Saudi Arabia Opens Real Estate Investment in Holy Cities to Foreigners

In a landmark decision, the Saudi Capital Market Authority (CMA) has allowed foreigners to invest in listed companies owning real estate in Makkah and Madinah, a move aimed at enhancing the Kingdom’s capital market and aligning with its Vision 2030 economic diversification plan.

Effective immediately, foreign investors can hold shares or convertible debt instruments in listed real estate companies operating in the holy cities. Total non-Saudi ownership, including individuals and legal entities, is capped at 49% of a company’s shares. However, strategic foreign investors are prohibited from acquiring stakes in these firms.

While non-Saudis have been permitted to purchase properties in Saudi Arabia under specific conditions, ownership in Makkah and Madinah has traditionally been limited to Saudi nationals. Foreigners have only been allowed to lease properties in these areas. This decision marks a significant step in opening the market to international investors.

“The CMA aims to stimulate investment, enhance the attractiveness and efficiency of the capital market, and strengthen its regional and international competitiveness while supporting the local economy,” the regulatory authority said in a press release.

The initiative is part of broader efforts to attract foreign direct investment (FDI) and provide liquidity for developmental projects in Makkah and Madinah. These reforms are central to the Kingdom’s Vision 2030 strategy, which seeks to reduce dependence on oil revenues and diversify the economy.

Saudi Arabia has set an ambitious target of attracting $100 billion in FDI by the end of the decade. Key reforms to achieve this include allowing foreign residents to invest directly in the stock market, enabling non-Saudi investors to access markets via swap agreements, and permitting qualified foreign institutions to invest in listed securities.

This latest policy change builds on previous measures, such as the 2021 decision allowing non-Saudis to subscribe to real estate funds investing within Makkah and Madinah’s boundaries, which has already bolstered the market’s appeal to regional and international investors.

The CMA’s announcement had an immediate impact on the stock market. Share prices of real estate companies surged, with Knowledge Economic City rising 9.89% to SR16.66 ($4.44), Jabal Omar Development Co. climbing 10% to SR25.85, and Makkah Construction and Development Co. increasing 9.84% to SR106 by mid-day trading on Monday.

These developments highlight the Kingdom’s commitment to fostering a more open and competitive investment environment, signaling promising opportunities for both local and international stakeholders.