Saudi Arabia has announced a major policy change allowing foreign investors to own shares in real estate companies with projects in Mecca and Medina, marking a turning point in the Kingdom’s evolving economic landscape.
Historically, real estate investment in the two Holy Cities has been strictly regulated, with ownership limited to Saudi nationals and entities. The new policy reflects the government’s growing commitment to economic liberalization and aligns with the broader goals of Vision 2030.
This development opens the door to global investors seeking exposure to one of the most culturally significant and economically promising real estate markets in the Middle East. Through carefully structured mechanisms, foreign participation is now permitted, while strategic investors remain excluded for the time being.
In this article, we explore what this policy change means, how it fits into Saudi Arabia’s real estate strategy, and what foreign investors should keep in mind while business setup in the KSA.
Key Insights for Foreign Investment in Mecca and Medina Real Estate
– What Has Changed?
The latest policy shift, introduced by Saudi Arabia’s Capital Market Authority (CMA), allows foreign investors to buy shares or convertible debt instruments in Saudi-listed companies that own real estate assets in Mecca and Medina.
This represents a considerable loosening of previous restrictions, which largely prohibited foreign ownership in the Holy Cities. However, this access comes with specific conditions:
- Foreign investors can acquire up to 49 percent of shares in these listed real estate companies.
- Strategic foreign investors, such as sovereign wealth funds or entities with long-term controlling interests, are currently excluded from investing under this regulation.
These rules are designed to allow for capital inflow while maintaining national control over strategically sensitive assets. The approach balances openness with prudence, ensuring the sacred and historic nature of Mecca and Medina is preserved while allowing market expansion.
– Market Response
The market responded swiftly and positively to the announcement. On the day of the policy change, 13 out of 14 real estate companies listed on the Saudi Stock Exchange saw their share prices rise.
The average increase was 3.59 percent, with companies specifically focused on Mecca and Medina real estate experiencing more substantial gains. Some of the notable performers included:
- Taiba Investments Co.
- Makkah Construction and Development Co.
- Knowledge Economic City
These companies recorded share price increases ranging from 9 to 10 percent, signaling strong investor confidence in the potential of this policy to drive long-term growth in the sector.
The enthusiasm is not just about short-term stock gains; it reflects a broader expectation that the opening of Mecca and Medina real estate markets will unlock significant opportunities in infrastructure, hospitality, housing, and tourism – all central to Saudi Arabia’s economic transformation.
– Strategic Context
The new regulations are part of a broader reform agenda under Vision 2030, Saudi Arabia’s ambitious plan to diversify its economy away from oil and create a more open, investor-friendly business environment. Real estate is one of the sectors prioritized under this strategy.
Saudi Arabia is currently managing real estate development projects worth over USD 1.1 trillion, with the goal of delivering more than four million housing units by 2030.
This scale of development is reshaping the country’s urban landscape and creating long-term investment opportunities across multiple asset classes.
While Riyadh has been at the center of real estate growth, attention is now turning to Mecca and Medina.
These cities, due to their religious significance and annual influx of pilgrims, have long-term, reliable demand for infrastructure, hospitality, and residential development. Opening these markets to international investors is expected to catalyze new waves of development.
– Implications for Foreign Investors
Foreign investors eyeing company formation in Saudi Arabia now have several options to access the Saudi real estate market, especially in Mecca and Medina:
- Acquiring shares in listed real estate companies with existing projects in the Holy Cities.
- Investing in real estate-focused REITs (Real Estate Investment Trusts) already active in the Saudi market.
- Participating in large-scale development projects via partnerships or investment vehicles.
While direct ownership of real estate in Mecca and Medina is still restricted, the investment structure allows meaningful exposure to the market through equity participation in listed firms.
Moreover, the CMA’s decision is part of a broader legislative push. Saudi authorities are also in the process of drafting a new property ownership law that will eventually allow non-Saudis to own residential, commercial, and agricultural properties across the country, including Mecca and Medina.
– Challenges and Considerations
Despite the excitement, foreign investors should approach the market with a clear understanding of the regulatory framework and cultural sensitivities involved. Mecca and Medina are among the most sacred cities in Islam, and their development is subject to unique legal and religious considerations.
Major challenges include:
- Navigating evolving regulatory frameworks as the CMA and other authorities implement new rules.
- Understanding restrictions related to foreign ownership limits.
- Ensuring alignment with local partners and stakeholders, especially for development projects in culturally sensitive areas.
- Monitoring any changes in the classification of strategic investors and their eligibility to invest.
That said, the current momentum suggests that the trend is toward greater access, more clarity, and increased foreign participation in the coming years.
– Outlook: More Openness on the Horizon
The decision to allow foreign investment in Mecca and Medina-focused real estate companies is a strong indicator of Saudi Arabia’s long-term economic direction.
The Kingdom is aiming to import global expertise and get profitable ventures and operational excellence into its urban development plans. As the real estate sector continues to mature and regulatory frameworks evolve, we can expect even more opportunities to open up, both in traditional asset classes and new investment vehicles.
For now, the move offers a low-friction entry point for foreign investors looking for business setup in Saudi Arabia. It also confirms the government’s intention to align its real estate sector with global best practices. But one thing is clear: Saudi Arabia is open for business—and Mecca and Medina are no longer off-limits.