Khaberni - Saudi Arabia is getting ready to enter a new phase of economic openness in the real estate sector, where the updated regime for the ownership of real estate by non-Saudis is scheduled to start next January (January). This system, approved by the Saudi Cabinet last July (July), represents a strategic step to regulate the ownership of real estate by non-Saudi individuals and entities, with the main goal of enhancing the contribution of the real estate sector to the Gross Domestic Product (GDP) and diversifying the sources of national income away from oil, fully aligned with the goals of "Vision 2030".
The Saudi Real Estate Authority, the body responsible for implementation, is currently preparing the executive regulations for the system, defining the geographical scope of the sites allowed for ownership and investment by foreigners, with details to be announced before the system takes effect.
The new legislation also aims to retain global skills and talents by enabling them to settle and improve the quality of urban and architectural life.
Scope of Ownership
Saudi Minister of Municipal and Housing Affairs, Majid Al-Hogail, confirmed in a television interview last week that next month will witness the implementation of the foreign real estate ownership system at the residential level in all cities of Saudi Arabia except four cities including Mecca, Medina, Jeddah, and Riyadh, while there will be specific areas within these cities where ownership is allowed. For residents within the Kingdom, they are entitled to own one residential unit.
Conversely, the system offers great flexibility towards other economic sectors, where ownership will be open to foreigners in all cities of the Kingdom without exception in the commercial, industrial, and agricultural sectors.
Fahd bin Sulaiman, the executive director of ownership of real estate for non-Saudis at the Authority, indicated in press statements last November (November) that the areas designated for foreign ownership in Riyadh, Jeddah, and the holy cities (Mecca and Medina) are still under review, and will be announced "very soon" along with the regulations governing the new property ownership rules, adding that those areas will be "very wide" and include what is known as mega-projects, and it is expected that the ownership rate for non-Saudis in these areas will range from 70 percent to 90 percent. He confirmed that buyers must be Muslim to purchase in the two holy cities, but they will not face significant restrictions otherwise. Generally, "there are no major conditions, and we do not wish to impose restrictions, and when comparing the current law with its updated counterpart, we find a noticeable difference".
Market Expectations
Commenting on the imminent implementation of the updated system, a number of real estate experts and specialists spoke to "Al-Sharq Al-Awsat," noting that the system will create additional demand for ready real estate units and increase liquidity levels within the real estate market. It will also encourage international companies to establish their headquarters and projects within the Kingdom, reflecting on economic activity and laying the groundwork for a more stable and growing real estate sector phase. They anticipate that the positive impact of the system on the real estate market in the cities of Riyadh, Jeddah, Mecca, Taif, and Medina, in addition to cities close to tourist areas, will begin to appear from the third and fourth quarters of 2026 and during 2027.
Real estate expert and marketer Saqr Al-Zahrani, in a statement to "Al-Sharq Al-Awsat," mentioned that the implementation of the system will mark a turning point in the movement of the Saudi real estate market, as it will lead to an expansion of the customer base and a wide shift of residents from the rental bracket to ownership, especially in cities where it is allowed.
He pointed out that this shift will create additional demand directed towards ready real estate units and organized residential communities, which will contribute to enhancing the buying and selling movement, and raise the level of liquidity within the market.
Raising Real Estate Quality
He anticipated that opening ownership to the commercial, industrial, and agricultural sectors for foreigners in all cities will provide international companies with a bigger incentive to establish their headquarters and projects within the Kingdom, which will reflect on economic activity and establish a period of more stability and growth in the real estate sector.
He saw that the first expected changes in the real estate market would be the improvement of the quality of real estate products, with developers aiming to create projects with higher specs and better planning to meet the requirements of a wider range of buyers, and the market will see an increase in the volume of regulated offerings, as a result of local and international investors entering to present projects aimed at meeting the demands of the new demand.
He indicated that the updated system would contribute to enhancing price stability, as owning by residents and foreigners usually involved long-term commitments, which limits short-term speculations; transparency and governance within the market would also increase, thanks to legal and regulatory controls accompanying the system, and it would provide broader opportunities for the financial sector to launch products tailored for residents and foreigners, reflecting positively on lending activity and the volume of liquidity.
Zahrani added that the announcement of the start of the system's implementation would directly impact inquiries and interest, although the real effect on the volume of transactions in the real estate market would start to appear gradually, and the first signs of impact are expected to appear during the second quarter of 2026, with the completion of the first deals for residents and foreigners.
He mentioned that clear indicators like increased transaction volume, accelerated delivery of projects, and the entry of foreign investors are likely to crystallize during the third and fourth quarters, as the market would have absorbed the executive regulations and started to interact with them in a practical and stable manner. Thus, the first year of implementing the system will represent a transitional period, while the biggest impact will be visibly evident during the second half of 2026 and thereafter.
Varying Impact by Geographic Location
In turn, real estate expert and evaluator Engineer Ahmed Al-Faqih, in his statement to "Al-Sharq Al-Awsat," expected the system's impact on the real estate market to vary by geographical location, predicting that the greater positive impact would be in the Mecca region and its cities like Jeddah and Taif, in addition to Medina. He pointed out that the real estate market in Riyadh would have a prominent share in attracting and attracting non-Saudi capital, whether for ownership or real estate investment.
He believes that capital aiming to invest in the tourism sector would direct its compass towards cities close to tourist areas, such as Taif due to its proximity to Mecca, and also Abha and Jizan, in addition to the city of Tabuk due to its proximity to the Neom project.
He expects that the first year of implementing the updated system will be a stage of testing and scrutinizing the market and reviewing the opportunities available in it, and that the system's impact on the market will start with the second year in 2027, pointing out that implementing the system will contribute to activating important targets within "Vision 2030" in diversifying the sources of income for the national economy and gradually moving away from relying on oil, as this capital will create hundreds of thousands of job opportunities for Saudi citizens of both genders.
System Incentives
It should be noted that the updated system for non-Saudi real estate ownership aims to regulate real estate ownership for non-Saudis, both individuals and entities, aligned with the goals of "Vision 2030", and attract foreign direct investment to the Saudi real estate market, enhancing the contribution of the real estate sector to the GDP. It also aims to retain global skills and talents by enabling them to settle, and increase the contribution of non-oil sectors in supporting the national economy, and develop the economy and diversify sources of income sustainably, and improve the quality of urban and architectural life.
According to the system, it allows non-Saudis to own real estate or acquire real rights to it within the Kingdom, in the geographic scope determined by the Cabinet, based on a proposal from the board of the Saudi Real Estate Authority, and approval by the Council of Economic and Development Affairs. It includes determining the type of real rights that can be acquired, the maximum ownership percentages, and the controls related to them.
The system also allows non-Saudi resident natural persons to own one property dedicated to housing, outside the specified geographic scope, except in the cities of Mecca and Medina, and it is required that the person be Muslim if the ownership is within these cities.
According to the system, non-publicly traded companies in the Saudi financial market, in which non-Saudis participate in ownership, are granted the right to own within the mentioned geographical scope, including Mecca and Medina, if the institution is according to the Saudi company system. It is also permissible for them to own outside this scope for the purpose of conducting activity or housing workers, as specified by the regulation.
The system also allows publicly traded companies, investment funds, and special purpose entities to own in the entire Kingdom, including Mecca and Medina, in accordance with controls issued by the Capital Market Authority in coordination with the Saudi Real Estate Authority and other relevant authorities.
The system emphasizes that its implementation does not affect the rights granted in other systems such as the Premium Residency System or Gulf Cooperation Council agreements, nor does ownership by non-Saudis grant any additional privileges beyond legal rights.
The system also authorizes the imposition of a fee not exceeding 5 percent of the value of the real estate transaction for non-Saudis, with details to be determined in the executive regulation. Offenders face penalties including fines or warnings, while those providing misleading information are penalized with fines up to 10 million Saudi riyals, with the possibility of selling the non-compliant property by order from the competent court.
