of the financial market institution through which the offering will take place, the shareholder registry, and the requirements for maintaining books and records.
According to the key provisions of the approved instructions, the financial market institution through which the offering is to be conducted must ensure that sufficient information is provided to investors in the real estate offering to enable them to make an informed investment decision, and that such information is complete, clear, accurate, and not misleading, The instructions also stipulate that if the offering is not completed, it shall be canceled and the subscribers” funds shall be refunded without any deductions within a period not exceeding ten days from the end of the offering period, provided that the Authority is notified thereof.
Real Estate Participation Certificates
The instructions also require the capital market institution through which real estate participation certificates are to be offered to submit a written application to the Authority, including the required data and documents, at least ten days prior to the proposed date of the private offering of real estate participation certificates, while the Authority has set a minimum of 30 days to review public offering applications before issuing its decision to approve, in accordance with the conditions and regulations it deems appropriate, or to reject the application.
The adoption of these instructions follows the Authority’s publication on November 6, 2023, of the draft "Instructions for the Offering of Real Estate Participation Certificates" on the unified electronic platform for soliciting public and government agency feedback operated by the National Center for Competitiveness (Istithlaq Platform) and the Authority’s website to solicit public feedback on the matter. This was accompanied by amendments to the rules governing the offering of securities and ongoing obligations, as well as the list of terms used in the Capital Market Authority’s regulations and rules, following a public consultation on the amendments contained therein.
The offering instructions for Real Estate Participation Certificates as well as the amended rules for the offering of securities and ongoing obligations and the list of terms used in the Capital Market Authority’s regulations and rules, as amended, can be accessed via the following link: www.cma.org.sa.
