Saudi Arabia Permits Foreign Investment In Real Estate Companies In Makkah And Madinah

The Saudi Capital Market Authority (CMA) has announced that foreign investors can now invest in Saudi-listed companies owning real estate in Makkah and Madinah. This change, effective Monday, is part of the "Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange (Tadawul) from the Meaning of the Phrase (Non-Saudi)" under the Law of Real Estate Ownership and Investment by Non-Saudis.

Foreign investment is limited to shares and convertible debt instruments of Saudi-listed companies with real estate in these cities. The total ownership by non-Saudi individuals and entities cannot exceed 49% of a company's shares. However, strategic foreign investors are not allowed to own shares or convertible debt instruments in these companies.

This initiative aims to attract foreign capital, enhance market appeal, and boost competitiveness regionally and globally. It supports the local economy by providing liquidity for ongoing and future projects in Makkah and Madinah. The CMA's efforts aim to position the Saudi market as a key funding source for major developmental initiatives in these cities.

The CMA has also granted listed Saudi companies the right to acquire ownership, easement, or usufruct rights over properties designated for their headquarters or branch locations within Makkah and Madinah. These properties must be fully utilized for these purposes according to exemption regulations outlined in the Law of Real Estate Ownership and Investment by Non-Saudis.

The CMA has launched several initiatives to make the Saudi financial market more attractive to foreign investors. These include allowing resident foreign investors direct participation in the stock market, enabling access through swap agreements, facilitating investments by qualified foreign financial institutions, permitting strategic stakes acquisition by strategic foreign investors, and allowing direct investments in debt instruments.

In 2021, non-Saudis were permitted to subscribe to real estate funds investing within Makkah and Madinah. This move diversified funding channels within the financial market and supported Saudi Vision 2030's objectives to enhance market appeal for both local and foreign investors.

Regulatory Framework

The approved controls were finalized after publishing draft regulations on foreign investor ownership on platforms like Istitlaa managed by the National Competitiveness Center (NCC) and on the CMA’s website for public feedback. These controls are available online under "Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange."

These measures reflect a comprehensive financial market framework offering various funding options for projects in Makkah and Madinah. They allow non-Saudi investors to benefit economically from existing and upcoming projects while adhering to relevant laws during company operations or liquidation.

With inputs from SPA