Saudi Arabia’s Evolving Property Landscape: Opportunities for Foreign Investors

Foreign Property Ownership in Saudi Arabia: Navigating a New Era for Strategic Investment

July 2025

Saudi Arabia's macroeconomic transformation under Vision 2030 is fundamentally recalibrating its real estate sector. The recent Law of Real Estate Ownership and Investment by Non-Saudis, updated by new legislation approved on 8 July 2025, and effective January 2026, represents a pivotal shift from prohibition to regulated possibility. This strategic policy is designed to reduce oil dependency and attract foreign direct investment (FDI), aligning with broader economic diversification initiatives led by the Public Investment Fund (PIF) and its subsidiaries, notably through giga-projects like NEOM, ROSHN, and Qiddiya.

This article provides a comprehensive analysis of the evolving legal framework, eligibility criteria, transactional mechanisms, and strategic opportunities for foreign investors, with detailed comparisons to established jurisdictions like the UAE.

I. Legal Framework: Anchoring Investment in Regulatory Certainty

The cornerstone of the Saudi foreign property ownership regime is Royal Decree Number M/94 of 1439 AH, which has been refined through a series of key amendments. The 2025 legislation authorizes foreign ownership of residential, commercial, and investment real estate in designated areas, subject to licensing and oversight by the Real Estate General Authority (REGA) and the Ministry of Investment (MISA). This regime integrates principles of the Saudi Civil Code while reinforcing investor protections through regulatory transparency.

Ownership rights are delineated into two primary investor categories:

• GCC Nationals: Citizens and wholly-owned GCC companies generally enjoy parity with Saudi nationals, though land development timelines and sectoral restrictions may apply.
• Non-GCC Nationals: Individuals with a valid Iqama or Premium Residency and foreign companies licensed by MISA may acquire property in designated zones, subject to regulatory approvals and minimum project values (e.g., SAR 30 million for some investment properties).

Significantly, foreign ownership remains restricted in Mecca and Medina, except by inheritance or through Shariah-compliant endowments (waqf). However, the 2025 reforms introduce a key exception permitting companies listed on the Saudi Stock Exchange (Tadawul) to acquire real estate in these cities for operational use, under the supervision of the Capital Market Authority (CMA).

II. Designated Zones: A Strategic Approach to Urban Development

Foreign ownership is exclusively permitted in zones officially designated by REGA in coordination with national planning authorities such as the Royal Commission for Riyadh City (RCRC). The designation process is driven by urban development priorities, infrastructure capacity, and alignment with Vision 2030 sectors like logistics, tourism, and entertainment.

Permissible zones include:

• High-demand urban corridors in Riyadh, Jeddah, and Al Khobar.
• Special Economic Zones (SEZs) like King Abdullah Economic City (KAEC) and King Salman Energy Park (SPARK).
• PIF-led megaproject areas, where foreign developers can secure plots under long-term development mandates.

The phased designation of these zones, with the official list expected by January 2026, provides a measured approach, ensuring that real estate liberalization supports national development goals without compromising market stability.

III. Transactional Mechanisms and Investor Protection: A Structured and Secure Framework

The acquisition process for foreign investors is structured for security and compliance, with a clear move toward digital transformation.

• Licensing and Application: Corporate investors must secure a foreign investment license from MISA. Individuals apply via the Ministry of Interior, providing proof of residency and demonstrating the intended purpose of the acquisition.
• Due Diligence and Title Verification: A Property Title Search (Tafsil Malikiyah) is conducted through the Ministry of Justice’s Real Estate Registry (RER). The RER is currently being modernized with a blockchain-enabled system, which will streamline title verification and enhance transparency, aligning with the digital platforms of a market leader like the Dubai Land Department (DLD).
• Escrow and Off-Plan Sales: Unlike the UAE, where a regulated, government-approved, bank-led escrow system has long been standard, Saudi Arabia’s new regulations have mandated escrow accounts for all off-plan sales through approved banks. This proactive step provides a robust layer of protection for buyers’ funds and signals a strong commitment to investor security.
• Limited Mortgage Availability: While the new law opens the door to ownership, foreign investors should be aware of the limited availability of mortgages from Saudi banks, which maintain conservative lending practices focused on Saudi nationals through programs like Sakan. While the 2025 law may signal potential reforms to expand mortgage eligibility, details remain forthcoming.
• Dispute Resolution: The Saudi Center for Commercial Arbitration (SCCA) provides a reliable, Shariah-compliant dispute resolution mechanism with international recognition. Its English-language proceedings and adherence to international standards make it a preferred choice for resolving commercial disputes involving foreign investors, reinforcing the Kingdom's commitment to legal certainty.

IV. Curbing Speculation and Market Stability

The Saudi government has implemented strong measures to prevent market overheating and speculative practices, contrasting with the UAE's more free-market approach.

• White Land Tax: The White Land Tax, increased to 10% in 2024, is an effective tool to incentivize development over land hoarding. This tax applies annually to undeveloped urban plots, ensuring that land supply meets demand and supports the Housing Program under Vision 2030.
• Development Mandates: In designated areas, REGA and authorities like the RCRC can impose strict development timelines on buyers. These conditions, which prevent the "flipping" of properties, ensure that land is put to productive use rather than being held for short-term speculation.

V. Taxation and Financial Structuring

Understanding the tax and financial landscape is critical for investors.

• Taxation: Saudi Arabia has no annual property tax. However, a 5% Real Estate Transaction Tax (RETT) is levied on property purchases. This tax, which is the buyer’s responsibility, replaced the previous VAT regime. Importantly, there is no personal income tax on rental income for individual foreign owners.
• Offshore Structuring: For high-net-worth investors, strategic ownership structuring through offshore entities in jurisdictions like the Abu Dhabi Global Market (ADGM) or the Dubai International Financial Centre (DIFC) is a viable consideration. While these free zones do not have specific agreements for holding Saudi real estate, their common-law frameworks and tax neutrality can provide significant advantages for estate planning, financing, and dispute resolution. Legal counsel must ensure full compliance with Saudi laws, particularly MISA licensing and anti-concealment provisions.

VI. Usufruct Rights and Alternatives to Freehold

In areas where outright ownership is barred, such as Mecca and Medina, alternative legal instruments provide a pathway for investment.

• Usufruct (Right of Use): A Shariah-compliant right to use and profit from a property for a specified period (typically up to 99 years). This is a practical solution for developers and investors in the hospitality and retail sectors seeking to operate in sacred cities without acquiring a permanent title. While usufruct limits capital appreciation, it offers significant utility and reduces regulatory hurdles.

VII. Future Trends: The Path Forward

• Regional Harmonization: Ongoing efforts toward a Gulf Cooperation Council Unified Real Estate Framework, anticipated by 2026, aim to harmonize ownership regulations across member states, enhancing predictability and stability for cross-border investors.
• Digital Transformation: By 2027, REGA’s blockchain-enabled RER is expected to be fully implemented, promising to streamline title verification and reduce fraud, mirroring global trends in digital asset management. This technological advancement positions Saudi Arabia as a leader in creating a secure, transparent, and digitally integrated real estate ecosystem.

Conclusion: A Recalibrated Market for Strategic Investment

Saudi Arabia's evolving foreign property ownership regime is a landmark development. The 2025 law, supported by strong institutional frameworks and a clear path toward digital modernization, offers foreign investors legal clarity, asset security, and sectoral alignment with Vision 2030. This is not a frictionless market; strategic investors must navigate zone restrictions, regulatory approvals, and specific transactional formalities.

However, with the right structuring, risk analysis, and regulatory engagement, investors can capitalize on the Kingdom’s ambition and secure access to one of the world's most dynamic and promising real estate markets. The Saudi regime rewards those who approach it with the rigor, discipline, and foresight of a true expert, positioning real estate as a powerful tool of economic diversification and a critical component of its post-oil future.