The Ministry of Investment published an explanatory memorandum for the draft amendment to the regulations governing non-Saudi ownership and investment in real estate . The memorandum outlines 13 economic, developmental, and social objectives. Nine of these objectives are specifically economic and developmental: enhancing economic development; increasing the real estate sector's contribution to the Kingdom's GDP; creating a more competitive business environment and promoting project development; increasing demand for real estate; improving the balance of payments; contributing to balancing supply and demand for real estate; increasing the Kingdom's share of foreign investment inflows; reducing foreign remittances; and stimulating tourism.
Four social goals in the amendment
The memorandum amending the system of non-Saudi ownership included four social objectives that the amendment seeks to achieve: increasing social capital, increasing employment rates for workers in the construction and real estate sector, working to develop less developed areas and increase demand for real estate in them, and increasing the incomes of workers in the sector.
The memorandum amending the system of non-Saudi ownership attributed the reasons that prompted the amendment of the system to the directive of Prince Mohammed bin Salman, Crown Prince, Deputy Prime Minister, Minister of Defense, Chairman of the Council of Economic and Development Affairs, contained in the recommendation of the Council’s Standing Committee regarding a number of real estate issues.
Right of use of the property
The reasons for amending the system of ownership by non-Saudis included supporting the system of regulations related to real estate, considering the right of usufruct as one of its main components and an influential aspect of it, and the expected economic impact resulting from the entry of foreign investments and enabling usufruct in the cities of Makkah and Madinah.
The reasons for the amendment also included achieving the goals of the programs and initiatives stemming from the Kingdom’s Vision 2030, which aim to develop the legislative and regulatory environment for the real estate sector in general and allow non-Saudis to own property in order to increase the rate of economic development, and to create an attractive environment that contributes to facilitating ways of living and working in the Kingdom and providing opportunities for non-Saudis to own property in certain areas.
Creating investment opportunities
Among the reasons for amending non-Saudi ownership are the creation of investment opportunities and foreign deals in the real estate sector, and the development of the legislative environment regarding the right of non-Saudis to benefit from and invest within the Kingdom, in addition to the positive impact on the balance of payments as a result of non-Saudis purchasing real estate, which in turn leads to an increase in foreign currency reserves.
In addition to finding a balance in supply and demand for different segments, increasing the supply of housing units, supporting the Saudi construction sector in increasing the supply of developed real estate products, and improving the quality of real estate offered to keep pace with global supply in a way that serves the real estate market.
Allowing foreigners to own property
The amendment project also aims to allow non-Saudi natural persons to own or benefit from real estate in the cities and economic zones in the Kingdom targeted for development, according to rules that support increased external demand for real estate and the growth of various economic activities in the rest of the economic sectors, as one of the means that the Kingdom follows to achieve an increase in the contribution of the real estate sector to the gross domestic product.
The project to amend non-Saudi ownership also aims to develop the targeted areas and increase demand for real estate in them to achieve balanced development in the projects that the Kingdom is working to develop, such as Qiddiya, the Amaala tourism project and the NEOM project.
It also contributes to increasing the government's revenue from taxes and real estate fees paid to the government by investors, clarifying the Kingdom's policies and procedures for promoting real estate investment, unifying and simplifying real estate ownership and investment procedures, achieving a unified system for foreign ownership and real estate investment, ending the multiplicity of systems and conflicting provisions, and finally increasing competitiveness, stimulating the real estate market, and providing job opportunities.
The right of foreign missions to own property
According to the draft amendment to the system, on the basis of reciprocity, foreign missions accredited to the Kingdom may own the official headquarters and residence of their president and members, and international and regional bodies may, within the limits stipulated by the agreements that govern them, own their official headquarters, all on the condition of obtaining a license from the Minister of Foreign Affairs.
The articles also stipulated that it is not permissible, by any means other than inheritance, to acquire the right of ownership, usufruct, or easement over a property located within the boundaries of the Two Holy Mosques, for persons prohibited from entering them. The regulations shall specify the necessary provisions for this, and it is prohibited for notaries public or any other competent authority to document any transaction that does not comply with the provisions of this system.
May 18th is the end of the opinion poll.
The Ministry of Investment has put forward a draft amendment to the system for non-Saudi ownership and investment of real estate for public and interested parties until May 18, 2022.
The Ministry of Investment was guided in the amendment by international practices and legislation regulating foreign ownership of real estate and the right to use it in more than ten countries, including: the United States, Germany, the United Kingdom (London), France, China, Turkey, the United Arab Emirates, Hong Kong, Singapore, Belgium, and the Netherlands (Amsterdam).
The lessons learned from foreign ownership of real estate in the GCC countries concluded that there are three key success factors that achieve the full benefits of non-Saudi ownership and use of real estate: maximizing the benefit to the service-sector-dependent economy from the adoption of rules for foreign ownership, offering attractive and lifestyle-appropriate deals with advanced infrastructure, in addition to a streamlined visa system, and establishing a strong risk mitigation mechanism to eliminate undesirable effects on the macroeconomy, society, and state sovereignty.
The risks that should be mitigated are summarized in speculation, where foreign investors are more interested in short-term profits, which may lead to the spread of speculative activities in real estate prices.
The ministry explained that the project aims to raise and improve the efficiency and effectiveness of procedures and controls related to the ownership and use of real estate by non-Saudis, both natural and legal persons, in cities and economic regions in the Kingdom targeted for development, including the cities of Makkah and Madinah.
She stated that she hopes the proposed amendment to the system will contribute to enhancing the competitiveness and marketing of the real estate sector in the Kingdom and stimulate growth in other economic sectors. In addition, enabling non-Saudis to own property will attract funds with controls and provisions that regulate and facilitate ownership in specific areas targeted for development.
The draft amendment to the ownership and investment of real estate by non-Saudis deleted Article Four and merged Articles One and Two, which stipulated that “a non-Saudi person, whether natural or legal, licensed by the competent authority, may acquire the right of ownership, easement, or usufruct over real estate, including its investment, in accordance with the controls, conditions, and rules specified by the regulations of this system,” and the second, “a regulation shall be issued by order of the Prime Minister to regulate the right of usufruct in the cities of Makkah Al-Mukarramah and Madinah Al-Munawwarah.”
According to the system, the application of the provisions of this system shall not prejudice the following: the ownership rights that accrued to non-Saudis under previous systems, and the provisions of this system shall be applied after its entry into force when the ownership of the property is transferred, the advantages included in the rules regulating property ownership for citizens of the Gulf Cooperation Council countries, the acquisition of ownership or any other original real right over a property through inheritance, the regulations, Cabinet decisions and royal orders that prohibit ownership in some locations, and the rights and advantages included in the relevant special regulations and regulations.
This system replaces the system for non-Saudi ownership of real estate in Saudi Arabia. It is published in the Official Gazette and comes into effect 90 days after its publication. The regulations are issued by order of the Prime Minister.
