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Establishing Private Real-Estate Funds in the KSA: Regulatory Pathways and the Newly Introduced Simplified Investment Fund Framework
6 min 10 sec
May 14, 2026 (Edited)
r.jaffer@tamimi.com 
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Private real-estate investment funds in the Kingdom of Saudi Arabia (KSA) operate within a regulatory framework overseen by the Capital Market Authority (CMA), principally comprising the Investment Fund Regulations (IFR) and the Rules for Special Purposes Entities (SPE Rules). The CMA recently introduced the Instructions of Simplified Investment Funds, offering a streamlined regime for private funds targeting institutional clients.
This article summarises the core regulatory requirements governing private real-estate funds under the IFR, compares them with the simplified investment fund regime, and highlights practical considerations for setting up private real-estate funds in KSA.
Why consider a fund structure?
The increasing number of private real-estate investment funds in the KSA reflects the growing popularity of fund structures as an alternative to conventional financing. Real estate owners can establish such funds to finance development without directly engaging banks or other financial institutions.
This structure enables owners to appoint a fund manager who can partner with developers, contractors, and investors to provide the expertise and liquidity necessary for successful project completion. A fund structure also allows owners to contribute land in exchange for fund units, enabling them to participate in a project as investors while limiting their exposure and additional financial commitments.
Depending on project requirements, fund managers may still obtain debt financing from financial institutions, in addition to raising capital from primary investors — typically qualified and institutional clients. This flexibility makes private real-estate funds, or simplified funds as described below, an attractive option for landowners.
Private real-estate funds under the IFR and SPE Rules
Pre-formation considerations
A real estate owner or investor wishing to establish an investment fund may engage a fund manager at the initial stage through a fund framework agreement, memorandum of understanding, or indicative term sheet, with provisions to conduct due diligence and feasibility studies prior to fund formation.
In the case of an owner wishing to contribute land as an in-kind contribution to the fund in exchange for fund units, the valuation of the land may also be carried out at this stage in line with the CMA regulations. Fund managers may also negotiate provisions for reimbursement and indemnification of costs incurred in this phase, as well as confidentiality provisions.
Such pre-formation arrangements allow the parties to discontinue if the due diligence or feasibility outcomes are unsatisfactory. The parties may also agree to mutual exclusivity provisions for a certain period, providing the fund manager with assurance that its resources are being deployed towards a committed project, even where the parties may ultimately decide not to proceed with fund formation.
Fund structure and fund manager licensing
An owner or investor cannot directly manage a real-estate investment fund in the KSA, as this activity requires a specific licence from the CMA. The fund manager must be a capital market institution (CMI) licensed by the CMA to carry out the activities of managing investments and operating funds. The licensed fund manager bears full responsibility for the establishment, management, and marketing of the fund, as well as compliance with all applicable CMA rules and regulations.
Under the IFR, fund managers must structure private real-estate funds as closed-ended investment funds, ensure full pre- and post-offering compliance, and establish a fund board in line with regulatory requirements. The fund is established upon execution of the terms and conditions between the first potential unitholders and the fund manager.
A real-estate investment fund may also be structured as a special purpose entity (SPE) under the SPE Rules, and the fund manager must satisfy the requirements to establish the SPE under both the SPE Rules and the IFR. Where an investment fund takes the form of an SPE, its board of directors shall be the board of directors of the SPE, subject to all provisions relating to the fund’s board of directors under the IFR.
CMA notification and approval process
At least 15 days prior to the proposed offering date, the fund manager must submit various documents to the CMA. The fund manager must also ensure payment of registration fees and submit evidence of any necessary government approvals, where required.
Following this submission, the CMA may conduct inquiries where the proposed offering may not be commensurate with the fund manager’s capabilities or where potential breaches of the Capital Market Law or its implementing regulations are identified. The CMA may issue a notification prohibiting the offer if such concerns arise. Where no objections are raised, the CMA will, upon request, issue a written “no-objection” notice confirming it does not oppose the fund’s launch.
Fund governance and key service providers
Every private real-estate fund must be supervised by a fund board appointed by the fund manager from the date of establishment, subject to requirements relating to the minimum number of directors and independent directors. The board owes a fiduciary duty to the unitholders and is responsible for, among other matters:
- approving material contracts and the appointment of the fund’s auditor;
- reviewing the fund manager’s regulatory compliance; and
- ensuring that the fund manager discloses material information to unitholders.
Private real-estate funds operating under the IFR regime must appoint a custodian, an auditor, a minimum of two accredited real-estate asset valuers, one or more developers where initial or structural development is envisaged, and an engineering office, in line with the CMA regulations.
Private placement and investor eligibility
Private real-estate funds are offered by way of private placement. While institutional and qualified client investors may participate without specific investment limits, retail client investors are subject to a maximum investment of SAR 200,000 per offeree. Additionally, cash subscriptions from retail clients may not exceed 50% of the total cash subscriptions received by the fund.
Post-offering and continuing obligations
Following the close of the offering period, the fund manager must submit the offering results and notification of the fund becoming operational to the CMA. In the event of an unsuccessful offering, the fund manager must notify the CMA and return subscription monies, together with any returns, to unitholders.
Ongoing reporting obligations to the CMA and unitholders include providing periodic updates on fund performance, material events, and any changes affecting the fund’s risk profile or governance.
Simplified investment funds
On 2 March 2026, the CMA issued the Instructions of Simplified Investment Funds (Instructions), introducing a streamlined offering process and enhanced flexibility in structuring funds.
The fund manager must notify the CMA in writing prior to the proposed offering date, submit prescribed documents, and pay the relevant fees. Unlike the IFR regime, the Instructions do not prescribe a 15-day advance notification period or a formal CMA review period, thereby enabling more agile fund launches and shorter lead times. Units for such simplified funds may be offered only by way of private placement to institutional clients, and secondary market ownership is similarly restricted to institutional clients.
A notable feature of the simplified regime is the flexibility to address key matters through bespoke terms and conditions rather than prescriptive regulatory rules. These matters include termination and liquidation rules, unit class characteristics, reporting mechanisms and frequency, policies for amending the fund’s terms and conditions, and procedures for unitholder meetings.
Similar to private real-estate investment funds under the IFR and SPE Rules, a simplified investment fund may not be established as a real estate fund or invest in real estate assets if the fund manager holds only a “managing investments” licence without an “operating funds” licence. Real estate owners wishing to establish a simplified fund must therefore engage a fund manager licensed for both managing investments and operating funds.
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Simplified funds, by offering greater contractual flexibility and a lighter offering process, allow institutional investors to negotiate bespoke fund terms and conditions with fund managers. This approach is likely to facilitate more efficient fund formation and faster capital deployment through simplified documentation and notification requirements.
Interaction with other regulatory regimes and practical implications
The CMA regulatory framework operates alongside other governmental approvals typically required for real estate development, including construction permits, zoning and land-use approvals, municipal clearances, and environmental approvals. These development-specific requirements are not substituted by the CMA’s jurisdiction or capital market laws and regulations.
Simplified funds, by offering greater contractual flexibility and a lighter offering process, allow institutional investors to negotiate bespoke fund terms and conditions with fund managers. This approach is likely to facilitate more efficient fund formation and faster capital deployment through simplified documentation and notification requirements.
However, careful analysis of the fund manager’s licensing status, the target investor base, and the parties’ requirements remain essential when evaluating the most appropriate regulatory pathway for accessing the Saudi real-estate investment market.
Private real-estate funds have become increasingly accessible to a broader range of investors, while offering new opportunities for real estate owners seeking to contribute land to funds for development. Fund managers may now distribute units through licensed investment-fund distribution platforms and electronic money institutions licensed by the Saudi Central Bank, including via websites and applications. These channels broaden investor access, reduce reliance on traditional intermediaries, and enable landowners to participate in fund structures that facilitate the development of their assets.
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