The New Foreign Ownership Framework: A Structural Shift in Saudi Real Estate Access
Royal Decree M/14, the Law of Real Estate Ownership and Investment by Non-Saudis, took effect on January 22, 2026, replacing the restrictive 1421H/2000G law that had limited foreign participation in Saudi Arabia’s property market for over two decades. Published in the Official Gazette (Umm Al-Qura) on July 25, 2025, and entering into force 180 days later, this legislation represents one of the most consequential regulatory reforms in Saudi real estate history — opening the market to non-residents, non-profits, and institutional investors through a geographical zoning model that replaces the previous one-size-fits-all restrictive approach.
The reform arrives at a pivotal moment for Saudi real estate. The Kingdom’s real estate market is forecasted to grow from over USD 75 billion in 2025 to nearly USD 110 billion by 2030, and achieving this growth trajectory requires not only domestic demand expansion through the housing programme but also international capital inflows that deepen market liquidity, introduce institutional investment practices, and support development activity across the residential, commercial, and mixed-use sectors. The old 2000-era law, with its blanket restrictions and licence-based access model, was structurally incompatible with these objectives.
The Legislative Architecture: From Blanket Restriction to Zoned Access
The previous foreign ownership framework operated on a restrictive, permission-based model. Non-Saudis required specific licences, met minimum investment thresholds, and navigated complex approval processes that deterred all but the most committed foreign investors. The result was a market effectively closed to individual expatriate buyers, smaller international investors, and institutional portfolio allocators — precisely the categories whose participation would deepen market liquidity and support price discovery.
Royal Decree M/14 replaces this architecture with a sophisticated geographical zoning model. The Council of Ministers determines zones based on proposals from REGA, which publishes a Geographic Scope Document containing maps, permitted limits, types of rights, durations, and controls for each zone. This approach allows precise calibration of foreign access based on location, development priorities, market conditions, and national security considerations — a far more nuanced instrument than the previous law’s binary permitted/prohibited framework.
The zone-based model means that foreign ownership rights may vary significantly between areas. Certain zones in Riyadh, Jeddah, or the Eastern Province may be fully open to foreign buyers with minimal restrictions, while other areas may impose ownership duration limits, property type restrictions, investment minimum thresholds, or caps on the proportion of foreign-owned properties within a defined area. REGA’s role in proposing zones gives the regulator direct influence over the pace and geographic distribution of foreign investment in the housing sector — enabling responsive policy adjustment as market conditions evolve without requiring new legislation.
The zoning approach also enables REGA to align foreign ownership access with development priorities. Zones where housing supply expansion is a priority — areas targeted by NHC and ROSHN developments, or parcels subject to the White Land Tax — could be designated for liberal foreign access to attract development capital. Conversely, zones where domestic affordability pressure is acute might maintain tighter foreign ownership controls to protect the Sakani programme’s target beneficiaries from price competition with foreign buyers.
Eligible Buyers and the Broadened Access Framework
The law significantly broadens the pool of eligible non-Saudi buyers. Previous requirements for specific licences or minimum investments have been removed for most buyer categories. The definition of “non-Saudi” encompasses three distinct categories: non-Saudi individuals (including both residents and non-residents), non-Saudi companies (foreign-incorporated entities), and Saudi companies with significant non-Saudi ownership. This broad definitional scope ensures that the law captures all forms of foreign participation, preventing circumvention through corporate structures that mask foreign beneficial ownership.
The inclusion of non-residents represents a particularly significant expansion. Under the previous law, foreign buyers generally needed Saudi residency to access property ownership. The new framework opens the market to international investors who may not live in the Kingdom — enabling diaspora investment, portfolio allocation by international real estate funds, and acquisition by multinational corporations seeking property for operational purposes. This non-resident access creates a new demand channel that could stimulate market activity, particularly in premium residential segments and commercial zones in major cities.
The eligibility for non-profits is another notable expansion. International charitable organisations, educational institutions, and religious endowments can now own property in Saudi Arabia within designated zones, supporting the Kingdom’s efforts to attract global institutional presence as part of Vision 2030’s social and cultural development objectives.
Transaction Fee Structure and Economic Implications
Transaction fees of up to 5 percent of transaction value apply on transfers involving non-Saudis, creating a fiscal mechanism that generates government revenue while providing a modest price signal that differentiates foreign and domestic transaction costs. Draft regulations contemplate a tiered fee structure: 2.5 percent for residential disposals, 0 percent for agricultural, commercial, and industrial properties (except in economic cities and special economic zones where 2.5 percent applies).
The tiered approach reveals policy priorities. The zero-percent fee on agricultural, commercial, and industrial transactions signals that the government prioritises foreign investment in productive economic activity over residential speculation. The 2.5 percent residential fee creates a modest barrier that generates revenue without being prohibitive — at SAR 25,000 on a SAR 1 million property, the fee is significant but unlikely to deter serious investors. The special economic zone treatment at 2.5 percent across all categories reflects the unique regulatory environments within these zones and ensures fee consistency for the mixed-use developments characteristic of economic city projects.
These transaction fees interact with the broader cost structure facing foreign buyers. Combined with real estate transfer fees, value-added tax on commercial properties, and potential property management costs, the total transaction cost for foreign buyers establishes a price premium over domestic transactions that partially compensates for the market access benefit. For Sakani-eligible families competing with foreign buyers in the same zones, this price premium provides a competitive advantage that the housing programme can leverage.
Mandatory Registration and Compliance Architecture
Mandatory registration with the Real Estate Registry applies to any transaction involving real rights by or to a non-Saudi — actions are only valid upon registration. This registration requirement ensures comprehensive transparency around foreign ownership levels, transaction volumes, price patterns, and ownership concentration within each zone. The Real Estate Registry maintains the authoritative record of property rights, and the registration requirement means that informal or unregistered foreign ownership is legally void.
Violation penalties include warnings or fines of up to 5 percent of property value, not exceeding SAR 10 million. This penalty structure — scaling with property value but capped at a meaningful absolute amount — creates proportional deterrence across the market. For high-value commercial properties, the 5 percent calculation could reach the SAR 10 million cap, while residential violations would typically result in lower but still significant penalties.
The registration requirement interfaces with the FAL brokerage licensing system. Brokers facilitating transactions involving non-Saudi parties must hold valid FAL licenses and understand the specific regulatory requirements — zone verification, fee calculation, registration procedures, and restriction compliance. The integration of foreign ownership compliance into the existing FAL framework leverages the professional infrastructure that REGA has built for market regulation, rather than creating a parallel compliance system.
Makkah and Madinah: Preserved Restrictions
The law maintains strict limitations on property ownership in Makkah and Madinah, reflecting the unique religious significance of the two holy cities. Non-Muslims cannot own property in either city regardless of residency status — a blanket prohibition that applies to individuals and entities alike. Muslim foreigners may only own within designated zones in these cities, with the zones presumably reflecting proximity to the sacred precincts and the sensitivities of the surrounding areas. Foreign companies are prohibited from owning property in both cities entirely, regardless of the religious affiliation of their shareholders or management.
These restrictions continue the pattern established by all previous Saudi real estate legislation and reflect constitutional protections around the holy sites. For the housing market analysis, the Makkah and Madinah restrictions mean that the foreign ownership reforms primarily affect Riyadh, Jeddah, the Eastern Province, and secondary cities — the geographic areas where the housing programme’s supply expansion efforts are concentrated and where foreign demand is most likely to materialise.
The restriction creates an interesting market dynamic for ROSHN’s ALMANAR community in Makkah (33,000 homes planned). While foreign company ownership is prohibited, Muslim foreign individuals may purchase within designated zones — potentially creating demand from the global Muslim community for residential property near the Holy Mosque, particularly for seasonal use or retirement.
Digital Fractional Ownership: A Forward-Looking Framework
One of the most forward-looking provisions is REGA’s explicit designation of digital fractional ownership as an official investment category under the new law. This creates a legal framework for tokenised real estate investment, where property ownership can be divided into digital shares and traded on regulated platforms — potentially enabling smaller investors to access Saudi real estate without purchasing entire units.
Digital fractional ownership addresses a fundamental accessibility barrier in real estate investment. Properties in premium locations may be priced beyond the reach of individual investors, while institutional investors may seek diversified exposure across multiple properties rather than concentrated ownership of single assets. Fractional ownership through digital tokens enables both: individual investors can acquire meaningful property exposure at accessible price points, while institutional investors can construct diversified portfolios with granular geographic and property-type allocation.
The regulatory implications are significant. REGA must develop frameworks for token issuance, trading platform licensing, investor protection, dividend distribution (from rental income), and governance rights (over property management decisions). The interaction between fractional ownership and the existing FAL licensing requirements — who needs licensing to facilitate tokenised transactions — requires clarification. Similarly, the application of the zone-based foreign ownership rules to fractional ownership by non-Saudis needs detailed implementation guidance.
The interaction between fractional ownership and the housing programme is still developing. Potential applications include enabling families to build equity through fractional property investment before purchasing a full home, creating investment vehicles that fund housing development through tokenised project financing, and developing rent-to-own structures where rental payments accumulate fractional ownership stakes. Each of these applications could create new homeownership pathways that complement the Sakani programme’s direct subsidy approach.
Housing Programme Implications and Policy Interactions
The foreign ownership reforms interact with the housing programme through multiple channels. Increased foreign demand for Saudi residential property could push prices higher in popular zones — a headwind for Sakani-eligible families competing in the same market. Riyadh’s residential price growth of 10.6 percent year-on-year in Q2 2025 demonstrates that demand-side pressure is already significant, and foreign buyer access could amplify this dynamic.
Conversely, foreign investment in development projects expands supply capacity, supporting NHC’s delivery targets and the broader housing supply pipeline. International developers bringing capital, construction expertise, and project management capabilities can accelerate unit delivery — potentially at lower cost through competitive advantages in construction methodology. The Ministry’s strategic partnerships with 36 international developers across 7 countries, plus agreements with Chinese developers for construction of 100,000 homes in 2026, demonstrate that foreign participation in the supply side is already a policy priority.
The White Land Tax reform and Riyadh rent freeze provide countervailing policy measures that moderate price inflation and protect domestic affordability. The WLT’s progressive rates up to 10 percent incentivise land development, increasing supply. The rent freeze stabilises housing costs for renters in the capital. Together with the foreign ownership reforms, these regulatory interventions create a balanced framework that welcomes foreign capital while maintaining safeguards for the housing programme’s domestic beneficiaries.
The SRC’s secondary mortgage market development adds another dimension: as foreign institutional investors gain access to Saudi property assets, they may also become purchasers of Saudi mortgage-backed securities, deepening the capital markets infrastructure that supports housing finance. SRC’s USD 5 billion international sukuk programme, listed on the London Stock Exchange and oversubscribed six times in its inaugural issuance, demonstrates existing international appetite for Saudi housing finance assets.
For related analysis, see Riyadh Rent Freeze, White Land Tax Reform, REGA and FAL Licensing, Ejar Platform, SRC and RMBS Market, and Mortgage Market Outlook 2026.