Article 10 of the Saudi Real Estate Investment Schemes Law
المادة 10 من نظام المساهمات العقارية · الفصل الثاني: الترخيص والاشتراكات
The article prohibits lending from a scheme's capital and allows borrowing against the scheme's funds or assets if the scheme agreement includes this, under the conditions the regulations set.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يجوز الإقراض من رأس مال المساهمة العقارية، ويجوز الاقتراض بضمان أموال أو أصول المساهمة العقارية على أن يتم تضمين اتفاقية المساهمة ذلك، وتحدد اللائحة الاشتراطات المنظمة لذلك.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 10 explained in plain English
This article distinguishes between two things that may be confused:
- Lending from the capital: prohibited. Money may not be taken out of the scheme's capital and lent to anyone, since the capital is dedicated to the project.
- Borrowing for the scheme: permitted on conditions. The scheme may borrow against its funds or assets, provided that:
- This is included in the scheme agreement, that is, it is provided for in the agreement.
- It is in accordance with the conditions the regulations set.
In practice, the participant must know in advance, through the scheme agreement, that the scheme's assets may serve as security for a loan. If the agreement is silent on this, the text ties the permissibility of borrowing to its being included in the agreement.
This is linked to Article 9, which divides the capital into equal shares and limits the participant's liability to their shares, and to Article 11, which makes the scheme's assets owned by the scheme and bars creditors of the participants, the licensee and the manager from any right in them other than what they own in shares.
Before joining a scheme, the participant should read the financing clause in the agreement. To review a particular scheme agreement, you may consult a lawyer specialized in real estate matters.
Practical example
A real estate investment scheme in Abha needed financing to complete the works. The scheme agreement provided for the possibility of borrowing against its assets, so it was allowed to borrow under the regulations' conditions. A proposal by one of the parties to lend part of the capital to another company was refused because the article prohibits lending from it.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 10 of the Saudi Real Estate Investment Schemes Law
May part of a real estate investment scheme's capital be lent?
No, the article expressly prohibits lending from the scheme's capital.
May a real estate investment scheme borrow?
Borrowing against the scheme's funds or assets is permitted, provided this is included in the scheme agreement and the regulations' conditions are met.
Why does the scheme agreement matter for borrowing?
The article requires borrowing to be included in the scheme agreement for it to be permitted.
More articles on Scheme Capital and Shares
- Article 6
The article provides that a scheme's capital, on which the number and amount of shares are calculated, is set by the estimated cost from a licensed valuation entity after the approval of the Authority and the Capital Market Authority.
يحدد رأس مال المساهمة العقارية، الذي على أساسه يُحتسب عدد الحصص ومقدارها من خلال التكلفة التقديرية من قبل جهة تقييمية مرخصة، بعد موافقة الهيئة وهيئة السوق المال
- Article 7
The article allows the Authority to require a reserve amount, not exceeding 15% of the estimated cost, to be added to a scheme's capital, which may be used only with the participants' assembly's approval.
للهيئة اشتراط إضافة مبلغ احتياطي إلى رأس مال المساهمة العقارية بما لا يتجاوز (15%) من تكلفتها التقديرية، وذلك لمقابلة أي مصاريف إضافية غير متوقعة. ويكون التصرف
- Article 8
The article allows a participant to join a real estate investment scheme with an in-kind or cash share, and refers to the regulations the type of in-kind share and its conditions.
يحق للمساهم الاشتراك في المساهمة العقارية، بحصة عينية أو نقدية. وتحدد اللائحة نوع الحصة العينية والشروط الواجب توافرها فيها.
- Article 9
The article divides a scheme's capital into shares equal in value and rights, limits each participant's liability to the shares they own, and assigns regulation of the register of participants to the Capital Market Authority.
1- يقسم رأس مال المساهمة العقارية إلى حصص متساوية القيمة والحقوق، وتكون مسؤولية المساهمين في حدود ما يملكون من حصص في المساهمة العقارية. 2- تقوم هيئة السوق الما
- Article 11
The article makes a scheme's net assets owned by the scheme and bars creditors of participants, the licensee and the scheme manager from any right in its funds or assets except what they own in shares.
يكون صافي أصول المساهمة العقارية من أصول ثابتة نقدية وعينية أو حقوق لدى الغير؛ مملوكة للمساهمة العقارية. وليس لدائني المساهمين أو المرخص له أو مدير المساهمة الع
- Article 12
The article requires the licensee's percentage in the scheme to be no less than the regulations specify and held until the scheme ends, and allows other participants to dispose of their shares under the regulations' conditions.
1- يجب ألا تقل نسبة المرخص له في المساهمة العقارية عن النسبة التي تحددها اللائحة، وأن يحتفظ لنفسه بملكية هذه النسبة حتى انقضاء المساهمة العقارية. 2- يجوز لبقية
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.