Khaberni -The Saudi Cabinet has issued a new decision concerning allowing foreigners to own real estate in Saudi Arabia.
This is not the first time the Kingdom has allowed non-Saudis to own properties on its land, but the new law provides unprecedented facilitations, although some conditions exist.
The new law will come into effect in the first month of the year 2026.
So, what does the new governmental decision entail? And what is its expected impact on the real estate sector and the economy in the Kingdom?
The decision was issued during a government meeting chaired by Crown Prince Mohammed bin Salman on Tuesday, July 8.
In an interview with the "Worth Attention" podcast on BBC News Arabic, the real estate expert and CEO of "Manasat" real estate company, Khaled Al-Mubayyid, positioned the new decision within Vision 2030 to attract investments and foreign currency to the Kingdom, and to gradually reduce dependence on the oil economy.
The text of the decision and its details, including a list of regulations, conditions, procedures, and legal and financial requirements, are expected to be published on the Saudi government's "Estilam" platform and will come into force 180 days from its publication date in the official gazette.
Among the conditions disclosed so far, non-Muslim foreigners are not allowed to reside in Mecca and Medina.
While waiting for the executive regulations of the decision with details, Khaled Al-Mubayyid stated that the new system is expected to provide greater facilitations for foreigners and accelerate the property ownership process, in addition to setting clear regulations.
What's new in the foreign ownership decision in Saudi Arabia?
Previously, the right of foreigners to own properties in Saudi Arabia was limited to residential property only. However, the revised version of the law will grant foreigners the right to own commercial and industrial properties, thereby granting the right to real estate investment, which constitutes a significant difference compared to the previous law.
According to Khaled Al-Mubayyid, the old ownership law was limited to narrow points and required special approvals that could take months to issue. He added: "There were no clear regulations."
For example, non-Saudis were not allowed to own in Mecca and Medina, while the new decision might grant Muslim foreigners the right to own there.
The law previously stipulated that the foreigner wishing to own property must be legally residing in Saudi Arabia and have a license to work.
The ownership law also adhered to the principle of reciprocity, which means that the country of the foreigner's nationality must treat the resident Saudi citizen reciprocally with respect to real estate ownership laws.
Al-Mubayyid says: "We do not yet know whether the new system will also allow non-resident foreigners to own."
Some observers see possible negative repercussions of the decision, as it could lead to higher real estate prices and increase the severity of competition among investors, which may harm the interests of Saudi citizens looking for housing or investing in real estate within a limited purchasing power.
Okaz Saudi newspaper reported in September 2024, about a continuous rise in residential apartment rents over the past five years.
The newspaper relayed information from the General Authority for Statistics report about a 10.7 percent increase in residential rents during August 2024.
Okaz stated that those seeking housing, especially young people looking to start families, face difficulties in finding accommodation that fits their income.
How will this reflect on the Saudi economy?
The real estate sector profits constitute 6.5 percent of the gross domestic product in Saudi Arabia.
So, did the Kingdom actually need to open this sector to foreign investment?
The real estate expert, Khaled Al-Mubayyid, says that "the Kingdom has become more attractive and ready," and that the real estate market "Bears, needs, and requires the entry of investors to enhance the efficiency of housing units."
He points out that real estate development "always mobilizes more than 80 industries, directly and indirectly," and it requires employing a large number of people, "and will cause a boom in many sectors."
He added that this development will bring hard currency into the sector, and reduce reliance on oil, which, according to Al-Mubayyid, would directly and indirectly benefit the Saudi citizen.
Al-Mubayyid confirms that "the discussion is not limited to owning property only, but also includes owning factories," which could pave the way for the emergence of large projects or companies, such as Boeing aircraft factories and Lucid electric car factories in the Jazan region in the south of the Kingdom.
In a research paper published in January of this year, the financial group "Hermes" mentioned that amending the law on foreign ownership in Saudi Arabia, especially if it includes lowering the threshold linked to special residency conditions related to owning properties, will boost demand for real estate from non-Saudi investors, especially expatriates and foreigners eager to benefit from special residency programs.
This change is expected to widen the buyer base and increase real estate market activity, supporting sector growth, according to Hermes, which also believes that this move could significantly transform the market.
Currently, to obtain special residency, it is required to own a property worth no less than 4 million Saudi Riyals (approximately one million dollars), a figure not available to a wide segment of expatriates.
However, if the new system includes a reduction of this threshold, it could lead to increased interest in ownership and stimulate the real estate market.
But the expert Khaled Al-Mubayyid told BBC that the government has prioritized the citizen's interests when issuing the decision.
He explained that the new system will specify areas where housing is "reserved for citizens," asserting that the Saudi citizen cannot withstand the competition or speculation or the repercussions of real estate inflation.
Noting that "real estate inflation is a major driver of general inflation, which concerns the Saudi citizen as their income is fixed."
Minister of Municipal and Rural Affairs and Housing, and Chairman of the Board of Directors of the General Real Estate Authority, Majed bin Abdullah Al-Hogail, confirmed that the "updated system" of the ownership law "takes into consideration the interests of citizens through mechanisms that ensure market regulation and compliance with specified procedures, achieving real estate balance," according to what was reported by the Saudi Press Agency "SPA."
