Makkah and Madinah hold unparalleled significance in the Muslim world. Until now, however, non-Saudi entities—have been prohibited from owning real estate in these cities, significantly limiting investment opportunities in one of the world’s most strategically important real estate markets. Capital Market Institutions may now accept subscriptions from non-Saudi natural and legal persons in investment funds that invest part or all of their assets in real estate located within the Kingdom, including in Makkah and Madinah. These reforms create unprecedented opportunities for fund managers to structure dedicated real estate investment—including hospitality, mixed-use developments serving tourism, and other real estate investments that can now tap into the enduring demand present in these cities. This client update provides an overview of the new Law on Real Estate Ownership by Non-Saudis, the accompanying Capital Market Authority Controls, and their alignment with Vision 2030, and concludes with an analysis of the significant implications for the investment fund market.
1. Outline of the New Law and Regulations
The Law on Real Estate Ownership by Non-Saudis
On 8 July 2025 (13 Muharram 1447H), the Saudi Council of Ministers approved the Law on Real Estate Ownership by Non-Saudis pursuant to Cabinet Decision No. 42/1447. This new law supersedes the prior Law on Real Estate Ownership and Investment by Non-Saudis issued under Royal Decree No. M15/1421, as well as the historic prohibition under Royal Decree No. 44/1377 dated 29/11/1377H.
Scope of Ownership Rights. Under Article 2 of the new law, a non-Saudi may own real estate or acquire other real property rights within the geographical scope determined by the Council of Ministers. The Cabinet, based on a proposal by the Real Estate General Authority and approval from the Council of Economic and Development Affairs, shall determine: (a) the geographical scope in which non-Saudis may own real estate; (b) the types of real property rights that non-Saudis may acquire; (c) maximum permissible ownership percentages; (d) maximum duration for usufruct rights; and (e) any other relevant controls.
Ownership in Makkah and Madinah. Significantly, the new law permits certain categories of non-Saudis to own real estate in the holy cities of Makkah and Madinah. For non-Saudi natural persons, the right to own real estate or acquire real property rights in Makkah and Madinah is limited to Muslim natural persons only. However, Saudi-incorporated companies with non-Saudi shareholders, publicly listed companies, licensed investment funds, and special purpose entities may own real estate in Makkah and Madinah under specific conditions detailed below.
Saudi-Incorporated Companies. Article 3 provides that a company not listed on the Saudi Stock Exchange but established under the Saudi Companies Law, in which non-Saudi natural or juristic persons hold capital shares, may own real estate or acquire other real property rights within the permitted geographical scope, including the cities of Makkah and Madinah. Such companies may also own real estate necessary for their activities and employee housing, both within and outside the designated geographical scope.
Listed Companies, Investment Funds, and Special Purpose Entities. Article 4 permits publicly listed companies, licensed investment funds, and special purpose entities to own real estate and acquire real property rights anywhere in the Kingdom, including Makkah and Madinah, in accordance with the Capital Market Law and controls issued by the Capital Market Authority in coordination with the Real Estate General Authority.
Personal Residence. A non-Saudi natural person who resides lawfully in the Kingdom may own one property designated for personal residence outside the designated geographical scope, excluding the cities of Makkah and Madinah.
Registration Requirements. Non-Saudi companies, non-profit entities, and other juristic persons must register with the competent authority before owning real estate or acquiring real property rights. Ownership is valid upon registration with the Real Estate Register in accordance with applicable provisions.
Fees and Penalties. The Real Estate General Authority may impose a fee not exceeding five percent (5%) of the transaction value when a non-Saudi disposes of real property rights. Violations may result in warnings or fines not exceeding five percent of the property value, capped at SAR 10,000,000. Non-Saudis who intentionally submit false or misleading information may face fines and mandatory sale of the property, with prosecution by the Public Prosecution.
Capital Market Authority Controls (January 2026)
On 21 January 2026, the Capital Market Authority issued “Controls on the Ownership of Real Estate in the Kingdom by Listed Companies, Investment Funds, and Special Purpose Entities” pursuant to Board Resolution No. 1-8-2026. These controls implement Article 4 of the new law and provide specific rules for capital market participants.
Listed Companies. Listed companies may own real estate or acquire other real property rights in the Kingdom, including Makkah and Madinah. When owning property within Makkah or Madinah, such real estate must be allocated to company headquarters or branch offices and fully used for such purpose.
Exception for Other Purposes in the Holy Cities. Listed companies may own property in Makkah or Madinah for purposes other than headquarters, provided: (1) no foreign strategic investor owns shares or convertible debt instruments of the company at any time; and (2) non-Saudi natural and legal persons jointly do not exceed 49% ownership of the company’s shares or convertible debt instruments at any time.
Investment Funds and Special Purpose Entities. Investment funds and SPEs licensed under the Capital Market Law may own real estate in the Kingdom, including Makkah and Madinah. Capital Market Institutions may accept subscriptions from non-Saudi natural and legal persons in investment funds that invest wholly or partially in real estate located in the Kingdom, including the holy cities.
Compliance Requirements. Investment funds and SPEs must comply with the Real Estate Ownership by Non-Saudis Law and its implementing regulations when dealing with in-kind redemption requests or upon fund termination or liquidation. These controls do not prejudice ownership rights lawfully acquired prior to their entry into force.
2. Implications for the Investment Fund Market
The new regulatory framework creates significant opportunities and considerations for the investment fund market.
Direct Ownership in the Holy Cities. Investment funds licensed under the Capital Market Law may own real estate and acquire real property rights in Makkah and Madinah. This opens access to some of the Kingdom’s most strategically valuable real estate markets, which have historically been restricted.
Non-Saudi Investor Participation. Capital Market Institutions may now accept subscriptions from non-Saudi natural and legal persons in investment funds that invest part or all of their assets in real estate located within the Kingdom, including Makkah and Madinah. This enables fund managers to offer Saudi real estate investment opportunities to a broader international investor base.
Product Structuring Opportunities. The reforms facilitate the development of new real estate investment products targeting the holy cities, including dedicated Makkah/Madinah-focused funds, hospitality and pilgrimage-related assets, and mixed-use developments serving religious tourism.
Regulatory Compliance Considerations. Fund managers must ensure compliance with both the Real Estate Ownership by Non-Saudis Law and the CMA Controls. Particular attention should be given to compliance with the law’s implementing regulations when dealing with in-kind redemption requests or upon fund termination or liquidation.
Institutional Investment Growth. These reforms align with Vision 2030’s objective to grow REITs and institutional investment vehicles, deepen liquidity, and attract global capital into the Kingdom’s real estate sector. Fund managers are well-positioned to benefit from the increased transparency, governance standards, and regulatory maturity that accompany these reforms.
3. Conclusion
The Law on Real Estate Ownership by Non-Saudis and the accompanying CMA Controls represent a watershed moment for Saudi Arabia’s real estate sector. By opening ownership in Makkah and Madinah to listed companies, investment funds, and SPEs, and by enabling non-Saudi participation in real estate funds, the Kingdom has significantly expanded investment opportunities while maintaining appropriate regulatory safeguards. These reforms underscore Saudi Arabia’s commitment to Vision 2030’s goals of economic diversification, foreign investment attraction, and capital market development.
We recommend that clients with interests in the Saudi real estate and investment fund sectors carefully review these new regulations and assess potential opportunities in light of their specific investment objectives and compliance requirements.
How can Al Tamimi help?
For more information on the above alert, feel free to contact the key contacts.
Key Contacts
Rafiq Jaffer, Partner, r.jaffer@tamimi.com
Andrew Thomson, Partner, Head of Real Estate, a.thomson@tamimi.com
Ambreen Bidiwala, Legal Director, A.bidiwala@tamimi.com
Muhammad Abdul Hamied, Senior Associate, m.abdulhamid@tamimi.com