Saudi Arabia Announces New Property Ownership Law
In a significant move for the real estate sector, Saudi Arabia has officially announced a new property ownership law for non-Saudis, published in the official gazette, Umm Al-Qura. Following Cabinet approval earlier this month, this announcement is part of the Kingdom’s ongoing efforts to enhance foreign investment and diversify the economy. The new law allows various non-Saudi entities, including individuals and companies, to invest in real estate within designated areas, marking a transformative shift in property ownership regulations.
Key Features of the New Law
The law is set to take effect 180 days from its publication and replaces previous legislation established under Royal Decree No. M/15 in 2000. The latest developments grant non-Saudis the right to own property or acquire other real rights over real estate in specified geographic zones determined by the Cabinet. These rights encompass usufruct (beneficial use), lease agreements, and various real estate interests; however, they come with specific controls and restrictions based on location and property types.
Restrictions on Ownership
While the law opens many doors, ownership remains off-limits in certain areas, particularly in Makkah and Madinah, with exceptions made for individual Muslim owners under specific conditions. Furthermore, prior real estate rights established for non-Saudis will be preserved even after the new regulation takes effect, ensuring stability for existing property agreements.
Provisions for Individuals and Corporates
The Council of Ministers, following proposals from the Real Estate General Authority, will delineate the permissible zones for foreign ownership and determine ownership limits. Notably, foreign individuals residing legally in Saudi Arabia can own one residential property outside restricted areas, although this does not extend to Makkah and Madinah.
Additionally, non-listed companies with foreign shareholders will be allowed to purchase real estate across the Kingdom, including in the aforementioned holy cities, provided it meets operational requirements. Listed companies and investment vehicles also gain the ability to acquire properties compliant with Saudi financial regulations.
Regulatory and Financial Aspects
The new law mandates that non-Saudi entities must register with the appropriate authorities prior to acquiring property, with ownership only becoming valid after registration in the national real estate registry. There is also a new real estate transfer fee that could reach up to 5% for transactions involving non-Saudis.
Sanctions for violations of the law are significant, including fines of up to SAR 10 million and, in cases of fraudulent activities, the forced sale of the property with proceeds directed to the state, deducting expenses. A committee under the Real Estate General Authority will oversee violations, with the ability to appeal decisions to administrative courts within 60 days.
Notably, the new legislation also repeals a prior rule that barred GCC citizens from property ownership in both Makkah and Madinah, creating a unified framework for all non-Saudi entities. The executive regulations, which will detail implementation and geographic specifications, are anticipated within the next six months.