The funds would be publicly offered and traded on the Saudi Arabia stock exchange, and would invest in residential, commercial, industrial, and agricultural real estate, the CMA said.

The rules cover the management, operation and ownership of the funds, which will not be allowed to invest more than 25% of their assets outside Saudi Arabia.

REITFs’ principal investment objective is to invest in the construction of real estate that generates periodic earnings, and distribute a percentage of the net earnings in cash to the unit holders, the CMA said.

At least 75% of the fund’s total assets worth must be invested in construction-developed real estate, and no investment can be made in unoccupied land. At least 90% of the fund’s net earnings must be distributed annually to the unit holders, the CMA said.

Fund managers must appoint unit or more custodians authorised to conduct activity in the Kingdom, to seize custody of the assets of the fund and its documentation, and a property management company that specialises in, and has experience, in managing properties.

Dubai-based finance law expert Amir Ahmad of Pinsent Masons, the law firm behind Out-Law.com said: “The draft rules purpose to ensure that the investment funds focus primarily on domestic real estate investment opportunities. This provides tangible evidence that the Kingdom is taking pro-active steps towards diversifying its economy.”

The CMA has asked for comment on the draft rules by 23 August.