Are you a foreign investor wanting to invest in Saudi Arabian real estate? Perhaps you're thinking: Can a foreigner buy property in Saudi Arabia? The short answer is Yes. But there's more to it than that. There are a variety of important details, regulations, and eligibility criteria you must consider. These details are becoming more and more important too. But why is this? It's simple really, Saudi Arabia continues opening up to foreign investment, even within the real estate market. So the need to understand the property buying process is greater than ever.
That's what you'll uncover in this article. We will take you through the dos and don'ts of property ownership for foreigners in Saudi Arabia. It doesn't matter whether you're a beginner or an expert, this article applies to us all.
SAUDI ARABIA’S CHANGING REAL ESTATE MARKET
Saudi Arabia is undergoing an extensive change. The country, as part of its Vision 2030 initiative, has been diversifying away from oil. In particular, its keen interest lies in encouraging foreign investments. These investment avenues span various sectors, including real estate. This therefore opens a unique perspective for foreign investors interested in owning property in Saudi Arabia.
Traditionally, Saudi Arabia has been strict when it comes to allowing foreign ownership of property. Recent reforms have somewhat eased some of these restrictions. So the country nowadays has a more lenient approach. It allows non-Saudis to buy different forms of property across residential, commercial, and even agricultural areas.
But don't start making your plans right now. You must first understand the conditions and legal requirements of Saudi Arabian real estate.
The Saudi real estate market is expanding rapidly, presenting a great opportunity for foreign and expat investors.
IS IT LEGAL FOR FOREIGNERS TO BUY PROPERTY IN SAUDI ARABIA?
Foreigners can buy property legally in Saudi Arabia. Yet there are lots of complexities to it, so it's far from straightforward. The Saudi Arabia government established set rules to manage foreign ownership of property. This makes sure that the process aligns with the country's strategic interests.
Who is Eligible to Buy Property in Saudi Arabia?
Foreigners who have a residence in Saudi Arabia with valid residence permits (known as Iqama) can but property in Saudi Arabia. But, this property must be for personal residential purposes. The Saudi Ministry of Interior must also approve the house purchase in advance.
The Saudi Arabian General Investment Authority (SAGIA) must also approve any foreign investment in Saudi real estate. This is more accepting of foreign firms. In particular, those investing in prime economic sectors like tourism, retail, and industry are most favoured.
As far as GCC citizens go, they face fewer restrictions when looking to invest in the Kingdom's real estate market. However, non-Saudis buying into real estate must go through more legal requirements and processes. So before you dive in, it’s essential to understand the specific conditions and legal requirements involved.
KEY REGULATIONS FOR FOREIGN BUYERS
Various laws govern the buying of property in Saudi Arabia. These determine who can own real estate, where they can own it, and what type of property they can buy.
Foreign Ownership of Land and Buildings
Generally speaking, foreigners are not allowed to own land in Saudi Arabia, except for economic zones, commercial areas, and touristic developments. But they can own buildings or apartments on leased ground. This means that you can buy a residential unit in a multi-storey building without owning the land it is on.
Furthermore, foreigners are not allowed to own property in the holy cities of Mecca and Medina. These cities remain off-limits to non-Saudi nationals.
Usufruct Rights
The most common form of property ownership by foreigners in Saudi Arabia is through usufruct rights. This grants the buyer ownership of a property or building for a certain period. This is usually a maximum of 99 years. So the land property is built on is still under the control of a Saudi national or the government.
The usufruct rights are renewable and transferable. So this makes it more attractive to foreigners who wish to invest in the long term or live in the Kingdom.
THE BUYING PROCESS: STEP-BY-STEP
How does a foreigner go about buying a property in Saudi Arabia? The process involves several stages. Each of these stages requires diligence and attention towards the technicality of the subject.
1. Find the Right Property
Before purchasing, it is important to find property in a zone that allows foreign ownership. Non-Saudis can buy properties in freehold or leasehold zones. The locations of these are mostly in key cities like Riyadh, Jeddah, and Dammam.
Most of these areas offer residential apartments, commercial areas, and investment properties that are specially designed to attract foreign buyers. It's best if you use a real estate agent or lawyer when buying real estate too. After all, they are familiar with the local market and can help you identify eligible properties.
2. Obtain Approval
Also, foreign buyers must obtain approval from the Saudi Ministry of Interior or the relevant governing body. Being that this can take a few months for a personal residence purchase, it is wise to apply well in advance.
Companies that wish to invest in real estate or foreigners buying commercial property must also seek prior approval from SAGIA or other applicable authorities.
3. Finalise the Purchase
Once you have secured all your approvals, you will be required to sign a purchase agreement. This contract should spell out all the details of the sale, from price to terms of payment to the transfer of ownership.
Buyers are also required to obtain a No Objection Certificate from the Ministry of Interior. They must then register the property in the Ministry of Justice's real estate registry to become the owner officially.
COSTS AND FEES OF REAL ESTATE TRANSACTIONS
Buying a property in the kingdom of Saudi Arabia involves a lot of other expenses apart from the price. Some common real estate fees here include:
- Registration fees: These are usually determined at 1% of the property sale price.
- Stamp duty: Also accrues up to 0.5% of the sale price of a particular property.
- Value-added tax: 15% of the sale price of commercial properties while residential properties could be exempted from such VAT payments under certain conditions.
So, these costs should factor into your budget when you go to make a purchase.
KEY CITIES AND INVESTMENT HUBS IN SAUDI ARABIA
Location plays an important role when investing in Saudi Arabia property. The following are the main focal points of real estate investment in KSA. They offer a wide array of opportunities to both residential and commercial buyers.
Riyadh
Riyadh, the capital of Saudi Arabia, is still growing with more than 7 million residents. It is a goldmine for foreign investors in both residential and commercial sectors.
Why invest in Riyad's real estate market?
Riyadh stands out as Saudi Arabia's financial and business hub. The city has a wealth of opportunities, even for foreign investors. Its thriving commercial real estate sector with major government-backed infrastructure projects proves attractive. It also hosts a growing number of multinational corporations and government institutions. There's a clear reason why too; the city creates an ideal setting for residential and commercial real estate investment.
On top of this, Riyadh is getting extensive investment from Saudi Arabia's Vison 2030 initiative. Through this, the King Abdullah Financial District will see major investment. Also, Boulevard Riyadh City has gained major investment recently with the launch of the $266m Boulevard Business Park. So Riyadh will have a strong role as a key financial hub in the Middle East. Foreign investors interested in commercial real estate can consider a broad range of options in the city too. These include office spaces, retail units, and mixed-use developments that cater to this good business environment.
Demand and residencies in Riyadh
Riyadh's rapid urbanisation is increasing the demand for high-quality housing. This is particularly the case within expat-friendly areas and residential compounds. With many professionals moving into the city, especially in the fields of finance, healthcare, and technology, demand for property is strong. These types of people want well-located residential units that cater to a modern, urban lifestyle. Such a perspective means opportunities for investors in a diverse range of areas. These include luxury apartments, villas, and rental properties, offering stable income streams.
Riyadh, the financial and business hub of the Kingdom, presents an attractive opportunity for foreign investors.
Jeddah
Jeddah is a major tourism and commercial centre on the Red Sea and provides the main entrance to Mecca. This makes it an appealing destination for a diverse range of real estate investors.
Jeddah's strategic location
Jeddah’s location on the Red Sea gives it unique importance as a trading and commercial hub. The city’s ports handle a significant amount of the Kingdom’s trade. This in turn boosts the local economy and creates demand for industrial and logistics properties. So the main appeal for foreign investors in Jeddah is within commercial real estate. They should therefore consider developments in warehousing, retail complexes, and office spaces designed for international companies and logistics firms.
Jeddah's Tourism and Hospitality Growth
Given its proximity to Mecca, Jeddah attracts millions of religious tourists every year. In particular, it is most popular during the Hajj and Umrah pilgrimages. This strategic location means Jeddah's hospitality sector is booming. The city is seeing a growing demand for hotels, serviced apartments, and tourism infrastructure. We see this recently with a range of hotels launching in Jeddah’s historic district. Investors looking at short-term rental properties or hospitality developments can capitalise on this steady influx of visitors. So Jeddah is an attractive option for those eyeing the tourism real estate market.
Residential Investment
Jeddah’s appeal also extends to residential properties. This is particularly the case in areas like Al Shati District and Corniche. These high-end neighbourhoods offer beachfront properties and luxury apartments. So they cater to both expats and affluent locals. As Jeddah expands, the demand for housing in these prime areas continues to rise. By doing so, it creates excellent opportunities for high-end residential investments.
Jeddah is a major tourism and commercial centre on the Red Sea with strong investment opportunities in the hospitality and tourism real estate sectors.
NEOM and Economic Cities
If you're looking for cutting-edge real estate, NEOM is the place to watch. This visionary project is a smart city of the future. The way it blends technology, sustainability, and innovation is stunning. By doing so, it creates a fully integrated urban environment.
NEOM: A $500 Billion Investment Opportunity
The ambitious NEOM project comprises a $500 billion smart city. This in particular is the major attractor of foreign direct investment into Saudi real estate. NEOM promises to be a futuristic city with cutting-edge technology at its heart. So it's an attractive investment for those interested in high-growth opportunities. In fact, NEOM is the top choice for expats investing in Saudi real estate.
NEOM is one of the flagship projects of Vision 2030 and is being built from the ground up as a futuristic megacity. The project focuses on renewable energy, advanced technologies, and sustainable living. This makes it a particularly attractive investment for tech-savvy and environmentally-conscious investors. Residential, commercial, and industrial real estate developments are all planned within the NEOM region. So investors have a wide array of options—from eco-friendly residential complexes to tech-driven business hubs.
NEOM’S Attractiveness for Global Investors
What makes NEOM stand out for foreign investors is its ambition to draw global talent and businesses. The city operates under a distinct regulatory framework, separate from the rest of Saudi Arabia. This approach helps foster innovation and international collaboration. It also makes NEOM an exciting prospect for companies in industries like tech, healthcare, and education alike.
Economic Cities: King Abdullah Economic City (KAEC)
Aside from NEOM, King Abdullah Economic City (KAEC) offers another fantastic opportunity for foreign investors. Located on the Red Sea, KAEC is a massive industrial and business development. It includes a deep-water port, a logistics hub, and residential communities. So the project focuses on fostering international trade and industrial growth. As a result, KAEC stands out as a top pick for foreign companies interested in logistics, manufacturing, or warehousing investments.
The Red Sea Project, another Vision 2030 initiative, also has strong appeal. It focuses on tourism and luxury real estate. In particular, it offers upscale resort developments for investors keen on high-end hospitality.
NEOM is at the core of Saudi Arabia's Vision 2030 and is the top choice for expats investing in Saudi real estate.
SAUDI ARABIAN REAL ESTATE TRENDS AND OPPORTUNITIES
The Saudi Arabian real estate market is one of the country's fastest-growing sectors. It's spurred by a governmental urge to move away from dependence on fossil fuels. So here are some of the leading trends to keep an eye out for:
Saudi Vision 2030 Project:
This ambitious development plan, Vision 2030 is fuelling the Kingdom's real estate sector. Be it the smart city NEOM or the improvement of infrastructure in Riyadh and Jeddah, the demand in the commercial and residential sectors will rise.
KSA Tourism growth:
New tourist attractions and expanding religious tourism are providing many hospitality opportunities. This is especially the case in Jeddah and other cities near key pilgrimage sites.
Urbanisation on the rise:
The cities of Riyadh and Jeddah continue experiencing fast urbanisation. This is particularly the case as more and more Saudis and expatriates are moving to these cities. So increasing demand in both the residential and commercial sectors is following. Demand for modern mixed-use developments or residential compounds is also rising.
Those who get in early on these trends will likely reap the most rewards.
FINANCING AND MORTGAGES FOR FOREIGN BUYERS
The financing options a foreigner has are very limited, and even more so for residential purchases. Some banks might grant a mortgage to a foreigner, but it is a rarity. Most of the time, they require a Saudi national to act as some form of guarantor, complicating things for non-resident buyers.
One of the available vehicles to foreign investors is REITs. The trust would enable foreigners indirectly to invest in Saudi Arabia's real estate. They do so by acquiring shares in a portfolio made up of properties that generate income. This is often easier at the same time and more flexible for those who do not want to own and manage physical property.
LIVING IN SAUDI ARABIA AS AN EXPAT PROPERTY OWNER
Most expatriates who own property in Saudi Arabia prefer to stay on. They enjoy modern amenities, a relatively low cost of living, and high-quality healthcare and education. So this is a strong signal to go by.
Residential Areas and Services
When choosing a residence, it is important to consider the surrounding neighbourhood. It will be an added convenience if schools and hospitals are within reach of the property. Considering the proximity to your workplace or public transport is also important too. For these reasons, most expats live in compound-type residences. These provide further security and special services catering to foreign residents.
Property Management
If you are thinking of letting out your property, the services of a property management company can come in handy. This would ensure that your property is well cared for and that your tenants behave well. Above all, it also ensures you are compliant with the local tax laws on house rents.
IS BUYING PROPERTY AS A FOREIGNER IN SAUDI ARABIA WORTH IT?
Buying property in Saudi Arabia all depends on what you want from the investment. If you are a long-term investor, in particular, Saudi Arabia has many opportunities. You'll get to be part of one of the fastest-growing real estate markets in the world with strong government support acting as the backbone. With this comes many possibilities with commercial, residential, or industrial properties.
It’s also important to follow legal rules and regulations. To make sure your investment goes smoothly, talk to local experts as part of your due diligence too. Real estate agents, lawyers, and financial advisors can help guide you toward success. So it's unwise to overlook them.
To the foreigners who seek to buy property in Saudi Arabia, the time could not get better than exploring the emerging real estate market.
