Recent developments in Saudi Arabia‘s property sector are set to catalyze the expansion of Real Estate Investment Trusts (REITs), particularly as the market opens up to foreign investors. With new regulations designed to enhance transparency and foster growth, the landscape for REITs in the kingdom is gearing up for significant transformation. The latest report suggests that these changes will not only modernize the sector but also align with the broader economic vision encapsulated in Vision 2030. This article delves into the recent updates and their implications for both local and international investors in the Saudi REIT landscape.
The ratings agency S&P Global noted that, while the kingdom’s REIT sector currently comprises 19 listed trusts valued at approximately $4 billion as of August, the newly implemented rules and ongoing reforms in the property sector could expedite its future growth. S&P remarked, “The new regulation permitting REITs listed on Nomu to invest in property development projects represents a major milestone in the evolution of the Saudi REIT market. We expect it will encourage more listings and help the sector gain scale.”
New Rules Reshape Saudi REIT Market
In a significant move towards enhancing capital markets and realizing the goals of Vision 2030, Saudi Arabia’s Capital Market Authority revised its REIT framework in July. The updates empower Nomu-listed REITs to invest in development projects while strengthening disclosure requirements and tightening the oversight of fund managers.
The primary goal behind these reforms is to attract additional capital, enhance transparency, and provide developers with innovative fundraising options. According to S&P, these updates, in conjunction with broader economic diversification efforts, are set to modernize the asset-management sector and elevate the real estate industry’s contributions to the kingdom’s GDP.
Significantly, these rule changes coincide with the enforcement of a new foreign ownership law set to take effect in January 2026. This legislation will allow non-GCC nationals to purchase property directly across most regions in Saudi Arabia for the first time. S&P emphasized that this move will deepen market liquidity and draw in more international investors. “The new law will allow foreigners to own property directly across most regions, which could boost demand and liquidity in the market,” the report outlined.
Long-Term Drivers and Short-Term Challenges
S&P continues to highlight the critical role of Vision 2030 mega-projects such as NEOM, Qiddiya, Diriyah, and The Red Sea as key long-term demand drivers in the real estate sector. “We expect these projects to sustain strong demand for both residential and commercial property,” it noted. However, the agency also acknowledged potential short-term challenges arising from a five-year rent freeze that was introduced in Riyadh earlier in September.
Implemented by the General Real Estate Authority, this freeze prohibits any rent increases on both residential and commercial properties within the city’s urban boundary, affecting new and renewed leases alike. It mandates that all rental contracts be registered on the government’s Ejar platform. While this measure aims to stabilize costs and enhance Riyadh’s appeal as a global business hub, S&P warns that it could limit income growth for landlords and investors. “Rental yields are expected to stabilize or soften in the near term as landlords adjust to the freeze,” the agency pointed out.
Despite the challenges posed by the current environment, S&P remains optimistic about the outlook for Saudi REITs as regulatory frameworks mature and investor engagement increases. “The continued development of new products, such as development REITs, could transform the Saudi market over the next few years,” the report concluded, highlighting the sector’s potential future growth in light of these evolving regulations.