Exploring the Upside of Relaxed Real Estate Regulations for Foreign Entities in KSA

27 Jun, 2024 - Saudi Arabia

In an effort to diversify its economic landscape, KSA has been a pillar of conservatism in real estate ownership by foreign entities, maintaining a market size of approximately $69 billion largely inaccessible to international investors. Contrastingly, neighboring Gulf countries, particularly the UAE, have embraced more liberal ownership laws, becoming vibrant hubs for global investors. In Q1 2024, Dubai real estate market reached USD $30 billion in sales transactions, showcasing the lucrative opportunities KSA might tap into by aligning its policies similarly.

In the past, KSA’s stringent ownership policies has been a bottleneck for foreign direct investment inflows. Recognizing the limitations, significant strides have been made since 2021, allowing foreign ‘residents’ to purchase property, signaling a shift towards a more open market. Future amendments aim to further liberalize policies, including potential ownership in the previously restricted holy cities of Makkah and Madinah.

These regulatory adjustments are essential components of KSA’s Vision 2030, striving to diminish its oil-dependency and invigorate the real estate sector. However, despite progressive reforms, 100% foreign ownership is still highly restricted, placing KSA at a competitive disadvantage.

Understandably, potential relaxation of these laws brings its set of challenges, including the need to develop robust regulatory frameworks to manage real estate sector and FDI inflows and ensure alignment with national interests. Moreover, there is a risk that opening the market to foreign investors could escalate property prices, impacting housing affordability for Saudi nationals.


So what does this all mean?

On a positive note, the implications of easing these regulations extend beyond merely increasing FDI. By liberalizing real estate ownership laws, KSA could potentially catalyze job creation in construction, facilities management, and real estate services, contributing to overall economic development. Population growth and increased demand for housing—evidenced by the recent surge in expatriates seeking residences in Riyadh—further justify the need for regulatory evolution.

To meet the growing demand and attract more investments, KSA must relax bureaucratic hurdles and enhance legal frameworks that promote investors confidence and ability to invest. Anticipated reforms in property ownership laws for non-residents could significantly boost investor confidence and contribute positively to KSA’s economy.