Saudi Arabia’s New Property Ownership Law for Non-Saudis
On Friday, Saudi Arabia officially released its comprehensive property ownership law for non-Saudi nationals in the Umm Al-Qura gazette. This announcement follows the Cabinet’s approval earlier this month, marking a significant shift in the Kingdom’s approach to foreign real estate ownership.
Key Features of the New Law
The new law will come into effect 180 days after its publication, replacing the previous regulations established under Royal Decree No. M/15 from 2000. The updated framework allows non-Saudis—whether individuals, corporations, or non-profit entities—to own property or to acquire other rights related to real estate in specific zones, which will be later defined by the Saudi Cabinet.
Types of Rights Granted
Under this new legislation, non-Saudis will have access to various property rights, such as usufruct (beneficial use), leaseholds, and other real estate interests. However, these rights will come with certain limitations based on location, property type, and intended use. Ownership in particular regions, notably Makkah and Madinah, remains largely restricted, with exceptions made solely for individual Muslim owners under specified conditions.
Preservation of Existing Rights
Notably, the law assures that all real estate rights legally established for non-Saudis before the new regulations take effect will remain intact. This provision aims to provide stability and assurance for existing foreign property owners.
Defining Ownership Zones
The Saudi Council of Ministers, upon recommendations from the Real Estate General Authority and the Council of Economic and Development Affairs, will delineate which areas are permissible for foreign ownership. This will include stipulating maximum ownership percentages and durations for usufruct rights tailored to different property types.
Residential Property Ownership for Foreign Residents
Foreign nationals legally residing in Saudi Arabia will also benefit from this new legislation, as they will be allowed to own one residential property outside of the restricted zones for personal use. However, this does not extend to properties within Makkah and Madinah.
Corporate and Investment Opportunities
The law further includes provisions for corporate entities. Non-listed companies with foreign shareholders, investment funds, and specially licensed entities will be able to acquire real estate throughout the Kingdom. This includes the potential to own property in Makkah and Madinah, provided that such ownership aligns with operational needs or facilitates employee housing.
Listed companies and investment vehicles are also granted the ability to purchase real estate in accordance with Saudi financial market regulations, thus broadening investment opportunities within the Saudi Arabian real estate market.
Diplomatic and International Entity Privileges
Foreign diplomatic missions and international organizations will be allowed to own property necessary for official use and residences for their representatives. However, this is contingent on obtaining approval from the Saudi Foreign Ministry and ensuring reciprocity with their home countries.
Registration and Compliance Requirements
Before acquiring property, non-Saudi entities must register with the appropriate authorities. The rights of ownership are only validated after formal registration in the national real estate registry, ensuring a clear and traceable property ownership process.
Transfer Fees and Penalties
A new real estate transfer fee of up to 5% will be applicable for transactions involving non-Saudis. To enforce compliance, the law introduces penalties for violations, which can reach up to SAR 10 million. In cases of providing falsified information, the law calls for the forced sale of the property, with the sale proceeds going to the state following necessary deductions.
Oversight and Enforcement Mechanisms
To oversee adherence to the new regulations, a committee under the Real Estate General Authority will be established to investigate violations and administer penalties. Decisions made by this committee can be contested in administrative courts within a 60-day window.
Conclusion of Old Restrictions
The new legislation also revokes the prior restrictions that prevented GCC citizens from owning property in Makkah and Madinah, thereby creating a more standardized framework for all non-Saudi entities.
Future Guidelines
Following the enactment of this new law, executive regulations detailing the implementation mechanisms, specific geographic restrictions, and conditions are expected to be issued within six months. This forthcoming guidance will further clarify the law’s application and enhance clarity for prospective foreign property owners in Saudi Arabia.
