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Introduction of a Real Estate Regulator in Bahrain

Introduction of a Real Estate Regulator in Bahrain

Real Estate Regulator in Bahrain

As most people living and working in Bahrain will be aware, a new real estate development law was passed into law on 3 August 2017.  Law No. 27 of 2017 (New Law) seeks to address a number of inadequacies which exist in the current laws governing real estate developments in Bahrain. Over the course of the next number of weeks we will issue a number of legal updates discussing some of the more salient aspects of the New Law and those which we believe will be of particular interest to our clients going forward.

One of the main features of the New Law, and the topic of this legal update, is the introduction of a real estate regulator in Bahrain (Regulator). This is very much a welcome addition to the development sector and should give direction and clarity to the real estate strategy of the country.

The Bahrain real estate development market has contracted somewhat over the last few years. A clear and properly governed real estate sector is vital to the country's economy and to secure sustained foreign investment. It is hoped that the establishment of the Regulator will assist Bahrain to attract international investors and bolster a stressed sector. This is achievable, provided it is well established, well run and the rules, procedures and regulations referred to in the New Law (which are yet to be prepared and passed) are clear and robust while at the same time tailored to the Bahrain market.

The Regulator's powers will be far reaching - it will have all the duties and powers required to regulate the real estate sector in Bahrain. Unlike the rest of the provisions of the New Law, which come into effect 6 months from the date of publication, the provisions establishing the Regulator (referred to as the "Authority" under the New Law) came into effect this month. It is now imperative that the Government of Bahrain move quickly to establish the Regulator and have it up and running as soon as possible. There is otherwise the risk that real estate development will be slowed further while the market adopts a "waits and see" approach to the new regulation of the sector.

Powers and Responsibilities of the Real Estate

A key role for the Regulator is to produce a national plan for real estate development. Other powers and responsibilities of the Regulator include:

  • collecting and analysing data;
  • proposing programmes and policies for the promotion of the real estate sector;
  • providing awareness and guidance for people involved in the real estate sector;
  • setting up rules and regulations for the enforcement of the New Law;
  • proposing and collecting the fees as required for permits and renewals;
  • monitoring compliance with the New Law;
  • acting as a central point for all applications and requests for licences and working with related parties to create a seamless system;
  • dealing with reports of complaints in contravention of the New Law;
  • representing the real estate sector (including internationally), providing opinions or generally examining real estate developments to see they are in line with the New law; and
  • determining the rules and procedures relating to licences, enforcement of the New Law and the registers required by the New Law.

The Regulator will conduct consultations with the public and concerned authorities when it intends to issue new regulations. Consultations such as these mean that developers and relevant authorities shall have a greater input on any new regulations introduced. Public consultations allow regulators to understand the needs and challenges of the people working within the sector. Information gathered in these forums are key to the success of the regulations as it allows laws and procedures to be drafted in a balanced and market relevant way. Failure to consider the particular nuances of a market can lead to laws and regulations, which only end up strangling the sector and acting as a deterrent to investment and future expansion, defeating the purpose behind bringing in better regulation to a market in the first place.

The New Law – A Work in Progress

While there can be little doubt that the introduction of the New Law and the Regulator is a positive step forward for the real estate sector in Bahrain, there is a long way to go before the laws needed to govern the sector are complete. Much of the provisions of the New Law require the Board of Directors of the Regulator to issue further rules, procedures and resolutions. What this means in practical terms is that, until these are passed, developers will be unable to comply with many parts of the New Law. If the Board of Directors were to delay in issuing these decisions and regulations, developers will be in the dark about several key compliance requirements. Many real estate developers felt uncertain as to how they could ensure full compliance with the previous development law (Law 28 of 2014), because of the uncertainty which prevailed in setting up parts of the regulatory aspects of that law. It is hoped that this will not occur again with the New Law.

What is clear about the New Law and the establishment of the Regulator is that the Government of Bahrain see the need for proper control and regulation of the real estate market. The New Law grants the Regulator considerable powers of inspection and sanction. Compliance by developers on the island of Bahrain is mandatory and the infrastructure needed to ensure compliance with the New Law is being established. We would encourage all of our developer clients to consider their practices and documentation to ensure they are in line with the New Law. Proper regulation of the sector has begun and is here to stay.

Key contacts: Abdul-Haq Mohammad, Mairead Finlay-Noonan and Shrin Pishbin.