Saudi Arabia Allows Foreign Investors To Engage In Real Estate Companies In Makkah And Madinah

The Saudi Capital Market Authority (CMA) has opened the door for foreign investors to invest in companies listed on the Saudi stock exchange that own real estate in Makkah and Madinah. This change took effect on Monday. The CMA's statement highlights that this move aligns with 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 firms owning real estate in these cities. However, strategic foreign investors cannot hold shares or convertible debt instruments in these companies. Non-Saudi individuals and entities can own up to 49% of a company's shares. These measures aim to attract foreign capital, enhance market appeal, and support local economic growth.

The CMA aims to make the Saudi market a key funding source for major projects in Makkah and Madinah. By attracting foreign capital, they hope to provide necessary liquidity for ongoing and future initiatives. This strategy leverages vast investment opportunities within the Saudi market, enhancing its competitiveness both regionally and globally.

In addition, listed Saudi companies can now acquire ownership, easement, or usufruct rights over properties designated for their headquarters or branches in Makkah and Madinah. According to exemption regulations outlined in the Law of Real Estate Ownership and Investment by Non-Saudis, these properties must be fully used for these purposes.

The CMA has introduced several initiatives to boost foreign investment appeal in the Saudi financial market. 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 allowed to subscribe to real estate funds investing within Makkah and Madinah. This expanded funding channels within the financial market aligns with Saudi Vision 2030's goals of enhancing market appeal for both local and international investors.

Regulatory Framework Development

The approved controls were finalized after publishing draft regulations on foreign investors' ownership of shares in companies with investment properties in Makkah and Madinah. The draft was shared on Istitlaa, managed by the National Competitiveness Center (NCC), and on the CMA’s website for public feedback before finalization.

The comprehensive framework reflects a diversified financial market offering various funding options for projects in these cities. The approved controls are available online under "Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange."

With inputs from SPA