The Saudi Arabian property market opens up to foreigners
- Involvement of pilgrimages
- Conditions
- Licences for real estate investments
Saudi Arabia has authorised the participation of foreign investors in the property market, as part of its strategy to attract international capital and overcome all the challenges involved in achieving the objectives of its Vision 2030 plan.
Vision 2030 is a strategic plan that seeks to reduce Saudi Arabia’s dependence on oil, expand its economy and develop sectors such as health, education, infrastructure, leisure and tourism.
According to a statement issued by the Capital Market Authority, as of 27 January, its managers are allowing foreigners to invest in publicly traded companies and to own permanent or temporary property within the territories of Mecca and Medina.
Involvement of pilgrimages
This measure has been approved three years after non-Saudis were authorised to invest in real estate funds within the boundaries of the two cities. Unlike the previous authorisation, the new plan will allow foreigners to invest in companies whose profits depend on the annual pilgrimage to Mecca, one of Saudi Arabia’s main sources of income.
In this regard, the authorities stated in the communiqué that the initiative aims to ‘attract foreign capital, as well as to provide the necessary amount of liquidity for projects in Mecca and Medina, whether existing or future’.
It should be added that the Saudi government’s goal for the year 2030 is to obtain some 30 million dollars annually for the Hajj and the Umrah, two religious pilgrimages that are very important for Muslims and represent a significant financial windfall for this Gulf monarchy. Moreover, according to official data, both pilgrimages had an estimated income of 12 billion dollars in 2019.
In this way, the Hajj, or annual pilgrimage to the holy city of Mecca, continues to play a key role in the Saudi economy, and with it the increase in the number of pilgrims has become a fundamental part of an ambitious agenda full of reforms aimed at diversifying the economy, moving it away from dependence on oil revenues.
In the wake of the news, the main Saudi Arabian index rose 0.2% thanks to the profits of companies with properties in Mecca, such as Jabal Omar Development Company and Makkah Reconstruction and Development Company, whose revenues increased by 10% each.
Conditions
Non-Saudi investment in companies operating in Mecca and Medina can only be made by purchasing shares in Saudi companies listed on the local stock exchange, Tadawul, or through the acquisition of debt instruments that can be converted into shares. It will even be possible to choose both options at the same time.
Although this new measure allows foreign investors to invest in companies whose income depends on the Hajj, a restriction will be established that will prevent them from owning shares or debt instruments convertible into shares of those companies.
According to the Saudi Arabian Capital Market Authority, foreign investments are ‘limited to shares in Saudi companies listed on the Saudi Arabian Stock Exchange or debt instruments convertible into shares’ and cannot exceed 49% of the company’s shares.
It is important to remember that the Saudi Arabian stock exchange, known as Tadawul, is considered the largest in the Persian Gulf with a value of 2.72 trillion dollars and it opened its doors to foreign investors in 2015 with the aim of attracting more capital and diversifying its economy.
Licences for real estate investments
According to the CEO of the General Real Estate Authority, Abdullah bin Saud Al-Hammad, the organisation approved more than 130 licences for foreign real estate investments in the third quarter of 2024, with the aim of attracting more foreign investment.
During his speech, Al-Hammad emphasised that these licences reflect ‘the confidence of global investors, the attractiveness of the Kingdom as a business destination, the growing opportunities for investors in the Saudi real estate sector and the strength of its legislation’. He also revealed that the real estate sector contributes 12% of GDP, which has exceeded one trillion dollars.
Over the last few years, Saudi Arabia’s real estate sector has consolidated its position as one of the pillars of the economy. For its part, the General Real Estate Authority announced the issuance of more than 20 basic legislations, the objective of which is to improve its reliability, according to the Minister of Municipalities and Housing, Majid Al-Hogail.
In this regard, Minister Al-Hogail said that: ‘The regulatory framework aims to facilitate and regulate the provisions for the development of off-plan real estate projects, from the granting of licences to the completion of real estate projects’ and, in turn, explained that the new regulatory legislation for the sector contributed to a notable growth last year, with 192 licences issued for projects with a total value of more than 39 billion dollars.
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