New System to Sell Off-plan Projects in KSA

No real estate developer is allowed to engage in the sale and rental of off-plan real estate projects unless registered in the Developer's Register

The Kingdom of Saudi Arabia has introduced a new system for the sale and rental of off-plan real estate projects, which was approved by the Council of Ministers last September. The system’s provisions apply to the activity of selling and renting off-plan real estate projects, involving the collection of funds from buyers, renters, or project financiers. This also includes the sale and rental of off-plan real estate projects affiliated with government entities, in accordance with their nature and as outlined in the regulation.

According to the system's third article, no real estate developer is allowed to engage in the sale and rental of off-plan real estate projects unless registered in the Developer's Register. Advertising these projects in local or foreign media, or organizing exhibitions and invitations to them, is prohibited unless the real estate project is licensed by the competent authority in accordance with the system's provisions and regulations.

The system requires developers interested in selling or renting off-plan real estate projects to apply to the competent authority for a special license for the project, committing to start construction within six months of obtaining the license. Developers must complete the project within the specified deadline. If there is a delay in delivering the land or residential unit without a justifiable reason, the buyer is entitled to predetermined compensation for developed land or equivalent rent for residential units.

The system states that “in the event of an unforeseen circumstance preventing the completion of the licensed real estate project, the competent authority, in consultation with the project's legal accountant and consulting office, shall take necessary measures to ensure the project's completion or liquidation and refund the amounts paid for it as determined by the regulation.”

In case of violations of the system or regulation, the competent authority can take necessary measures, including halting the licensed project until the violation is rectified. Developers and landowners are prohibited from disposing of the shared part of the licensed project before the division of real estate units, and any disposals after division must comply with the system for ownership, division, and management of real estate units.

Violators engaging in the sale and rental of off-plan real estate projects without a license, presenting false documents or information for licensing, misappropriating, dissipating, or wrongfully using funds intended for project establishment, failing to deposit funds in an escrow account, or legal accountants and consultants verifying false documents will face penalties including imprisonment of up to five years, fines up to SR10 million, or both.