Saudi Arabia is poised to significantly alter its real estate landscape with a new legal framework governing foreign ownership, set to take effect in January 2026. The updated regulations, announced by the Ministry of Municipalities and Housing, will broaden access to property ownership for non-Saudis while establishing clearer boundaries and controls. This move aims to attract foreign investment and stimulate economic growth within the Kingdom.
The changes represent a major liberalization of Saudi property laws, previously restrictive to foreign buyers. While some areas will remain off-limits, the new system will allow both foreign residents and non-residents to purchase property under defined conditions. The Ministry anticipates these changes will streamline the investment process and provide greater legal certainty.
Expanding Foreign Real Estate Ownership in Saudi Arabia
The core of the new system is a tiered approach to ownership, differentiating between foreign residents and non-residents. According to Minister Majed Al-Hogail, the regulations seek to balance economic diversification goals with the preservation of cultural and religious sensitivities. The implementation date of January 2026 provides a period for preparation and adjustment for all stakeholders.
Geographic Restrictions
Notably, the cities of Makkah, Madinah, Jeddah, and Riyadh are excluded from general foreign residential property ownership. This restriction is largely attributed to concerns about overcrowding and maintaining the sanctity of the holy cities. However, the possibility of designating specific zones within these cities for non-resident ownership remains open for future consideration.
Outside of these four major urban centers, foreign residents will be permitted to own one residential property. Non-residents, meanwhile, will be limited to purchasing property in areas specifically approved by the Council of Ministers, based on recommendations from the Real Estate General Authority and the Council of Economic and Development Affairs.
Commercial and Industrial Property
In a significant departure from previous restrictions, the new system will allow foreigners to own commercial, industrial, and agricultural properties throughout Saudi Arabia without exception. This unrestricted access is intended to encourage foreign investment in key sectors of the Saudi economy and support the Kingdom’s Vision 2030 diversification plan. This is expected to boost the property market significantly.
Ownership Rules for Different Entities
The regulations also address the complexities of corporate ownership. Non-listed companies with foreign ownership can acquire property within approved zones, including Makkah and Madinah, provided they adhere to Saudi company law. These companies can also purchase property outside designated zones for operational needs, such as employee housing.
Listed companies, investment funds, and special-purpose entities will enjoy broader ownership rights across the Kingdom, including the holy cities. However, their activities will be subject to oversight by the Capital Market Authority, in coordination with the Real Estate General Authority and other relevant regulatory bodies. This aims to ensure transparency and prevent market manipulation.
Financial Implications and Legal Compliance
A transaction fee of up to 5% of the property value will be levied on foreign ownership transactions. The specific details of this fee will be outlined in the forthcoming executive regulations. The Ministry emphasizes that foreign ownership will not confer any privileges beyond those explicitly defined by law, and will not supersede existing frameworks like the Premium Residency Program or agreements with GCC nations.
Registration is mandatory for all non-Saudi individuals and entities seeking to own property. Legal recognition of ownership will only be granted upon successful registration in the Real Estate Registry. Failure to comply with the regulations can result in penalties, ranging from fines to the potential court-ordered sale of the property. Submitting false information carries a particularly hefty fine of up to SR10 million.
The move is part of a broader effort to attract foreign investment into Saudi Arabia, diversifying the economy away from its reliance on oil. The government hopes that increased foreign participation in the real estate sector will contribute to job creation and economic growth. The updated framework also aims to provide greater clarity and security for investors, reducing bureaucratic hurdles and fostering a more predictable business environment.
The Real Estate General Authority is expected to play a crucial role in implementing the new system, including identifying and designating approved zones for foreign ownership. The authority will also be responsible for providing guidance and support to investors navigating the new regulations. This includes clarifying the process for obtaining necessary approvals and ensuring compliance with all legal requirements.
Looking ahead, the release of the detailed executive regulations is the next critical step. These regulations will provide specific guidance on the implementation of the new system, including the precise criteria for designating approved zones, the calculation of transaction fees, and the procedures for resolving disputes. The market will be closely watching for these details, as they will ultimately determine the extent to which the new regulations succeed in attracting foreign property buyers and stimulating the Saudi real estate sector.
