A New Era for Investment: Foreign Ownership Opens Up in Mecca and Medina’s 

Saudi Arabia has just unlocked a door that many international investors have long hoped would open. In a historic move, the Kingdom is now allowing foreign investors to hold stakes in listed real estate companies that own property in Mecca and Medina, two of the most significant cities in the KSA, which were previously among the most restricted real estate markets globally.

This regulatory shift indicates Saudi Arabia’s readiness to embrace international capital and expertise in sectors traditionally shielded from foreign involvement.

Below, we explore the implications of this decision, what investors should know about the new regulations, and how it may reshape Saudi Arabia’s real estate sector in the years ahead.

SAUDI ARABIA’S NEW REAL ESTATE REGULATION FOR MECCA AND MEDINA

1. Understanding the Policy Shift

The Saudi Capital Market Authority (CMA) has introduced regulations that allow foreign investors to own up to 49 percent of shares in Saudi-listed real estate companies that hold property in Mecca and Medina.

While this still stops short of allowing direct foreign ownership of property in the Holy Cities, it represents a significant loosening of previously strict investment barriers.

What’s permitted?

• Foreign investors can purchase shares or convertible debt instruments in qualifying companies listed on the Saudi Stock Exchange (Tadawul).

• Ownership is capped at 49 percent per company for foreign investors.

• Foreign strategic investors are excluded under the new rules.

While the rules still have limitations, they reflect a broader trend of gradual liberalization that may pave the way for more direct foreign property ownership in the future.

2. Why Mecca and Medina Matter?

Besides being spiritual cities, Mecca and Medina are also economic powerhouses, largely driven by tourism. With millions of pilgrims visiting annually for Hajj and Umrah, the demand for real estate, hospitality infrastructure, and support services in these cities is high.

By allowing foreign capital to into real estate in these sacred areas, Saudi Arabia strives to:

• Enhance liquidity in the local property market.

• Boost development to meet growing demand.

• Bring global best practices and innovation into religious tourism infrastructure.

This new policy complements earlier changes introduced in 2021 that allowed foreign investors to participate in real estate funds (REITs) focused on the Holy Cities, indicating a clear trajectory toward more openness.

3. Market Reaction

The market has responded with enthusiasm. On the day of the announcement, 13 out of 14 real estate companies listed on Tadawul saw an average share price increase of 3.59 percent. Companies directly connected to real estate in Mecca and Medina posted even more impressive gains.

This response reflected confidence in the potential for new capital inflows and a positive outlook for development projects in the Holy Cities.

4. A Landmark Move

Some industry leaders and real estate experts mark it as a landmark move.

Ziad El Chaar, CEO of Dar Global, a London-listed property firm, echoed this sentiment, emphasizing that the policy shift will likely accelerate development in Mecca and Medina, especially in sectors aligned with the pilgrimage economy.

For developers, this change means more funding options. For foreign investors, it provides access to one of the region’s most resilient real estate markets, driven by consistent demand from religious tourism.

5. The Real Estate Boom in the KSA

Saudi Arabia’s real estate market has undergone a significant transformation as part of the government’s Vision 2030 strategy. With a national push to diversify away from oil, the real estate and construction sectors are seeing massive state-led and private sector investments and projects like NEOM and Qiddiya.

While much of the spotlight has been on Riyadh, the opening of Mecca and Medina to international investors is expected to shift attention toward these historically restricted markets.

With land values already high and demand consistently strong, these cities offer long-term upside for investors focused on business setup in the KSA in the hospitality and travel industry.

6. Investment Opportunities

Though foreign investors cannot directly purchase real estate in Mecca and Medina, the current structure offers several viable entry points like:

• Buying shares in Tadawul-listed real estate companies operating in the Holy Cities.

• Investing in REITs that focus on hospitality and real estate assets in Mecca and Medina.

• Participating in large-scale development projects through joint ventures or equity stakes.

This indirect investment model still allows for significant exposure to the performance of real estate markets in these cities while offering regulatory safeguards and ease of access through the public markets.

7. Looking Ahead

Saudi Arabia’s decision to ease foreign investment restrictions in Mecca and Medina is part of a larger pattern of liberalization and global integration. The Kingdom is seeking to:

• Create a more attractive investment climate for international players.

• Strengthen its financial markets and increase participation.

• Promote company formation in the KSA in urban development that supports tourism and commerce.

While the 49 percent ownership cap and exclusion of strategic investors reflect caution, the strong market response and expert analysis suggest that this could be the first of many steps toward a more open, globally integrated property market.

Opportunity for Real Estate Businesses in the KSA

The opening of Mecca and Medina’s real estate markets to foreign investors through listed companies marks a watershed moment in Saudi Arabia’s investment history.

For years, these Holy Cities were considered off-limits to non-Saudis, but the evolving regulatory framework shows a shift in mindset marking inclusivity and global engagement.

Investors now have a real opportunity to participate in one of the Middle East’s most dynamic and significant real estate sectors. For international businesses, private equity firms, and individual investors alike, the time to explore Saudi Arabia’s real estate market might just be now.