Real estate contributions system

Real estate contributions system

The real estate development sector in the Kingdom of Saudi Arabia is witnessing rapid growth driven by qualitative projects and an ambitious vision aimed at enhancing the quality of life and diversifying the economy. 

With this expansion, the need has emerged for a legal framework that regulates real estate financing mechanisms and reduces risks, as stipulated in the Real Estate Contributions System and its implementing regulations.

The system aims to enable developers to implement their projects efficiently by regulating fundraising, while enhancing transparency and protecting investors’ rights through precise controls, most notably licensing conditions that guarantee the seriousness and credibility of projects.

What is the Real Estate Contributions System and its executive regulations?

It is one of the systems specialized in developing the real estate sector, as the system defined real estate contribution, clarified the conditions for obtaining a real estate contribution license, the mechanism for distributing shares in the real estate contribution, the responsibilities of the licensee, cases of expiration of the real estate contribution, and specified the penalties resulting from violating the provisions of the system.

The General Real Estate Authority supervises the regulation of real estate contributions, the issuance and cancellation of licenses, and the oversight of real estate projects.

What are real estate contributions?

Article 1 of the system defines a real estate contribution as a real estate development project in which a group of people participate to achieve a benefit. This is achieved by owning a property, developing it, and converting it into a residential, commercial, industrial, or agricultural project. The property is then sold and the contribution is terminated.

A real estate joint stock company is a legal entity established by a group of shareholders wishing to establish a real estate project for profit, with the assistance of a real estate developer who holds a real estate joint stock license to supervise the project.

Real estate contributions are classified by volume according to Article 3 of the Regulations into:

• A small contribution with a capital of less than 50 million Saudi riyals.
• An average contribution with a capital of no less than 50 million riyals and no more than 300 million Saudi riyals.
• A large contribution with a capital exceeding 300 million Saudi riyals.

Licensee’s powers

Licensee’s powers

The licensee (real estate developer) shall be responsible for the real estate contribution and real estate development and shall be responsible for carrying out the work stipulated in Article 24 of the Executive Regulations of the Real Estate Contributions System, which are:

• Preparing all requirements and approvals necessary to issue a license.
• Appointing a real estate contribution manager and supervising his work.
• Appointment of a chartered accountant and engineering consultant.
• Opening an escrow account in the name of the real estate contribution from one of the licensed banks.
• Implementation of disbursement from the escrow account.
• Concluding contracts for the benefit of real estate contributions.
• Borrowing secured by real estate contribution funds.
• Sale of real estate joint stock assets.
• He chaired the shareholders’ assembly.

Real estate contributions system

What are the conditions for opening a real estate contribution?

It is not permissible to offer a real estate contribution, announce it, or collect funds for it unless the conditions stipulated in Article 4 of the system are met, which are:

• Approval of the Capital Market Authority and obtaining a license from it.
• The property must be owned by a valid title deed.
• The property must have the necessary approvals for its development from the competent authorities.

When does the real estate contribution expire?

Article 29 of the system clarifies the cases in which the real estate contribution expires, which are:

• Sell it either by public auction or direct sale.
• The expiry of the period specified for it.
• Impossibility of achieving the purpose for which it was established.
• Cancel real estate contribution.
• A final court ruling is issued to liquidate her.

What are the penalties for violating the provisions of the Real Estate Contributions System?

Article 32 of the Real Estate Contributions System stipulates that anyone who violates the provisions of the Real Estate Contributions System and its executive regulations shall be punished with one or more of the following penalties:

• Alarm.
• Suspension of the license for a period not exceeding one year.
• License cancellation.
• A fine not exceeding 10 million Saudi riyals.
• Preventing the licensee or real estate contribution manager from carrying out any work related to real estate contributions in the future for a period not exceeding 10 years.

Are you thinking about entering into a real estate contribution or launching a real estate development project? Don’t leave your decisions vulnerable. 

Through the office of Attorney Abdul Majeed Al Rashid, you can contact a specialized real estate attorney who will help you review licensing terms, ensure the integrity of regulatory procedures, and protect your legal rights at every step.

What are the requirements for obtaining a real estate contributions license?

What are the requirements for obtaining a real estate contributions license?

To obtain a real estate contributions license, the necessary attachments stipulated in Article 8 of the regulations must be provided, which are:

• A certificate that includes the integrity of the license applicant’s credit record from an accredited body.
• The real estate registry number or ownership document of the property subject to real estate contribution.
• Regular approvals from the Ministry of Municipalities and Housing, the Ministry of Energy, the Authority, or other competent authorities.
• An economic feasibility study for real estate contributions in Arabic.
• Description of the real estate contribution shop.
• Fill out the contribution agreement form.
• Agreement with engineering consultant.
• Agreement with the chartered accountant.
• Agreement with the Real Estate Contribution Manager.
• The agreement concluded with the property owner, if any.
• Evaluation of the property subject to real estate contribution by three certified residents.
• Appointing a financial market institution in accordance with the instructions of the Financial Market Authority.

Steps to issue a real estate contribution license

Anyone wishing to obtain a real estate joint stock license, whether individuals or companies, can visit the website of the General Real Estate Authority and follow the following steps:

• Click on “Enter the Real Estate Contributions Platform“
• Create an account on the platform.
• Fill in the facility data.
• Issuance of a real estate developer qualification.
• Go to create a license application.
• Choosing a real estate contributions license.
• Fill out the application form.
• Approval of declarations.
• Engineering consultant approval to apply for a license through the platform.
• Certified Public Accountant to apply for a license through the platform.
• Submit the request.

Real estate lawyer from the office of Abdul Majeed Al Rashid Lawyer

Having an experienced real estate attorney is no longer an option, but a necessity to avoid legal risks and make informed real estate decisions with confidence. 

Through the office of lawyer Abdul Majeed Al Rashid, the role of a skilled lawyer is not limited to resolving disputes only, but extends to providing accurate legal advice, reviewing contracts, verifying the integrity of licenses and regulatory procedures, and representing you before judicial authorities with efficiency and professionalism.