The ownership of real estate by non-Saudis in the Kingdom of Saudi Arabia has long been a complex and tightly regulated issue. The Kingdom maintained strict limitations on foreign investment in the country's property market, reflecting concerns over national sovereignty and demographic considerations. The Kingdom's Regulation No. 15 of 1421 regarding the system of non-Saudi ownership and investment of real estate, has introduced a more nuanced and investor-friendly approach to this critical issue.
The law establishes clear guidelines for non-Saudi individuals and corporate entities seeking to acquire real estate in the country. A key provision allows non-Saudi investors who are licensed to practice professional, vocational, or economic activities in Saudi Arabia to purchase real estate necessary for their business operations, including for the residence of employees. This includes the ability to rent out such properties, providing valuable investment opportunities. In situations where non Saudi Arabian investors include the acquisition of buildings of lands for the purpose of construction or investment though rent or sale the total cost of the project cannot be less than 30,000,000 Riyals unless stipulated so by the Council of Ministers.
For non-Saudi natural persons legally residing in the Kingdom, the law permits the acquisition of real estate for private residence, subject to approval from the Ministry of Interior. Additionally, foreign diplomatic representatives and international/regional agencies can obtain permission from the Ministry of Foreign Affairs to acquire real estate for their official offices and staff housing.
One notable restriction, is the prohibition of non-Saudis owning real estate within the boundaries of the holy cities of Mecca and Medina, except through inheritance or by way of a grant to a Saudi Arabian entity. Article 5 establishes that the restriction applies to all non-Saudis, with the sole exception of acquiring ownership through inheritance. The law further clarifies the definition of a "non-Saudi" as any of the following: Any individual person who does not hold Saudi nationality, any non-Saudi company or corporate entity and any Saudi company that is founded, co-founded, or partially owned by a natural or corporate person who does not hold Saudi nationality. The exception to the law is as follows: any banks and real estate financing companies which are licensed by the Saudi Arabian Monetary Authority, and companies that are not engaged in real-estate activities.
In the event of any dispute arising from the ownership, rental, or investment of real estate by non-Saudi individuals or entities within the Kingdom of Saudi Arabia, such disputes shall be subject to binding arbitration. The arbitration system process shall be conducted in accordance with the Arbitration Law of the Kingdom of Saudi Arabia and its implementing regulations as outlined inLaw No. M/34, 24/5/1433.
The ADR procedure shall be conducted by the Saudi Center for Commercial Arbitration (SCCA) where the arbitration panel shall be composed of three arbitrators, one of whom shall be appointed by the non-Saudi party, one by the Saudi party, and the third shall be appointed by mutual agreement of the two appointed arbitrators. In the event the two appointed arbitrators are unable to agree on the selection of the third arbitrator, the appointment shall be made by the competent court having jurisdiction over the location of the disputed real estate property. The arbitration proceedings shall be conducted in the Arabic or English language. The arbitration panel may, at its discretion, allow the use of other languages during the proceedings if deemed necessary.
The article aims to preserve the sanctity and sovereignty of the holy cities by maintaining strict control over real estate ownership within their boundaries. This reflects the religious and cultural significance of these locations within the Kingdom of Saudi Arabia. As the Implementing Regulations of this law are further refined and updated, it will be critical for non-Saudi investors to closely monitor the evolving regulatory landscape to navigate the nuances of real estate acquisition and investment in the Kingdom. The Law of Real Estate Ownership and Investment by Non-Saudis has marked a significant milestone in Saudi Arabia's efforts to attract global capital and expertise to its real estate sector. By establishing a more permissive regulatory framework, the Kingdom has sought to position itself as an increasingly attractive destination for international investors seeking opportunities in the dynamic Middle East region.
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