Real Estate Business In Bahrain: Getting Started

Bahrain's real estate market is booming, with an overall increase in transaction values and the sector bolstered by a USD 30 billion infrastructure. The country's flexible policies, easy access to the Gulf market, and 100% foreign ownership make it an attractive prospect for investors.

Starting a business in Bahrain offers numerous advantages, including tax exemptions, world-class infrastructure, and liberal public policies. However, there are also challenges, such as a segmented labour market and a biased legal system.

To start a real estate business in Bahrain, you will need to understand the legal framework, obtain the necessary licenses, and develop a strategic business plan. This includes choosing a legal structure, registering your trading name, and obtaining preliminary approval from the relevant authorities.

With careful planning and a comprehensive understanding of the local market, you can establish a successful real estate business in Bahrain.

Understanding Bahrain's real estate market

Bahrain's real estate market is experiencing a boom, with a range of developments attracting an influx of overseas property investments in large-scale commercial and residential projects. The country's real estate sector is bolstered by a $30 billion infrastructure and remains a key pillar of the Kingdom's economy.

Bahrain offers 100% foreign ownership, making it highly attractive for investors from outside the Gulf Cooperation Council (GCC). There are no limitations on repatriation, capital, profits, or dividends, making it a profitable choice for investors. Additionally, Bahrain's rental market provides stable and steady income, with gross rental yields among the highest in the GCC.

The country's liberal foreign ownership laws and robust regulatory systems, such as the Real Estate Regulatory Authority (RERA), make it a competitive destination in the global real estate marketplace. RERA ensures fair, effective regulation and pricing, working with the government and industry to develop a long-term National Real Estate Policy.

Bahrain's real estate market is also supported by world-class infrastructure, with the country ranked 7th globally in terms of business access. Its strategic location and excellent logistics provide efficient connections to the GCC.

The Kingdom's stable government and favourable policies have enhanced the real estate sector, making it a competitive and prosperous arena. The Bahrain Board of Economic Development (EDB) supports and participates in various programmes to enrich the real estate sector and increase development opportunities for investors and property developers.

The tourism sector is a growing opportunity for international real estate investment in Bahrain, with a variety of major tourism-related developments underway. These include residential and mixed-use projects, waterfront developments, fully integrated modern cities, and luxury resorts.

Bahrain's real estate market is expected to continue its upward trajectory, driven by strong economic growth, robust demand, and limited supply.

Choosing a legal structure

When starting a business in Bahrain, choosing a legal structure is one of the most important decisions you will make. This decision will directly impact how your company is handled, the owner's liability, and other factors. Here are some things to consider when choosing a legal structure for your real estate business in Bahrain:

• Limited Liability Company (LLC): This is a common choice for businesses as it offers limited liability protection for owners. In an LLC, the owners' liability is limited to their investment in the company. It is important to note that an LLC in Bahrain cannot engage in banking, insurance, or brokerage activities.
• Foreign Company Branch: As a foreigner, you can open a branch of your existing company in Bahrain if it is authorised by the Minister of Commerce and Agriculture and designated by a local (Bahraini) sponsor.
• Partnership Company: A partnership company is formed between two or more individuals with no limited liability. Partners are jointly responsible for the company's debts and liabilities.
• Sole Proprietorship: A single individual owns and operates the business, with unlimited liability. The minimum capital required to start a sole proprietorship in Bahrain is BD 50,000. It is important to note that single-person companies in Bahrain cannot operate in the banking, financial services, or insurance industries.
• Public Shareholding Company: Also known as a Joint Stock Company, this type of company consists of several promoters (more than 7) who subscribe via shares. Shares can be subscribed to by people from both within and outside the GCC.
• Closed Shareholding Company: This type of company is composed of 2 shareholders who subscribe via negotiable shares that are not available to the public. These shares are typically held by Bahraini, GCC, and non-GCC residents.

When choosing a legal structure, consider factors such as the level of control you want over the company, the protection of personal assets, the complexity of the structure, and the cost of formation and maintenance. It is always recommended to consult with a local business advisor or lawyer to determine the most suitable legal structure for your specific needs and circumstances.

Registering your business

• Choose a Legal Framework: This is a fundamental decision that will shape how your company is structured and operated. Bahrain offers various legal frameworks for business formation, including Limited Liability Company, Foreign Company Branch, Partnership Company, Sole Proprietorship, Public Shareholding Company, and Closed Shareholding Company. Each framework has different requirements and implications for ownership, liability, and operations.
• Register a Business Name: Once you've chosen the legal framework, it's time to select a unique and memorable name for your real estate business. The Ministry of Industry and Commerce (MOIC) has guidelines for naming your company, so ensure you adhere to their rules. You can submit up to four name options simultaneously.
• Commercial Company Registration: Obtain the commercial registration documents from the Bahrain Investment Centre. They will provide you with the necessary forms and paperwork. Make sure to carefully fill out the application form and submit any required supporting documents.
• Licensing and Registration: If your company does not immediately obtain commercial registration papers, you will need to secure licensing and approval. This step involves obtaining the relevant licenses and permissions from the authorities, such as the Department of Economic Development (DED) or any other industry-specific regulatory bodies.
• Other Authorisations: After successfully registering your business, there are a few more steps to complete. These include opening a dedicated bank account for your company, leasing office space, and recruiting employees. Additionally, depending on your specific operations and industry, you may need to register with additional entities, such as the Department of Naturalization and Residency (DNRD) for visas and work permits, and the Ministry of Labor (MOL) for employment-related matters.

Remember, it is always a good idea to consult a local business advisor or expert who can guide you through the intricacies of registering your real estate business in Bahrain and ensure compliance with all legal and regulatory requirements.

Getting the necessary licenses

The process of obtaining the necessary licenses for starting a real estate business in Bahrain involves several steps, including choosing the appropriate business structure, registering your trading name, obtaining preliminary approval, and fulfilling specific requirements set by the regulatory authorities. Here is a detailed guide to help you navigate the licensing process:

• Choose the right business structure: Decide on the legal framework that suits your real estate business. Bahrain offers various options, including a Limited Liability Company (LLC), Foreign Company Branch, Partnership Company, Sole Proprietorship, Public Shareholding Company, and Closed Shareholding Company. Each structure has different requirements and limitations, so it is essential to understand the differences before making a decision.
• Register your trading name: After choosing the business structure, you must register a unique name for your real estate business. Submit an application to the relevant authority, such as the Ministry of Industry and Commerce (MOIC) or the Department of Economic Development (DED), along with the necessary supporting documents. Ensure your chosen name reflects your business activities and complies with the guidelines.
• Obtain preliminary approval: Seek preliminary approval from the DED or the appropriate regulatory body. This usually involves submitting an application form and providing initial documents. Their approval indicates that you can proceed to the next steps in the process.
• Understand real estate-specific requirements: In Bahrain, the real estate sector is regulated by specific authorities, such as the Real Estate Regulatory Authority (RERA) or similar entities. Familiarize yourself with their requirements, which may include mandatory training courses, examinations, or certifications specific to the real estate industry. Ensure you meet all the qualifications and comply with the industry standards.
• Apply for a trade license: Apply for the necessary trade license from the DED or the equivalent licensing authority. This license allows you to legally conduct commercial operations and is a prerequisite for operating your real estate business in Bahrain.
• Obtain a real estate brokerage license: To engage in real estate transactions, you will need a specialized license, such as a real estate brokerage license, issued by the relevant authority. This license authorizes you to buy, sell, rent, or manage properties on behalf of clients. Each authority may have specific requirements for obtaining this license, so ensure you meet their criteria.
• Comply with additional licensing requirements: Depending on your specific business activities and the regulatory framework in Bahrain, there may be additional licensing requirements. For example, if you plan to manage rentals, you may need to register with a rental agreement system or obtain additional approvals from other government entities overseeing the real estate sector.
• Register your business: Once you have obtained the necessary licenses, register your real estate business with the appropriate authorities, such as RERA or the equivalent. This step typically involves submitting an application form, providing copies of your licenses, and fulfilling other registration requirements specified by the regulatory body.
• Obtain residency visas: If you plan to hire employees or bring in staff from overseas, you will need to obtain residency visas for them. Register with the relevant authorities, such as the General Directorate of Residency and Foreigners Affairs (GDRFA) or the Ministry of Human Resources and Emiratisation (formerly the Ministry of Labour), to ensure compliance with immigration and employment regulations.
• Stay informed about legislative changes: Stay up to date with any changes in legislation or regulatory requirements pertaining to the real estate industry in Bahrain. This includes being aware of any modifications to licensing procedures, approval processes, or compliance standards. Consult with local business consultants or legal advisors to ensure your business remains compliant at all times.

Complying with legislation

When starting a real estate business in Bahrain, it is imperative to comply with the country's legislation and regulatory framework. Here are some key points to consider:

• Understand the Regulatory Authorities: Bahrain's real estate sector is regulated by various entities, including the Real Estate Regulatory Authority (RERA) and the Ministry of Commerce (MOIC) or the Ministry of Industry and Commerce (MOIC). Familiarise yourself with their roles and guidelines to ensure compliance.
• Adhere to Foreign Ownership Laws: Bahrain offers 100% foreign ownership in most sectors, including real estate. However, it is important to understand the specific regulations and restrictions for foreign investors in the industry.
• Obtain Necessary Licenses and Permits: Obtain all the required licenses and permits to operate legally in Bahrain. This includes a commercial registration from the MOIC and any specific licenses related to your real estate activities, such as brokerage or property management.
• Understand Tax Regulations: Bahrain offers tax advantages, including zero taxation on rent and property. Ensure you understand the tax regulations and any applicable taxes for your real estate business to avoid any legal issues.
• Comply with Anti-Financial Crime Laws: Stay compliant with anti-financial crime laws and anti-money laundering measures. These regulations are crucial to maintaining the integrity of the real estate industry and protecting investors.
• Maintain Good Standing: Ensure your company maintains a good standing with the relevant regulatory authorities. This includes submitting any required reports, undergoing audits, and addressing any compliance-related issues promptly.
• Stay Informed on Regulatory Changes: The legislative landscape can evolve, and Bahrain's government actively works to improve the business environment. Stay updated on any changes in laws, regulations, and policies that may impact your real estate business.
• Consult with Experts: Consider consulting local business consultants or legal experts specialised in Bahrain's real estate industry. They can provide tailored advice and guidance on complying with the country's legislation and help you navigate any complex regulatory matters.

By diligently adhering to the legislation and maintaining a strong understanding of Bahrain's regulatory environment, you can establish a compliant and successful real estate business in the country.

Frequently asked questions