Saudi Arabia Opens Real Estate Investment in Mecca and Medina to Foreigners

In a significant move aligning with its Vision 2030 economic diversification plan, Saudi Arabia has opened the doors for non-Saudis to invest in listed companies owning real estate in Mecca and Medina. 

This landmark decision, announced by the Capital Market Authority (CMA), marks a new chapter in the Kingdom's efforts to attract foreign capital and bolster its capital market competitiveness. 

The announcement underscores the Kingdom's intent to stimulate foreign direct investment (FDI) and provide liquidity for existing and upcoming projects in Islam's holiest cities. According to the CMA, foreign investment will be restricted to shares and convertible debt instruments, with a total ownership cap of 49% of a company's shares. 

Strategic foreign investors, however, are barred from participating in these investments, maintaining a level of local control over strategic assets. 

“This initiative aims to enhance the attractiveness and efficiency of the capital market while strengthening its regional and international competitiveness,” stated the CMA. 

 Strengthening the real estate sector is a key goal in Vision 2030 program

 

This policy shift is a cornerstone of Saudi Arabia's Vision 2030 agenda, which seeks to reduce the Kingdom's reliance on oil revenues and develop a more diversified economy. As part of these reforms, Saudi Arabia has already introduced measures to relax foreign ownership laws and stimulate its stock market. 

The Kingdom has ambitious goals, including attracting $100 billion in FDI by the end of the decade. This is evident in the recent changes, such as permitting foreign residents to invest directly in the stock market and enabling qualified foreign institutions to access listed securities through swap agreements. 

While non-Saudis have been allowed to lease properties in Mecca and Medina, direct ownership within these cities has remained largely off-limits. This latest move reflects a regional trend, as neighboring Gulf nations have also been loosening restrictions on foreign property ownership in designated areas to boost investment. 

The CMA's decision had an immediate impact on the stock market. Real estate firms with investments in Mecca and Medina saw their share prices soar. Notably, Jabal Omar Development Company and Makkah Construction and Development Company recorded 10% increases, while Knowledge Economic City’s stock rose by nearly 10%. 

Thousands of Muslims pray inside the Grand Mosque in Mecca

 

These companies are well-positioned to benefit from the steady stream of pilgrims and the associated revenue streams. The Kingdom aims to host 30 million pilgrims annually by 2030. 

In 2019 alone, pilgrimage-related activities generated approximately $12 billion in revenue. Expanding the capacity and infrastructure for Hajj and Umrah pilgrims is an integral component of Saudi Arabia's broader economic overhaul. 

Despite the reforms, Saudi Arabia continues to face economic challenges. The International Monetary Fund recently estimated that the Kingdom requires oil prices at $96 per barrel to balance its budget—significantly higher than current market rates. 

Additionally, its Public Investment Fund (PIF), a key driver of domestic development, has scaled back spending, with its investments dropping from $31.6 billion in 2023 to $19.9 billion in 2024. 

Even so, international investors have shown strong interest in Saudi Arabia's financial instruments. The Kingdom's recent $12 billion bond issuance attracted bids exceeding $30 billion, highlighting global confidence in its economic prospects.