Saudi Arabia’s Capital Market Authority has announced that foreign investors are now permitted to invest in listed companies owning real estate in Mecca and Medina. This policy change, effective immediately, allows non-Saudis to acquire up to 49% of shares in these firms, aiming to attract foreign capital and enhance market liquidity in alignment with the Kingdom’s Vision 2030 economic diversification plan.
Historically, non-Muslims have faced restrictions on property ownership in Mecca and Medina. The new regulations enable foreign individuals and entities to invest in shares or convertible debt instruments of real estate companies operating in these cities, though direct property ownership remains prohibited. The CMA emphasized that this initiative seeks to stimulate investment and bolster the competitiveness of the capital market.
The decision is part of broader efforts to diversify Saudi Arabia’s economy away from oil dependency. By facilitating foreign investment in the real estate sector of its holiest cities, the Kingdom aims to provide necessary liquidity for ongoing and future developmental projects. This move is also expected to support the goal of increasing the number of pilgrims visiting Mecca and Medina to 30 million annually by 2030, up from approximately 20 million in 2019.
Market reactions to the announcement have been positive. Shares of Jabal Omar Development Company and Makkah Construction and Development Company, both heavily invested in Mecca’s real estate, surged by 10% and 9.8% respectively following the news. Analysts attribute this uptick to anticipated foreign capital inflows and increased market confidence.
This policy shift aligns with recent legislative reforms aimed at enhancing Saudi Arabia’s investment climate. In August 2024, the Kingdom introduced a new investment law granting equal treatment to foreign and domestic investors, easing regulatory restrictions, and promoting fair competition. These reforms are designed to make Saudi Arabia a more attractive destination for foreign direct investment.
Despite these advancements, certain restrictions remain. Direct property ownership by non-Saudis in Mecca and Medina is still prohibited, and foreign investments are limited to shares or convertible debt instruments of listed companies, with a maximum ownership cap of 49%. Strategic foreign investors are also barred from holding stakes in these firms.
The Kingdom’s real estate sector is poised for significant growth, driven by population increases, tourism expansion, and regulatory reforms. The Real Estate General Authority projects the market to reach $101.62 billion by 2029, with an anticipated compound annual growth rate of 8% from 2024. Government initiatives, such as the Sakani program and the introduction of Real Estate Investment Trusts , are further propelling this growth by supporting home ownership and encouraging institutional investment.
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