The Saudi Capital Market Authority (CMA) has announced that foreign investors are now permitted to invest in Saudi-listed companies that own real estate within the holy cities of Makkah and Madinah, effective Monday, January 27, 2025. This landmark decision, detailed in the “Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange (Tadawul) from the Meaning of the Phrase (Non-Saudi) in accordance with the Law of Real Estate Ownership and Investment by Non-Saudis,” aims to foster investment, enhance the appeal and efficiency of the capital market, and bolster its competitiveness both regionally and globally, while also supporting the local economy.
Context and Background
The CMA’s initiative seeks to attract foreign capital and provide the necessary liquidity for ongoing and future projects in Makkah and Madinah, leveraging the Saudi market’s vast investment opportunities. These efforts aim to position the Saudi market as a pivotal funding source for significant developmental initiatives in these cities, aligning with the Kingdom’s broader economic diversification goals under Vision 2030. The move builds on previous reforms, including a 2021 decision to allow non-Saudis to subscribe to real estate funds investing within the two cities.
Key Details
Foreign investment will be restricted to shares of Saudi-listed companies that own real estate in Makkah and Madinah, as well as convertible debt instruments, according to the approved controls. The total ownership of non-Saudi natural and legal persons is capped at 49% of a company’s shares. However, strategic foreign investors are not permitted to own shares or convertible debt instruments in these companies. The approved controls enable non-Saudi investors to benefit from the economic advantages of existing and upcoming projects while adhering to relevant laws, particularly the Law of Real Estate Ownership and Investment by Non-Saudis, whether during the operation or liquidation of these companies. Meanwhile, the CMA has granted listed Saudi companies the right to acquire ownership, easement, or usufruct rights over properties designated for their headquarters or branch locations within Makkah and Madinah.
Implications and Impact
This decision is expected to significantly boost foreign portfolio investment in Saudi Arabia, enhancing liquidity in the capital market and supporting large-scale urban development projects in Makkah and Madinah. It reflects a comprehensive and diversified financial market framework, providing various funding options for projects in these cities. The CMA has implemented numerous initiatives to enhance the appeal of the Saudi financial market, including allowing resident foreign investors to participate directly in the Saudi stock market, enabling foreign investors to access the market through swap agreements, and facilitating investments by qualified foreign financial institutions in listed securities. These measures underscore Saudi Arabia’s commitment to becoming a global investment destination.
Vision 2030 Alignment
This policy directly supports Saudi Vision 2030’s objectives of diversifying the economy, attracting foreign investment, and positioning the Kingdom as a leading global investment hub. By opening up real estate investment in Makkah and Madinah to foreign investors, Saudi Arabia is reinforcing its commitment to sustainable development and economic modernization, creating new opportunities for international partners to participate in the nation’s transformative journey. The initiative highlights the Kingdom’s forward-looking approach to leveraging its unique assets for long-term growth and global integration.
20 Questions
Q1. What did the Saudi Capital Market Authority announce on January 27, 2025?
A1. The CMA announced that foreign investors are now permitted to invest in Saudi-listed companies that own real estate within Makkah and Madinah, effective immediately.
Q2. What is the purpose of this new regulation?
A2. The regulation aims to foster investment, enhance the appeal and efficiency of the capital market, bolster its competitiveness, and support the local economy.
Q3. Which companies are affected by this decision?
A3. The decision affects Saudi-listed companies that own real estate within the holy cities of Makkah and Madinah.
Q4. Is there a limit on foreign ownership in these companies?
A4. Yes, the total ownership of non-Saudi natural and legal persons is capped at 49% of a company’s shares.
Q5. Can strategic foreign investors participate in this program?
A5. No, strategic foreign investors are not permitted to own shares or convertible debt instruments in these companies.
Q6. What types of investments are allowed under these controls?
A6. Foreign investment is restricted to shares of Saudi-listed companies that own real estate in Makkah and Madinah, as well as convertible debt instruments.
Q7. How does this decision align with Saudi Vision 2030?
A7. It supports Vision 2030 by attracting foreign capital, diversifying the economy, and positioning Saudi Arabia as a global investment hub.
Q8. What previous steps did the CMA take to promote foreign investment?
A8. In 2021, the CMA allowed non-Saudis to subscribe to real estate funds investing within Makkah and Madinah, among other initiatives.
Q9. What is the role of the Law of Real Estate Ownership and Investment by Non-Saudis?
A9. Investors must adhere to this law, which governs real estate ownership and investment by non-Saudis, during operation or liquidation of companies.
Q10. Are listed Saudi companies allowed to own properties in Makkah and Madinah?
A10. Yes, they can acquire ownership, easement, or usufruct rights over properties designated for their headquarters or branch locations in these cities.
Q11. How does the CMA aim to boost the capital market’s competitiveness?
A11. By attracting foreign capital and providing liquidity for projects, the CMA seeks to enhance the market’s appeal regionally and globally.
Q12. What is the significance of Makkah and Madinah in this context?
A12. These holy cities hold immense religious and economic importance, and the decision aims to fund major developmental initiatives there.
Q13. How does this initiative support ongoing and future projects?
A13. It provides necessary liquidity and positions the Saudi market as a pivotal funding source for significant developments in these cities.
Q14. What other measures has the CMA implemented to attract foreign investment?
A14. Measures include allowing direct participation by resident foreigners, swap agreements, and investments by qualified foreign financial institutions.
Q15. Are there controls to ensure compliance with Saudi laws?
A15. Yes, the approved controls require adherence to relevant laws, including the Law of Real Estate Ownership and Investment by Non-Saudis.
Q16. How was the final regulation developed?
A16. The CMA published draft regulations in November 2023 for public feedback via the Istitlaa platform before finalizing them.
Q17. What is the Istitlaa platform?
A17. It is the National Competitiveness Center’s public consultation platform used to gather feedback on draft regulations.
Q18. Can foreign investors benefit from economic advantages of projects?
A18. Yes, the controls enable them to benefit from economic advantages while adhering to relevant laws during operation or liquidation.
Q19. How does this decision reflect Saudi Arabia’s global engagement?
A19. It demonstrates the Kingdom’s commitment to opening up its economy and creating opportunities for international investors in unique assets.
Q20. What is the long-term vision for such initiatives?
A20. The long-term vision is to modernize the economy, attract sustainable foreign investment, and achieve the goals of Saudi Vision 2030.
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