Understanding Saudi Arabia's Law of Real Estate Ownership by Non-Saudis

Saudi Arabia's real estate sector is on the cusp of a major transformation with the upcoming implementation of the Law of Real Estate Ownership by Non-Saudis. Approved via Royal Decree No. M/14 on July 14, 2025, this legislation aims to attract foreign investment, boost economic diversification, and align with Vision 2030 goals. As of January 9, 2026, the law is set to take effect in just 12 days, opening new opportunities for international buyers while maintaining strategic controls.

Background and History of the Law

Saudi Arabia has historically restricted foreign ownership of real estate to protect national interests and preserve cultural sites. The previous framework, the Law of Real Estate Ownership and Investment by Non-Saudis (Royal Decree No. M/15, issued in 2000), allowed limited ownership for licensed investors, residents with permits, and diplomatic entities. However, it imposed strict conditions, such as minimum investment thresholds of SAR 30 million for development projects and prohibitions in holy cities.

The new law repeals the 2000 legislation and introduces a more flexible, zone-based approach. It was published in the Official Gazette (Umm Al-Qura) on July 25, 2025, following approval by the Council of Ministers. This shift reflects broader reforms under Crown Prince Mohammed bin Salman to make the Kingdom more appealing to global capital.

Effective Date and Implementation

The law becomes effective 180 days after its publication, on January 21, 2026. Implementing regulations, which will provide detailed procedures for registration, zone maps, and ownership limits, are expected by the same date. These regulations will be issued by the Real Estate General Authority (REGA) in coordination with the Council of Ministers and the Council for Economic and Development Affairs.

Until full details are released, potential investors should monitor REGA announcements for clarity on application processes and compliance requirements.

Key Provisions of the Law

The law expands access to real estate ownership and related rights, such as usufruct (the right to use and profit from property), easements, and long-term leases. It categorizes ownership based on residency status, entity type, and location.

Who Can Own Property Under the New Law

Eligibility is broad but structured:

• Non-Saudi Individuals: Both residents and non-residents can acquire property. Residents (including premium residency holders) may own one residential property for personal use outside designated zones, plus additional properties within zones. Non-residents are limited to designated zones.
• Foreign Companies and Entities: Includes corporations, non-profits, investment funds, and special-purpose vehicles. They can own for business operations, employee housing, or investment, primarily within designated zones.
• Saudi Companies with Foreign Ownership: Listed companies on the Tadawul stock exchange have broader access, including for offices and activities per Capital Market Authority rules. Non-listed companies can own in zones and, if needed, outside for operational purposes.
• Diplomatic Missions and International Organizations: Allowed to own official premises based on reciprocity, with approval from the Ministry of Foreign Affairs.

The definition of "non-Saudi" encompasses non-citizens, foreign entities, and any others designated by the Council of Ministers.

Designated Zones for Foreign Ownership

A core feature is the "designated-zone model." The Council of Ministers will approve specific geographic areas in cities like Riyadh and Jeddah where foreign ownership is permitted. These zones will include maps, maximum ownership percentages per zone, usufruct duration limits, and allowable property types (residential, commercial, industrial, agricultural).

REGA will publish a Geographic Scope Document outlining these details. Early indications suggest high-growth areas and mega-projects like NEOM and the Red Sea developments may be prioritized to drive investment.

Restrictions, Especially on Holy Cities

While the law liberalizes access, safeguards remain:

• Ownership is generally confined to designated zones, with exceptions for residents' personal residences.
• In Mecca and Medina, ownership is heavily restricted. Only Muslim non-Saudi individuals and certain foreign-owned Saudi companies can own within designated zones, subject to special conditions. Non-Muslims are prohibited entirely in these cities.
• The law prohibits acquisitions that violate Sharia principles or national security rules.

These measures ensure the protection of sacred sites while allowing controlled economic activity.

Fees and Taxes Associated with Ownership

• Transfer Fee: Non-Saudis face a fee of up to 5 percent of the property's value upon sale or disposal, levied by REGA. This is in addition to the standard 5 percent real estate transaction tax applicable to most sales.
• Other Costs: Buyers should anticipate registration fees and potential corporate income taxes for entities. Exact structures will be clarified in implementing regulations.

Registration Process

All acquisitions by non-Saudis must be registered with the competent authority and recorded in the national Real Estate Registry to be legally valid. Foreign companies and non-profits require prior registration with designated bodies. The process will likely involve digital platforms like the evolving Saudi Properties system for streamlined transactions.

Failure to register renders ownership ineffective, emphasizing compliance.

Penalties for Violations

The law enforces strict accountability:

• Fines up to SAR 10 million (approximately USD 2.67 million) per violation.
• In cases of fraud, such as using false information, properties may be forcibly sold at public auction.
• A specialized REGA committee oversees enforcement, with appeals possible to administrative courts within 60 days.

These penalties deter speculation and ensure adherence to rules.

Major Changes from the Previous Law

Compared to the 2000 law:

• Broader Eligibility: No longer requires specific licenses or minimum investments for most buyers; opens to non-residents and non-profits.
• Zone-Based Flexibility: Shifts from blanket restrictions to targeted zones, allowing more properties and rights.
• Holy Cities Access: Introduces limited ownership for Muslims in designated areas, previously near-impossible.
• No Purpose Restrictions: Properties can be for any use, not just tied to business or residence permits.

These updates make the market more investor-friendly while retaining controls.

Implications for Investors and the Real Estate Market

This law positions Saudi Arabia as a competitive player in the Gulf real estate landscape, potentially complementing markets like Dubai by attracting long-term, strategic investors. Early adopters may benefit from undervalued assets in growth zones, with rental yields in Riyadh estimated at 5 to 8 percent.

However, success depends on clear implementing regulations and zone details. Investors should:

• Consult local legal experts for compliance.
• Monitor REGA for zone announcements.
• Consider tax implications, including the transfer fee.

For ultra-high-net-worth individuals and funds, opportunities in mega-projects could yield significant returns over a 10-plus-year horizon.

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