Saudi Arabia approves real estate fund rules

RIYADH — The Saudi Capital Market Authority Board has approved on Sunday (Oct. 30) the final version of the Real Estate Investment Traded Funds Instructions after publishing the draft on the CMA’s website.

The instructions enter into force starting from the date of approval.

The instructions, the draft of which was published by the Capital Market Authority (CMA) in August, cover the management, operation and ownership of the funds.

The Authority ensured in the final draft which consists of eleven parts, that it took into consideration the comments and observations it received from the investors and concerned and interested parties during the public consultation period.

The international best practices and standards have been taken into consideration by the CMA in preparing the instructions.

Non-resident foreign investors are allowed to trade in the units of the Real Estate Investment Traded Funds in the Saudi Stock Exchange (Tadawul).

This step comes as a part of the CMA’s role in regulating and developing the capital market as well as introducing new investment legislations to help providing new financial instruments and diversifying investment opportunities therein in line with the National Transformation Program and Saudi Arabia’s Vision 2030. Moreover, the CMA considers the asset management industry as one of the key securities business activities, where it contributes to providing diversified investment products, provides professional management to client assets and boosts professional practices and institutional conduct in the



market.

In line with the CMA (2015-2019) strategy, the CMA will conduct a number of initiatives to support the growth of this industry; this involves providing new investment channels supporting all investor categories, updating the related implementing regulations, increasing the level of client asset protection, supporting the occupational qualification for professionals working in the asset management field and raising investor awareness.

A Real Estate Investment Traded Fund (REIT), as mentioned in the Instructions, is a real estate investment fund that is publicly offered and the units of which are traded on the Exchange, whose primary investment objective is to invest in constructionally-developed real estates that generate periodic income, this includes residential, commercial, industrial, agricultural and other types of real estates. The Fund must distribute a prescriptive percentage of the fund›s net profit in cash to the unit holders at least annually.

The fund manager must appoint a real estate company or more than one company specialized in managing properties (Property management company) – after ensuring that the required approvals and licenses are obtained from the relevant governmental agencies – to manage the property held for investment The company should possess the necessary experience in real estate management, and should be responsible for carrying out property management activities including, but not limited to, property management, property maintenance, leasing services and rent collection. The fund manager may agree with the lessee- under a leasing contract- that the lessee will manage and maintain the property during the leasing contract period.