Saudi Arabia Opens Doors for Foreign Investment in Makkah & Madinah Real Estate

Saudi Arabia has made a groundbreaking decision to allow foreign investment in listed companies that own real estate in Makkah and Madinah. This significant reform, announced by the Saudi Capital Market Authority (CMA), aligns with the Kingdom’s ambitious Vision 2030 strategy, which aims to attract foreign capital and diversify the economy beyond oil revenues.

New Investment Opportunities in the Holiest Cities

Under this new policy, foreigners can now invest in shares and convertible debt instruments of real estate companies operating in Islam’s two holiest cities. However, certain restrictions remain:

• Foreign ownership is capped at 49% of a company’s shares.
• Strategic foreign investors cannot hold stakes in these entities.
• Direct property ownership remains restricted for foreigners, but leasing under specific conditions is allowed.

This move is designed to stimulate foreign investment, enhance the capital market’s liquidity, and provide essential funding for the continued development of Makkah and Madinah.

Boosting Economic Growth and the Pilgrimage Sector

The real estate sector in Makkah and Madinah plays a crucial role in the Saudi economy, largely due to the millions of pilgrims visiting these cities annually. In 2019, Saudi Arabia earned approximately $12 billion from Hajj and Umrah, and under Vision 2030, the Kingdom aims to increase the number of pilgrims to 30 million per year.

The latest reforms align with broader economic changes in Saudi Arabia, including:

• Allowing non-Saudis to invest in the stock market.
• Granting foreigners access to swap agreements and debt instruments.
• Permitting non-Saudis to subscribe to real estate investment funds focused on Makkah and Madinah.

Positive Impact on the Stock Market

Following this announcement, several real estate firms saw their stock prices surge:

• Knowledge Economic City: Up by 9.89% to SR16.66 ($4.44).
• Jabal Omar Development Co.: Increased by 10% to SR25.85.
• Makkah Construction and Development Co.: Rose by 9.84% to SR106.

These gains highlight the confidence of regional and international investors in Saudi Arabia’s evolving economic landscape.

The Future of Foreign Investment in Saudi Arabia

The Kingdom aims to attract $100 billion in foreign direct investment (FDI) by 2030, and opening Makkah and Madinah’s real estate sector to foreign investors is a step toward achieving this ambitious goal. This reform marks a significant shift in Saudi policy, aligning it with regional peers that already allow foreign ownership in designated areas.

For investors and businesses looking to capitalize on one of the most dynamic real estate markets in the Middle East, this change presents unprecedented opportunities.