The CEO of the Real Estate General Authority, Eng. Abdullah Al-Hammad, said that the real estate contributions system, which was recently approved by the Council of Ministers, will contribute to increasing the supply of commercial and residential real estate products as a new financing and investment channel for real estate developers.
Al-Hammad explained that the system will have a role in enhancing investor confidence in the real estate sector in the Kingdom through the rules and provisions it contains that preserve the rights of all parties and will eliminate the practice of random and irregular real estate contributions, and the governance of control and compliance work. The system will also allow the creation of promising investment opportunities for small enterprises. or medium in the real estate market, and provides a new and reliable real estate investment vessel.
He added that the system came as an extension of the real estate legislation system supervised by the authority and comes within the framework of the objectives of the comprehensive strategy for the real estate sector, which seeks to govern, enable and sustain the sector, and raise its effectiveness and efficiency of transactions in it, according to the Saudi Press Agency, “SPA”.
“The system aims to regulate real estate shareholding activity, raise the level of transparency and disclosure in real estate shareholding activity, protect the rights of all real estate shareholding parties, govern and organize real estate shareholdings, and automate all shareholding procedures until their termination (closure),” according to Al-Hammad.
The head of the Real Estate General Authority stated that the system will be effective in November 2023 AD.
And he continued: “Work is underway in coordination with the Capital Market Authority to issue the executive regulations for the real estate contributions system, which includes the executive regulatory rules, interprets and clarifies the system, and specifies in detail its provisions, responsibilities, obligations, procedures, and requirements necessary to practice the activity of real estate contributions.”
Regarding the integrated roles with the Capital Market Authority, Al-Hammad confirmed that the system defines the roles and responsibilities whereby the Real Estate Authority organizes the activity of real estate contributions, issues the license, amends and cancels it, classifies the real estate contributions according to size, type or location, and sets appropriate conditions and requirements and time periods for the real estate contribution according to its classification. And setting conditions for qualifying and classifying real estate developers for the purpose of offering real estate contributions, and setting conditions for qualifying and classifying practitioners of real estate contributions activity, and laying down foundations that determine the entitlements of the licensee in return for his fees, commissions and all control and supervision work on real estate contributions.
“While the role of the Capital Market Authority is highlighted in organizing the register of shareholders of the real estate contribution, which is a record in which the names of the shareholders and their shares are registered and any change that occurs in the ownership of their shares and the approval of offering the real estate shareholding for advertising and marketing and collecting the financial value in exchange for the shares of the shareholding and issuing a certificate of real estate shareholding that proves that the shareholder owns a share in the real estate contribution,” according to Al-Hammad.
On the other hand, the Real Estate General Authority clarified that the Real Estate Contributions Regulation contained 38 articles divided into seven main chapters.
As for the second chapter, it was devoted to “licensing and subscriptions”, as it included the conditions of the licensee, how to determine the capital of the real estate shareholding, its shares, the mechanism for the shareholder’s participation in it and the distribution of shares, while the third chapter included all the articles related to “management of the real estate shareholding”, and the responsibilities of the person responsible for everything It relates to the real estate contribution towards the shareholder and towards the relevant government agencies, his role in managing the shareholding, managing its financial assets and his powers. The fourth chapter bore the name “Assembly of Shareholders”, and it contained all articles related to the formation of a special assembly of shareholders, its mechanism of action, its convening and the enforcement of its decisions. While the fifth chapter included the articles regulating the “extinguishment of the real estate shareholding” and the mechanism of its sale and closure.
As for “Violations and Penalties”, it was the title of the sixth chapter, which included a mechanism for controlling violations and provisions of the system and the penalties resulting therefrom.
As for Chapter Seven of the Law, “Final Provisions,” it specified a period of 120 days for the Real Estate General Authority to issue the executive regulations of the Law in coordination with the Capital Market Authority, and canceled any contradictory provisions.