Saudi Arabia’s Capital Market Authority (CMA) recently announced a groundbreaking reform, allowing foreigners to invest in companies owning real estate in Makkah and Madinah. This decision is a strategic move to attract foreign capital, enhance market efficiency, and provide liquidity for current and future projects in these holy cities.
Previously, non-Saudis were prohibited from purchasing property in Makkah and Madinah. They could only lease property for a maximum of 99 years. The new legislation now enables foreigners to hold up to 49% of shares in real estate companies listed on the Tadawul stock exchange. However, this right excludes strategic investors.
Makkah and Madinah Real Estate
The CMA’s reform aligns with Saudi Vision 2030’s goals to diversify the economy and attract global investors. The new change in the law makes it easier for non-Saudis to invest in the real estate market of the two holy cities. It also responds to growing demand from international high-net-worth individuals seeking to invest in Makkah and Madinah. A Knight Frank survey revealed that 82% of wealthy Muslims are interested in buying property in Saudi Arabia, with nearly half favoring Makkah.
Furthermore, opening up the two cities to foreign investment would have a big impact on the market. Real estate companies focusing on these cities have already seen significant market reactions. Markets reacted positively to the news. Firms like Makkah Construction and Development Co. and Jabal Omar Development Co. recorded share price increases of up to 10% following the CMA announcement. Real estate investment trusts (REITs), such as Jadwa REIT Al Haramein, also experienced gains, reflecting investor confidence in the sector.
Major Projects Driving Growth in Makkah and Madinah Real Estate
The Royal Commission for Makkah City recently launched a $2.91 billion fund to develop the Al Kidwa area near the Holy Masjid. This project will include 2,614 properties and span 686,056 square meters. It aims to support Vision 2030’s objective of hosting 30 million Umrah performers. Also, it supports the objective of six million pilgrims annually.
This initiative is part of a larger trend, with Saudi Arabia investing heavily in infrastructure and real estate to accommodate growing religious tourism. Expansions to the Haram in Makkah and Madinah have boosted hotel occupancy rates and revenues. The average daily rate for rooms in Makkah rose by 41% in the second quarter of 2023 compared to 2019.
As Saudi Arabia opens its real estate market to foreign investors, Makkah and Madinah are poised for transformative growth. These changes create opportunities for international investors while aligning with the Kingdom’s Vision 2030.
As opening up the new markets, Saudi real estate market presents great investment opportunities. Injaz Company offers tailored business expansion services for companies seeking to explore Saudi Arabia’s booming real estate sector. Let us guide you in navigating these exciting investment opportunities.
