Saudi Arabia’s Booming Real Estate Market: Opportunities for Investors & Developers

By Sudhanshu Singh

Saudi Arabia’s real estate sector is undergoing a period of rapid transformation, driven by Vision 2030, economic diversification, and population growth. The market is expected to reach a value of US$2.31 trillion in 2025, with residential real estate holding the largest share at US$1.64 trillion. Demand for luxury properties is rising, particularly in Riyadh and Jeddah, fueled by an increasing affluent population and foreign investment interest.

The government’s initiatives, including mortgage lending programs, infrastructure development, and regulatory reforms, have made Saudi Arabia’s real estate market one of the most dynamic in the Gulf region. But challenges such as construction costs, land prices, and regulatory complexities remain significant factors shaping market trends.

Market fundamentals of Saudi Arabia’s real estate sector

Saudi Arabia’s real estate market is built on a sturdy foundation of economic growth, government initiatives, and increasing investor confidence. The market size is projected to reach US$2.47 trillion by 2029, with significant growth in the residential, commercial, and industrial sectors. Homeownership rates have steadily increased, reaching 63.7 percent in 2023, with a government target of 70 percent by 2030.

The mortgage sector has played a vital role in this expansion, with lending growing 5.3 percent in the first half of 2024. This trend is expected to continue as interest rates decline. Foreign direct investment (FDI) is also a critical driver, with Saudi Arabia aiming to attract US$100 billion under Vision 2030. The hospitality sector is experiencing robust growth, targeting 70 million international visitors by 2030, increasing demand for hotels and commercial real estate.

Key segments of Saudi Arabia’s real estate market

Residential real estate

The residential sector dominates Saudi Arabia’s real estate landscape. In first half of 2024 (H1), the number of real estate transactions surged by 38 percent, with total transaction values rising 50 percent to SAR 127.3 billion (US$33.9 billion). Riyadh saw a 10 percent increase in residential sale prices, while Jeddah experienced a 5 percent rise. Rental yields remain strong, with 9 percent growth in Riyadh and 4 percent in Jeddah.

The government has actively supported homeownership through initiatives such as the Sakani program and the Real Estate Development Fund, which provide interest-free mortgages. These policies align with the broader Vision 2030 goal of reaching 70 percent homeownership by 2030, which is already progressing steadily, with rates at 63.7 percent in 2023.

Commercial real estate

Saudi Arabia’s commercial real estate sector is expanding rapidly, driven by corporate relocations, tourism growth, and retail expansion. Office space demand in Riyadh remains high, with rental rates increasing 18 percent in 2024 due to limited supply. Jeddah and Dammam have seen 10-12 percent rent increases, highlighting strong occupier demand across major urban centers.

The retail market continues its expansion trajectory, with major shopping centers under development to accommodate rising consumer spending. Saudi Arabia’s hospitality sector is booming in parallel, with strategic plans to attract 70 million international visitors by 2030, creating substantial demand for hotel properties and mixed-use developments.

Industrial and logistics real estate

Saudi Arabia’s industrial real estate sector is gaining momentum as the country invests heavily in logistics hubs, manufacturing zones, and free economic zones. Recent developments include MODON’s expansion of industrial cities, with 247 new ready-built factories planned across the Kingdom.

The development of a dedicated food production hub in Jeddah supports the Kingdom’s food security strategy while creating specialized industrial real estate opportunities. Industrial rental rates in Riyadh continue to rise, with prime locations seeing strong demand from e-commerce operators and manufacturing companies seeking strategic positioning.

Government initiatives and Vision 2030 impact

Saudi Arabia’s Vision 2030 plays a critical role in shaping the real estate sector.

Housing development and mortgage expansion

• The Saudi Real Estate Refinance Company (SRC) aims to refinance 20 percent of Saudi Arabia’s mortgage market by 2025, injecting liquidity into the system.
• Mortgage lending grew 5.3 percent in H1 2024, with projected interest rate cuts for 2025 expected to boost lending further.
• The Ejar rental platform has improved transparency in the leasing market, enhancing landlord-tenant relations.

Tax and regulatory reforms

• The removal of VAT on real estate sales and introduction of a 5 percent real estate disposal tax has incentivized investment.
• The White Land Tax applies a 2.5 percent levy on undeveloped land, encouraging land development and preventing speculation.

FDI and premium residency programs

• Saudi Arabia aims to attract US$100 billion in FDI under Vision 2030, with real estate playing a key role.
• The Premium Residency Program offers foreign investors real estate-related visas, requiring a minimum investment of SAR 4 million (US$1 million).

Challenges in Saudi Arabia’s real estate market

Rising costs and construction bottlenecks

The rising cost of land and construction materials is a growing concern in Saudi Arabia’s real estate sector. Urban properties, especially in Riyadh and Jeddah, are witnessing significant price increases, making development more expensive. Additionally, the country’s construction capacity is limited, with major Vision 2030 projects competing for resources, leading to project delays. Private developers also face financing hurdles, as accessing capital markets remains challenging in a highly competitive environment.

Regulatory complexities and investor concerns

The FDI inflow in real estate remains low, averaging only 2 percent of GDP in recent years due to complex regulations. Investors also have to face lengthy approval processes and administrative hurdles, limiting market entry. This is complicated by the absence of a standardized foreclosure process for mortgage-backed security development.

Opportunities in Saudi Arabia’s real estate market

Growth in luxury and smart real estate

The demand for luxury properties in Riyadh and Jeddah is rising, attracting foreign investors. Smart cities, such as NEOM and The Line, incorporate AI, blockchain, and renewable energy into real estate projects. Sustainable building initiatives align with Saudi Arabia’s Green Initiative, focusing on LEED-certified properties and solar-powered homes.

Expansion of hospitality and entertainment sectors

Saudi Arabia is investing US$800 billion in tourism infrastructure over the next decade. Mega-projects such as Qiddiya, Red Sea Project, and Amaala are driving demand for hospitality real estate. The country is preparing for global events such as Expo 2030 and the FIFA World Cup 2034, boosting investment in hotel and commercial properties.

Regional headquarters program for multinational corporations

The Regional Headquarters (RHQ) program mandates foreign companies to establish offices in Saudi Arabia. This has resulted in higher demand for Grade A office spaces, with Riyadh seeing rental growth of 19 percent in 2024. Companies such as Siemens, KPMG, and Unilever have already moved their regional offices to Saudi Arabia.

Key projects shaping Saudi Arabia’s real estate market

Saudi Arabia is home to some of the most ambitious real estate projects in the world. One of the most significant developments is NEOM, a US$500 billion megacity spanning 26,500 square kilometers. NEOM consists of multiple futuristic projects, including The Line, Oxagon, and Trojena, with a focus on sustainability and renewable energy. The Line, in particular, is a 170-kilometer-long linear city designed to house 9 million residents with zero-carbon emissions.

Another major project is Qiddiya, a US$63 billion entertainment city near Riyadh. It includes theme parks, sports stadiums, and cultural attractions and is expected to create 17,000 new jobs in the entertainment and tourism sectors. The Red Sea Project, a luxury tourism development spanning 90 islands, aims to attract one million visitors annually by 2030 and focuses on sustainable tourism and eco-friendly resort development.

Riyadh’s King Salman Park is set to be one of the largest urban green spaces in the world, covering 13.4 square kilometers and incorporating residential, commercial, and cultural spaces. Meanwhile, Jeddah Central, a US$20 billion waterfront development, will transform the city’s coastline with a mix of residential, commercial, and leisure components. These projects collectively underscore Saudi Arabia’s commitment to building a dynamic, sustainable, and investment-friendly real estate sector.

Key players in Saudi Arabia’s real estate sector

The Saudi real estate market is dominated by major developers, investment firms, and government entities. The following table outlines the most influential players:

Outlook for Saudi Arabia’s real estate market

Saudi Arabia’s real estate market is poised for sustained growth, supported by economic diversification, infrastructure investments, and favorable government policies. Key trends to watch include:

• Increase in housing stock, with the Kingdom targeting 1.2 million new homes by 2030;
• Continued commercial expansion, particularly in mixed-use developments combining retail, office, and residential spaces; and
• Rising foreign investment, as regulatory reforms, make market entry easier for global investors.

Takeaways

Saudi Arabia’s real estate sector is at the forefront of economic transformation, presenting vast opportunities for investors, developers, and businesses. Vision 2030’s focus on urbanization, infrastructure, and housing affordability is shaping a dynamic market, while challenges such as regulatory complexity and rising costs remain key considerations. For businesses looking to tap into one of the world’s fastest-growing real estate markets, Saudi Arabia presents a wealth of opportunities across residential, commercial, industrial, and hospitality segments.

• Previous Article Tax Regulations for Businesses and Expats in Qatar
• Next Article Saudi Arabia’s Women in the Workplace: A Key Driver of Economic Growth