Bahrain Real Estate Law: Contracts and Guarantees

Published on September 29, 2025 and written by Cyril Jarnias

The rapid evolution of Bahrain’s real estate market presents numerous opportunities and challenges for local and international investors, making a clear understanding of the legal framework surrounding real estate contracts and guarantees essential.

This article aims to break down the crucial legal aspects related to real estate transactions in this Gulf country, including contract regulations, party obligations, and guarantees designed to secure investments.

Whether you’re a buyer or developer, thorough knowledge of contractual standards and guarantee mechanisms is crucial for effectively navigating Bahrain’s dynamic market, thereby optimizing your investments while minimizing legal risks.

Real Estate Law in Bahrain: An Overview of Rules and Regulations

Legal Frameworks and Regulatory Bodies in Bahrain Real Estate Law

• Law No. 27 of 2017: Foundation of the current legal framework, governing property ownership, transactions, management, and real estate regulation.
• Bahrain Civil Code: Defines land ownership and regulates transactions.
• Real Estate Regulatory Authority (RERA): Primary regulatory authority overseeing agents, management, and sector compliance.
• Survey and Land Registration Bureau (SLRB): Responsible for transaction registration and cadastre management.

Property Acquisition Process

Step	Bahraini Residents	Foreigners (Outside Designated Areas)	Foreigners (Designated Areas)
Purchase	Free throughout territory	Not permitted	Permitted (full ownership)
Lease	No limit	Up to 99 years	No limit within zone
Procedure	Property selection, sales contract signing, legal checks, down payment (~10%), SLRB registration, fee payment (2% of price), property certificate delivery	Same, but limited to designated areas (Juffair, Amwaj Islands, Seef)	Same, but limited to designated areas (Juffair, Amwaj Islands, Seef)

• Freehold areas: Juffair, Amwaj Islands, Seef (expanding list).
• Residency by investment: Possible through acquisition in these areas.

Potential Restrictions

Foreigners can only purchase full ownership in designated areas.

Outside freehold areas, only long-term leases (up to 99 years) are available for non-nationals.

Registration Procedures

Registration occurs with SLRB after contract verification and payment of registration fees (2% of purchase price).

Property certificate issued to buyer.

Owner and Tenant Rights

• Owners: Full ownership rights (in authorized areas), right to lease, sell, mortgage, or transfer property.
• Tenants: Rights governed by lease agreement, protection against wrongful eviction, recourse options for clause violations.

Tax and Financial Implications

Type	Rate or Cost
Registration fees	2% of purchase price
Notary/legal fees	0.5–1%
Capital gains tax	None
Annual property tax	None
Rental income tax	None (for individuals)
VAT	5% (only on new or off-plan commercial sales)

Bahrain offers a very favorable tax framework: no tax on rental income, capital gains, or annual property tax for individuals.

Guarantees for Buyers and Sellers

• Enhanced legal security through Law No. 27/2017.
• Protection against arbitrary expropriation.
• Transaction oversight by RERA and SLRB.

Legal Recourse in Case of Dispute

Parties can approach civil courts or opt for arbitration in case of contractual disputes, failure to meet commitments, or hidden defects.

RERA can intervene in mediation and sanction professionals for sector rule violations.

Key Points Summary

• Modern and secure legal framework.
• Facilitated property access for foreigners in freehold areas.
• No taxation on rental income and capital gains.
• Active regulatory bodies (RERA, SLRB).
• Judicial recourse and arbitration available for dispute resolution.

Purchase Contracts: Understanding Key Elements for Expatriates

Real Estate Purchase Contracts in Bahrain: Key Elements for Expatriates

Available Contract Types

• Freehold Purchase Contract
  Available to expatriates only in designated areas (e.g., Amwaj Islands, Durrat Al Bahrain, Juffair, Seef).
  Offers full property ownership with resale rights and possibility of obtaining renewable residency permits.
• Leasehold Purchase Contract
  Allows acquisition of usage rights for a determined period (typically 50 to 99 years), but full ownership remains limited.

Contract Type	Expatriate Access	Legal Particularities	Authorized Areas
Freehold	Yes (listed areas)	Resale rights, possible residency	Amwaj, Durrat, Juffair, Seef
Leasehold	Yes	Usage rights, limited duration	More extensive, outside freehold

Essential Steps in the Purchase Process

1. Property selection in expatriate-authorized area
2. Verification of zone eligibility (freehold)
3. Signing purchase offer or preliminary agreement
4. Administrative verifications:
   • Seller ownership check (property title)
   • Absence of mortgage or debts on property
   • Property compliance with local zoning rules
5. Financing application (if needed)
6. Signing purchase contract before notary or competent authority
7. Official registration with Bahrain cadastre

Specific Clauses for Expatriates to Monitor

• Geographical restriction: Only certain neighborhoods are open to foreign purchase.
• Residency permit conditions: Often linked to investment amount and area.
• Resale or leasing rights: Verify if contract limits resale or leasing to other foreigners.
• Maintenance responsibilities and condo fees: Clearly clarify cost distribution.
• Deposit cancellation or refund: Specific conditions if sale not finalized.

Essential Documents for Signing

Required Document	Legal Importance
Valid passport	Identity verification
Residency permit (CPR)	Purchase and registration condition
Proof of financial capacity	Purchase financing guarantee
Seller’s property title	Transaction legality validation
Sales contract (Arabic/English)	Official deed transferring ownership
Employment/income verification	Bank and tax requirement
Mortgage-free certificate	Assurance property is debt-free

Practical Tips for Secure Acquisition

• Research the area: Purchase only in foreigner-authorized neighborhoods.
• Verify developer or real estate agent reputation: Prefer recognized professionals.
• Engage independent legal counsel specialized in Bahraini real estate.
• Read each contract clause carefully (especially regarding restrictions and future obligations).
• Request English translated copies if contract is in Arabic.
• Be wary of overly attractive offers and verify project viability (especially for new or off-plan properties).
• Anticipate additional fees: Legal, registration, and transfer fees (2-3% of property value).
• Keep all documents and receipts related to the transaction.

Remember: Real estate purchase in Bahrain by expatriates is possible but strictly regulated legally. Scrupulous adherence to procedures, engagement of qualified professionals, and vigilance regarding documents and contractual clauses are essential to secure the operation and avoid disputes.

Guarantees and Protections for Real Estate Buyers in Bahrain

Types of Legal Guarantees for Real Estate Buyers in Bahrain:

• Hidden defects guarantee: Protects buyer against any non-apparent defects at sale that compromise property use or value.
• Ten-year guarantee: Covers for ten years after delivery, defects affecting building strength or integrity, holding developers and builders responsible.
• Conformity guarantee: Ensures delivered property matches contractual specifications (area, materials, equipment).

Guarantee Type	Duration	Covered Item	Responsible Party
Hidden defects	2 years from discovery	Non-apparent defects	Seller/developer
Ten-year	10 years	Strength, structure	Developer/builder
Conformity	Upon receipt	Equipment/finishing	Seller/developer

Developer Obligations Towards Real Estate Buyers:

• Provide notarized and registered sales deed
• Supply no-objection certificate guaranteeing absence of mortgage or dispute on property
• Comply with all local construction and zoning standards
• Deliver property conforming to signed contract

Importance of Contract Registration:

The sales deed must be registered with the Survey and Land Registration Bureau. This registration formalizes legal property transfer to buyer and protects their rights. Without this formality, there is no official recognition or strong legal protection.

Legal Recourse in Case of Real Estate Dispute in Bahrain:

• Written formal notice to seller or developer
• Approach competent authorities (Survey and Land Registration Bureau)
• Mediation before local commission or recourse to civil courts for compensation (sale cancellation, indemnification)

Examples Regarding Buyer Rights:

• Right to withdraw in certain specific cases before final signing
• Right to compensation if hidden defect discovered after purchase
• Possibility to demand immediate correction in case of non-conformity

List of Main Authorities Involved in Real Estate Supervision and Dispute Resolution:

• Survey and Land Registration Bureau (land registration)
• Municipal Council (zoning compliance)
• Ministry of Housing (regulatory supervision)

These entities validate official documents, oversee real estate transactions, and can intervene to arbitrate or sanction in case of abuse.

To ensure your legal security when purchasing real estate in Bahrain, verify each document with competent authorities, require all necessary certifications before final payment, and be accompanied by a specialized lawyer.