KSA property rules rewired

Bilal Ambikapathy of Wisefields examines Saudi Arabia’s new foreign real estate ownership regulations, outlining what investors, developers and companies need to know about compliance, fees and market access.

The Kingdom of Saudi Arabia has taken another significant step in opening its real estate market to international investors with the publication of the Implementing Regulations of the Law of Real Estate Ownership by Non-Saudis. The Regulations provide the practical framework for the foreign ownership regime introduced earlier this year and establish the procedures, requirements and controls governing foreign ownership of real estate across the Kingdom.

While the headline announcement is that the Regulations are now in force, the more important development lies in the detail. The Regulations provide much-needed clarity on how foreign individuals, companies and investment vehicles will access the market and the regulatory obligations that will accompany that access.

A MORE STRUCTURED PATHWAY FOR FOREIGN INVESTORS

One of the most notable features of the Regulations is the establishment of a formal registration and compliance framework for foreign purchasers.

Foreign individuals who are not resident in Saudi Arabia will be required to obtain a Saudi-approved digital identity, open a Saudi bank account and obtain a Saudi mobile number linked to that identity before acquiring real estate.

Foreign companies will be required to register with the Ministry of Investment (MISA), disclose their direct and indirect ownership structure, appoint a legal representative holding a Saudi-recognised identity, and maintain a Saudi bank account before being permitted to acquire real estate interests.

The Regulations strike a sensible balance between opening the market to international capital and maintaining regulatory oversight. Investors should view these requirements not as barriers to entry, but as part of Saudi Arabia’s broader effort to create a transparent and institutionalised real estate market that can support long-term foreign investment.

The Regulations also introduce ongoing notification obligations requiring registered foreign companies to notify MISA of transfers of 5 per cent or more of their ownership, governance arrangements that restrict the company’s independence or allow another party to exercise material influence over its decisions, and other matters specified by the Real Estate General Authority (REGA).

One of the less-publicised but equally significant aspects of the Regulations is the enhanced transparency framework. The disclosure of direct and indirect ownership, together with continuing reporting obligations, reflects Saudi Arabia’s broader move towards increased corporate transparency and institutional oversight of foreign investment.

 DIGITALISATION AT THE CORE

The Regulations require REGA to establish a dedicated electronic platform linked to the Real Estate Registry through which applications relating to the ownership of real estate, the acquisition of rights in rem and the disposal of those rights will be processed.

In addition, all financial transactions relating to foreign ownership must be completed through approved electronic payment systems in accordance with the Saudi Central Bank’s payment framework.

GREATER CLARITY FOR SAUDI COMPANIES WITH FOREIGN SHAREHOLDERS

The Regulations also clarify the position of Saudi companies with foreign shareholders. Such companies may acquire real estate outside the designated geographical areas (excluding Makkah and Madinah) where ownership is required for the conduct of their business activities or to provide employee accommodation, subject to prior approval from the Ministry of Investment.

The Regulations further confirm that acquisitions within the designated geographical areas may proceed without separate MISA approval where permitted under the Law.

INTRODUCTION OF A 2 PER CENT DISPOSAL FEE

A key commercial development is the introduction of a 2 per cent fee on disposals of rights in rem over real estate by non-Saudis in Riyadh, Jeddah, Makkah and Madinah.

The Regulations also contain a number of important zero-rate exemptions, including certain inheritance transfers, court-ordered transfers, transfers involving diplomatic entities, specific internal restructurings and disposals arising from the sale of developed units by qualifying foreign developers.

ENCOURAGING ACTIVE DEVELOPMENT

Perhaps one of the more interesting provisions is the incentive structure for developers.

The Regulations provide for a zero-rate disposal fee where a foreign investor develops land within the approved development period and disposes of the completed units within one year following the expiry of the development license.

The policy objective appears clear: encourage active development and productive investment rather than speculative land banking.

This is likely to be welcomed by developers of residential communities, hospitality assets, branded residences and mixed-use projects, all of which form a central part of Saudi Arabia’s Vision 2030 development pipeline.

INCREASED COMPLIANCE AND ENFORCEMENT

The Regulations establish a comprehensive enforcement regime, including the appointment of inspectors and the introduction of substantial penalties for non-compliance.

Violations include deliberately providing false or misleading information, failure to disclose ownership changes, obstructing inspectors and failing to remedy violations within the prescribed period.

In serious cases, penalties may include fines of up to SAR10 million, together with the forced disposal of the relevant real estate interest.

GEOGRAPHICAL ZONES

Foreign ownership is generally only allowed in specific zones. Those zones are set out online by the Real Estate General Authority at the following website:  https://saudiproperties.rega.gov.sa/zones

Importantly, the website also lists all the real estate types and real estate rights that are available for foreign ownership in each of the geographical zones specified. In most cases freehold ownership is allowed, as well as all other types of real estate rights, including leasehold and usufruct.

LOOKING AHEAD

The publication of the Implementing Regulations marks another significant milestone in Saudi Arabia’s ongoing transformation of its real estate sector.

While investors will continue to monitor the practical implementation of the new regime, the Regulations provide the legal certainty and operational framework that many international market participants have been awaiting.

For developers, investors, hospitality operators and real estate funds, the focus will now shift from understanding the new regime to implementing investment strategies that take advantage of the opportunities it presents. As the market evolves and further guidance is issued, stakeholders should carefully assess how the new framework may affect their ownership structures, development strategies and investment objectives in the Kingdom.

Text by:

Bilal Ambikapathy, partner, Wisefields