Saudi Real Estate Braces for Freehold Boom as Foreign Ownership Reforms Loom
Foreigners eye lucrative opportunities in Saudi real estate as the Kingdom plans to lift property ownership restrictions, experts told sources, highlighting that the move will spark investor optimism but also exacerbate the house affordability issue.
“Relaxing foreign ownership laws will expand the potential pool of international investors in the Saudi real estate market,” said Mansoor Ahmed, Executive Director at Colliers MENA. “This surge in demand from foreign buyers could lead to a rise in property sales, especially in sought-after locations like major cities and tourist destinations.”
Saudi Arabia’s 2021 mandate requiring foreign firms to establish local headquarters by the end of 2023 or risk losing out on lucrative government contracts has prompted an influx of expats. But the growing pains of this migration have become evident as the shortage of suitable accommodations has emerged as a major concern among new and incoming residents looking to settle in the Kingdom.
The Gulf country’s booming economy has piqued the interest of many foreigners looking for a lucrative investment opportunity or simply buying a home instead of renting one.
“The influx of foreign companies and executives has created a pressing need to attract more foreign investment,” Jean Abboud, Partner (KSA) at BSA Legal, told sources.
In March, reports emerged citing the CEO of Saudi Arabia’s Real Estate General Authority (REGA), Abdullah Alhammad, stating that the Kingdom was planning new laws which will allow foreigners to buy property anywhere in the country, even in the holy cities of Mecca and Medina.
The new law will enable non-Saudi residents to own real estate of all kinds, be it commercial, residential, or agricultural, under certain regulations which have not been made clear yet.
“The proposed changes will not only boost the real estate market in Saudi Arabia but potentially initiate a freehold boom in the Middle East,” Abboud added.
“It will significantly increase the potential for foreign investment in line with the Kingdom’s ambitious real estate development plans under Vision 2030. Analysts forecast a surge in demand and a more balanced sector, which will moderate real estate prices.”
The present regulations in Saudi Arabia, namely the Council of Ministers Resolution No. 89, provide specific allowances yet impose restrictions on foreign real estate ownership. Foreigners and entities are allowed to own properties required for their professional or economic activities, but obtaining approval from the Ministry of Investment is mandatory.
Similarly, non-Saudi residents can own residential real estate, provided they acquire a license from the Ministry of Interior. However, foreign ownership has been hindered by the time-consuming approval process, among other legal restrictions.
Ownership of real estate in Mecca and Medina, as of yet, is restricted to Saudis only, with the exception of inheritance cases. Streamlining the approval process and revisiting some of the limitations could potentially encourage more foreign investment in the country’s real estate market.
Foreigners looking to buy property must also have a residency visa (Iqama), live in the property itself (investment properties are not allowed), and are required to sell the property upon leaving the country or cancellation of the Iqama.
“The timing is apt for Saudi Arabia to ease its restrictions on foreign ownership,” Abboud added.
