In a historic ruling, Saudi Arabia has permitted foreign investment in publicly traded firms that own real estate in Makkah and Madinah, the two holiest cities in Islam. The Kingdom’s Vision 2030 plan to diversify its economy and draw in international investment is in line with the action, which was announced by the Saudi Capital Market Authority (CMA).
Foreigners are now able to purchase convertible debt instruments or shares of businesses that own real estate in certain holy cities. However, strategic foreign investors are not allowed to own stakes in certain companies, and foreign ownership is limited to 49% of a company’s shares.
According to the CMA, the effort intends to boost investment, improve the competitiveness of the capital market, and supply liquidity for current and upcoming development projects in Madinah and Makkah. With a goal of $100 billion by 2030, the Kingdom hopes to increase foreign direct investment (FDI) and lessen its dependency on oil earnings. These changes help achieve this goal.
A major driver of Saudi Arabia’s economy, the pilgrimage industry is essential to this endeavor. Hajj and Umrah brought in about $12 billion for the Kingdom in 2019, and by 2030, it hopes to have 30 million pilgrims a year.
The CMA emphasized that foreign investment in the real estate market in Makkah and Madinah is a component of larger changes that also permit non-Saudis to directly purchase debt instruments, access swap agreements, and invest in the Saudi stock market. This current development comes after the CMA allowed non-Saudis to invest in real estate funds that focused on properties in the two cities in 2021.
Foreigners are permitted to lease homes in the holy cities under certain restrictions, but they are still not permitted to physically buy real estate there. The goal of this change is to bring Saudi Arabia into line with its neighbors which let foreigners to acquire real estate in certain areas.
The stock market responded favorably to the announcement. The share prices of real estate companies with sizable holdings in Madinah and Makkah soared. Jabal Omar Development Co. saw a 10% increase to SR25.85, Knowledge Economic City’s shares increased 9.89% to SR16.66 ($4.44), and Makkah Construction and Development Co. saw a 9.84% increase to close at SR106.
These actions demonstrate the Kingdom’s determination to boost the local economy, increase its attractiveness to regional and foreign investors, and establish its capital market as a major source of finance for development initiatives.
