Saudi Arabia to Allow Foreign Ownership in Real Estate Companies with Projects in Mecca & Medina

Saudi Arabia is expanding access to foreign investors in Mecca and Medina’s real estate market in a major step toward easing international ownership laws. Market reactions have been positive, as companies focused on the two Holy Cities expect to see notable gains.

By Giulia Interesse

Saudi Arabia has taken another step toward opening its economy to international investors by allowing foreign ownership in real estate companies with projects in Mecca and Medina. This marks a significant shift in policy, as investment in these two Holy Cities has traditionally been highly restricted. By enabling foreign participation through listed companies on the Saudi stock exchange, the government aims to enhance market liquidity, attract global capital, and support ongoing development initiatives.

This decision builds upon earlier reforms, such as the 2021 allowance for non-Saudis to invest in real estate funds focused on these areas. For businesses and investors tracking opportunities in the Gulf region, this move signals Saudi Arabia’s broader commitment to increasing foreign investment in its key economic sectors.

In this article, we explore the implications of Saudi Arabia’s decision to allow foreign investors to acquire stakes in real estate companies operating in Mecca and Medina. Additionally, we assess the potential market impact, investor interest, and what this shift means for businesses looking to engage with Saudi Arabia’s evolving real estate sector.

What foreign investors need to know about the new regulations

The new regulations introduced by Saudi Arabia’s Capital Market Authority (CMA) allow foreign investors to invest in listed Saudi companies owning real estate in Mecca and Medina. Here’s what foreign investors need to know about the policy:

• Eligible investment options: Foreign investors can invest in shares or convertible debt instruments of Saudi-listed companies that own real estate in Mecca and Medina.
• Ownership limits: Foreigners can own up to 49 percent of the shares in these companies. Strategic foreign investors are excluded from these investment options.
• Excluded strategic investors: Strategic foreign investors are not allowed to own shares or convertible debt instruments in these companies under the new rules.

Experts insights and market reaction

The announcement that Saudi Arabia is allowing foreign investment in companies owning real estate in Mecca and Medina has sparked significant interest among global investors and industry experts. Faisal Duranni, head of research for MENA at Knight Frank, described the move as a major step toward easing international ownership laws in Saudi Arabia, signaling a broader strategy to attract foreign capital into the kingdom’s real estate market.

Ziad El Chaar, CEO of London-listed Dar Global, echoed these sentiments, noting that the relaxation of foreign ownership restrictions in the Holy Cities of Mecca and Medina would significantly impact the market. Developers are already preparing to capitalize on the increased interest from international investors, anticipating a boost in real estate activity and development projects, particularly in areas linked to the pilgrimage economy. The expansion of foreign investment opportunities is expected to bring international capital and expertise into these sacred cities, further enhancing the value and appeal of the local real estate market.

Market reactions have been overwhelmingly positive, with significant gains in the share prices of companies focused on real estate in Mecca and Medina.

On the day of the announcement, 13 out of 14 real estate companies listed on the Saudi Stock Exchange saw an average rise of 3.59 percent in their stock prices. The companies with a direct focus on Mecca and Medina, such as Taiba Investments Co., Makkah Construction and Development Co., Knowledge Economic City, and Jabal Omar Development Co., experienced even larger increases, ranging from 9 percent to 10 percent. These strong market reactions suggest that investors are optimistic about the potential for further development and the opportunity to tap into the lucrative real estate market tied to the religious and cultural significance of these cities.

In summary, the decision is viewed as a catalyst for both short-term market activity and long-term strategic shifts in Saudi Arabia’s real estate landscape. The easing of foreign investment restrictions is likely to attract a wider pool of international investors, from private equity firms to individual investors, all eager to engage with the booming real estate market in Mecca and Medina. As the Kingdom continues to open up to global capital, experts anticipate a broader trend of increased foreign participation in Saudi Arabia’s economic growth, underpinned by projects that align with the country’s Vision 2030 agenda.

Outlook for Saudi Arabia’s real estate sector

Saudi Arabia’s real estate market is undergoing rapid transformation, driven by Vision 2030 initiatives that aim to boost home ownership, expand urban infrastructure, and diversify economic activity beyond oil. The government’s focus on large-scale housing, commercial, and tourism projects is reshaping the sector, with growing investor interest in key cities beyond Riyadh, such as Mecca and Medina.

Mega projects such as NEOM, Qiddiya, and The Red Sea Project are reshaping the investment landscape, attracting global interest in newly emerging economic hubs. Riyadh has seen the most significant price increases, particularly in the residential and rental markets, but the latest regulatory changes in Mecca and Medina could lead to a surge in demand in the Holy Cities as well.

While government-led initiatives are expanding housing supply, the gap between supply and demand remains a challenge, leading to increased property prices. To counterbalance this, Saudi Arabia is working on US$1.1 trillion worth of real estate projects, with a goal of constructing over four million residential units across the Kingdom by 2030. These efforts aim to stabilize the market, improve affordability, and create investment opportunities for domestic and foreign players alike.

Investment outlook

The recent decision to allow foreign investors to hold stakes in listed real estate firms with Mecca and Medina assets represents a key step toward further liberalizing Saudi Arabia’s property market. The positive market reaction to the latest policy shift—evidenced by the strong performance of Tadawul-listed real estate firms—suggests growing confidence in Saudi Arabia’s real estate sector as a viable investment destination.

Beyond the stock market, Saudi authorities are finalizing a broader property ownership law, which will enable non-Saudis to own commercial, residential, and agricultural real estate anywhere in the country, including Mecca and Medina. The law is designed to balance investor interest with regulatory safeguards to prevent market distortions. If passed, this legislation could be a game-changer, offering foreign investors more direct exposure to one of the region’s fastest-growing real estate markets.

For now, the most accessible routes for international investors include buying shares in listed property companies, investing in REITs, and participating in large-scale development projects. Analysts predict that as the Kingdom continues to ease restrictions and refine its regulatory framework, foreign participation in Saudi real estate will expand beyond corporate structures, eventually allowing for direct property purchases in key cities.

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