Saudi Arabia Overhauls Foreign Real Estate Ownership Law
Riyadh, Saudi Arabia — Saudi Arabia has officially released the full details of its new real estate ownership law for non-Saudis, following its approval by the Cabinet earlier this month. Published in the official gazette Umm Al-Qura on Friday, the comprehensive law will take effect in 180 days and represents a significant shift in the Kingdom’s approach to foreign property ownership.
The new regulations grant non-Saudis, including individuals, companies, and non-profit organizations, the right to own property or hold other real estate rights (like beneficial use or long-term leases) within specific geographic areas that will be determined by the Cabinet. These rights, however, will be subject to various controls and restrictions based on the location, type, and intended use of the property.
It’s important to note that the law protects all existing legal real estate rights for non-Saudis established before this new regulation. However, it explicitly prohibits ownership in certain locations and regions, particularly in Makkah and Madinah, with an exception for individual Muslim owners under specific conditions.
Key Provisions and Scope
A crucial aspect of the law is the requirement for the Council of Ministers to define the permissible zones for foreign ownership. This will be done based on a proposal from the Real Estate General Authority and with approval from the Council of Economic and Development Affairs. They will also set limits on ownership percentages and the duration of usufruct rights.
Foreign individuals legally residing in Saudi Arabia can now own one residential property outside the restricted areas for personal housing, excluding Makkah and Madinah.
For corporate ownership, non-listed companies with foreign shareholders, investment funds, and licensed special-purpose entities will be allowed to acquire real estate throughout the Kingdom, including in Makkah and Madinah, provided the property supports their operational needs or employee housing. Listed companies and investment vehicles can also acquire property in line with Saudi financial market regulations.
Furthermore, diplomatic missions and international organizations are permitted to own premises for official use and residences for their representatives, contingent on Foreign Ministry approval and reciprocal agreements.
Compliance, Fees, and Penalties
To ensure compliance, non-Saudi entities must register with the relevant authority before acquiring property, and ownership or real rights only become valid after formal registration in the national real estate registry.
The new law introduces a real estate transfer fee of up to 5% for transactions involving non-Saudis. It also outlines a robust penalty system for violations, which can include fines up to SR10 million ($2.67 million). In serious cases, such as providing false information, the property may be forcibly sold, with the proceeds (after deductions) going to the state.
A dedicated committee under the Real Estate General Authority will be established to investigate violations and impose penalties. Decisions made by this committee can be appealed to the administrative courts within 60 days.
Repeal of Previous Regulations
Significantly, the new law repeals a previous rule that prohibited GCC citizens from owning property in Makkah and Madinah, effectively standardizing the regulations for all non-Saudi entities under a single framework.
The executive regulations, which will provide detailed implementation mechanisms and specify geographic boundaries and conditions, are expected to be issued within the next six months. This new legislation replaces the previous foreign property ownership law, Royal Decree No. M/15, issued in 2000.
Click here for more on Business
