With the new law coming, Saudi Arabia will soon be a top pick for foreigners who want to invest in real estate.
The government recently announced that the population of professional expatriates in The Kingdom has increased six times, surging from 200,000 to 1.2 million. It seems people are increasingly wanting to live in KSA! This is understandable, given that the country offers majestic deserts, a rich culture, and hospitable locals.
However, buying property in a foreign country can be complicated, especially with all the new laws and regulations involved.
Don’t worry! This guide is here to make it easy for foreign buyers to understand how the property market works in Saudi Arabia.
We’ll cover everything you need to know in a straightforward and simple manner. We really want to make it easier for you. If you still have some questions left, just contact us.
Also, for a more in-depth analysis, you can check our property pack for Saudi Arabia made by our country expert and reviewed by locals.
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Can you purchase and own a property in Saudi Arabia as a foreigner?
Background and current restrictions
As you may already be aware, Saudi Arabia has specific regulations governing property ownership, and these regulations impose restrictions on non-Saudi nationals.
Before 2021, these regulations were quite stringent. However, since then, Saudi Arabia has issued a directive that allows legal residents who are non-Saudis to purchase single properties, subject to certain conditions.
Here are some of the key restrictions:
– Foreign ownership is limited to residents with an Iqama (regular one is ok, Golden Iqama is not mandatory to buy a property in KSA) or Muqeem, so not all foreigners are eligible.
– Land ownership is prohibited.
– Ownership of property in holy cities like Makkah and Madinah is not permitted (however, you can get usufruct rights for 99 years).
– Properties should be used exclusively for residential purposes, or additional permissions may be required.
– Approval from the relevant authorities is necessary.
– Ownership is not allowed in protected areas, such as those near borders and military zones.
– The property size cannot exceed 3,000 square meters.
– Only one property per foreigner.
Restrictions are the same for all foreigners (except GCC nationals). US citizens who want to buy property in Saudi Arabia have the same rights as British citizens, French citizens, etc.
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New regulations and what is (probably) changing
Good news for you if you are a foreigner looking to buy in Saudi Arabia.
As part of its strategy to diversify the economy, Saudi Arabia is in the process of developing new property ownership laws that will permit non-Saudi nationals own more types of real estate.
This announcement was made by Abdullah Alhammad, who is the Head of the Real Estate General Authority (REGA), in March 2023.
Although the specifics of the new laws are still in the drafting stage, authorities have indicated that they are in the final stages and will be publicly disclosed shortly. Of course, we will update this article as soon as the new law is live. We will also let all our customers who have bought the Saudi Arabia Property Pack know (and we will try to explain it as clearly as possible).
Anyway, this is excellent news for foreigners, as the new law is expected to offer a broader and more inclusive framework than the current property ownership system.
As of now, the Saudi law has prohibited foreigners from acquiring properties in holy cities – Makkah and Madinah.
However, the preliminary interpretation of the new Saudi law suggests that it will grant foreigners the right to own property anywhere in the Kingdom, including Makkah and Madinah.
Also, these new property rights will encompass various types, including commercial, residential, and agricultural real estate.
Read: Renting Property In Saudi Arabia As A Foreigners
Nitaqat, joint ventures and leasehold
Direct ownership is not the only way to own a place in KSA.
Foreigners can also invest in Saudi Arabian real estate through joint ventures or partnerships with Saudi nationals or entities.
Leasing options, such as long-term leases or long-term leaseholds, are also available. It’s not really ownership but it helps if you want to settle long-term in the Kingdom.
Finally, there is the Nitaqat program in Saudi Arabia, which promotes hiring locals and reducing joblessness among Saudis. Companies are grouped by how many Saudis they hire and get rewards or penalties. This program also affects how foreigners can own property, as companies that hire more Saudis might make it easier for their foreign employees to own homes.
Gulf nationals
Citizens of Gulf Cooperation Council (GCC) countries are allowed to own properties in Saudi Arabia, with a maximum limit of three properties.
The property area should not exceed 3,000 square meters. The ownership must be for residential purposes, and if the property is in the form of land, it must be developed within six years from the date of registration.
No transactions are allowed on the property until four years have passed from the registration date.
What does the real estate market look like in Saudi Arabia?
Market data
If you were to ask anyone, they would likely complain about the current prices in Saudi Arabia, especially in the major cities. This sentiment is also echoed in professional reports, and we’ve summarized their findings in our Saudi Arabia Property Pack.
In Saudi Arabia, many people aspire to own their own homes, but the prices are prohibitively high. For instance, a Knight Frank survey shows that a significant majority of residents in Riyadh (84%) and Jeddah (85%) express interest in buying properties in their respective cities.
According to our partners who live there, the Riyadh real estate market is largely controlled by a small group of individuals and entities, which contributes to the rising prices. Additionally, Saudi Arabia is highly centralized, with most activities centered in Riyadh, making it a desirable place to live and causing prices to soar.
In fact, major Saudi cities like Riyadh and Jeddah are grappling with chronic undersupply issues, leading to steep property prices that many find unaffordable.
Moreover, the demand for houses in Saudi Arabia has surged due to the government’s housing assistance initiatives. In 2011, King Abdullah announced a plan to build 500,000 homes in Saudi Arabia over several years, allocating approximately $67 billion in state funds for this endeavor.
The Saudi government has also introduced various schemes to provide housing aid to its citizens, including state-subsidized home loans. Instead of paying rent, people have been using interest-free loans to purchase their properties.
This trend may continue as part of Vision 2030, which aims to achieve at least 75% home ownership for Saudi nationals. Substantial funds have been allocated to support this vision. For instance, since the inception of Saudi Arabia’s National Transformation Plan in 2016, the total value of real estate projects has exceeded $1.1 trillion (yes, it’s more than the country’s total GDP, $840 billion).
Saudi Arabia is currently home to 15 mega-projects at various stages of development, with NEOM being the largest among them. NEOM is designed to accommodate 9 million residents in approximately 300,000 new homes.
Prices are likely to increase in suburban areas like Oxagon, Sindalah, Trojena, and The Line as they aim to set new standards for luxury living in the region, driven by robust demand.
If you have the budget for investment, it can be an attractive option due to the promising yields. Looking at the data reported by Numbeo, rental properties in Saudi Arabia offer gross rental yields ranging from 5.6% to 8.3%.
Furthermore, when considering the GDP per capita indicator, the IMF shows us that the wealth of Saudi Arabian citizens has increased by 4.8% over the past five years.
If the population continues to grow wealthier, which is likely given the Saudi government’s initiatives and ongoing projects, there may be a greater demand for real estate in the future, potentially driving up prices.
If you want to know more, we have written an article to understand whether it’s a good time to buy property in Saudi Arabia now. In the article, we use reliable data solely from primary sources, just as we did in our documents and reports about real estate in Saudi Arabia.
The expat life
The life of an expat in Saudi Arabia can be an exciting and rewarding experience, but it can also be very challenging. Expats in Saudi Arabia must be prepared for a different way of life, with different customs and laws.
The climate in Saudi Arabia is hot and dry, with temperatures reaching up to 50°C in the summer months. The country is also very conservative, and expats must adhere to the local dress code and cultural norms.
The cost of living in Saudi Arabia is relatively low, but expats must be prepared for a higher cost of living compared to their home country. Expats must also be aware of the laws and regulations in Saudi Arabia, as the country has strict laws and penalties for breaking them.
The job market in Saudi Arabia is strong and there are many opportunities for expats. The country is also very welcoming to expats, and there are a variety of activities and experiences to enjoy.
Overall, life as an expat in Saudi Arabia can be an exciting and rewarding experience. Expats must be prepared for a different way of life and must be aware of the laws and regulations in the country. But with the right attitude and preparation, expats can make the most of their experience in Saudi Arabia.
What are the best places to invest in real estate in Saudi Arabia?
Riyadh is the capital and largest city in Saudi Arabia, making it a prime location for investment. It is the political, economic, and financial hub of the country. The city offers a wide range of residential and commercial properties, catering to various budgets. Popular neighborhoods include Al Olaya, Diplomatic Quarter (DQ), and Al Nakheel.
There is also Jeddah, which is a major port city and commercial center on the Red Sea coast. It is known for its vibrant culture, diverse expatriate community, and proximity to Mecca. There, areas like Al Hamra, Al Andalus, and Al Rawdah are popular for real estate investment.
We can also mention Dammam and al Khobar, two key cities.
To make it clearer, we have made this table, which summarizes some of the best places to buy a property in Saudi Arabia.
As mentioned before, for the moment, you cannot own a property as a foreigner in Mecca or Madina (just a 99-year lease, with the Golden Visa). The new law might change that.
| City / Region | Population | Average Price per sqm (SAR) | Strengths |
|---|---|---|---|
| Riyadh | ≈ 7.9 million | 5,000 – 9,000 | National capital, economic hub, modern infrastructure |
| Jeddah | ≈ 4.5 million | 4,000 – 8,000 | Commercial center, Red Sea coast, cultural diversity |
| Mecca | ≈ 2 million | 4,000 – 8,000 | Holy city, pilgrimage destination, religious significance |
| Madina | ≈ 1.5 million | 3,500 – 7,000 | Holy city, historical sites, peaceful atmosphere |
| Dammam | ≈ 1 million | 4,000 – 8,000 | Eastern Province hub, oil industry, proximity to beaches |
| Al Khobar | ≈ 650,000 | 4,000 – 8,000 | Commercial center, expat community, waterfront attractions |
| Abha | ≈ 500,000 | 3,000 – 6,000 | Mountainous region, cool climate, natural beauty |
Do you need a lawyer to buy real estate in Saudi Arabia?
When purchasing a property in Saudi Arabia, engaging a local lawyer can provide valuable assistance in navigating the legal aspects and ensuring a successful transaction.
One crucial document they can help you with is the Property Sale Agreement (Akad Bait), a legally binding contract between the buyer and seller that outlines the terms and conditions of the sale.
The Saudi Arabian lawyer can also assist with conducting a Property Title Search (Tafsil Malikiyah) to verify the property’s ownership status and identify any potential legal issues or encumbrances.
Furthermore, they can guide you through the process of obtaining necessary permits and approvals, such as approval from the local Ministry of Municipal and Rural Affairs or relevant authorities.
They will ensure that all applicable taxes and fees, such as the Property Transfer Tax and Notary Fees, are paid correctly and in compliance with Saudi Arabian laws and regulations.
What are the risks when purchasing a property in Saudi Arabia?
When buying a property in Saudi Arabia, there are a few unique risks to consider that are not common in other countries.
We have made a complete overview of the risks and how to avoid them in our Saudi Arabia Property Pack.
For a shorter version, you can check our article about the common mistakes foreigners make when buying property in KSA.
Here is also a summary table we’ve made for you.
| Mistake/Pitfall | Description | Prevention Tips |
|---|---|---|
| Not aligning prayer areas with the Qibla | Failing to ensure that prayer areas in the property face Makkah (Mecca) can lead to dissatisfaction and affect resale value. | Verify the Qibla direction, use Qibla compasses or apps, consult local religious authorities if needed. |
| Not understanding the Ijara contract | Misunderstanding the terms of an Ijara contract, a common financing method in Saudi Arabia, can lead to disputes and misunderstandings. | Fully understand payment structure, maintenance responsibilities, and conditions for property ownership transfer. |
| Buying land designated for sustainable resource management | Purchasing property within Hima zones without understanding the restrictions can lead to legal issues and unexpected responsibilities. | Research the property thoroughly, seek legal advice regarding Hima-designated land. |
| Not having your name on the title deed | Not being aware of the “tanazul” system can put foreign buyers at risk as the property’s title deed remains under a Saudi national’s name. | Be aware of the risks associated with tanazul arrangements, including limited legal recourse. |
| Not considering Vision 2030 developments | Failing to research future development plans in the area may lead to property issues, including expropriation and changes in the neighborhood’s character. | Thoroughly research development plans, consult reliable real estate experts, and assess long-term impacts. |
| Not verifying the title deed properly | Inadequate investigation of the property’s title deed, zoning regulations, and land use permissions can result in unexpected limitations and disputes. | Work with local real estate professionals familiar with Saudi Arabian property market and zoning regulations. |
| Not being familiar with the Hijri calendar | Lack of understanding of the Hijri calendar can lead to misunderstandings, miscalculations, and potential legal issues in property transactions. | Know which calendar is used in documents, convert and calculate dates accurately, especially for payment schedules and milestones. |
| Overlooking undocumented rights of way | Ignoring informal access rights on a property can lead to disputes with locals and restrictions on land use and development. | Conduct thorough due diligence, engage with local communities, consult legal experts, and understand cultural dynamics. |
| Buying property with fragmented ownership | Saudi Arabia’s inheritance laws can result in complex, fragmented property ownership, making consolidation and purchase challenging. | Ensure clear and undisputed ownership before proceeding with a sale, resolve disputes among owners if necessary. |
What are the required documents for a real estate transaction in Saudi Arabia?
When buying a property in Saudi Arabia, the documents needed include:
– A letter specifying the type, size, and location of the property.
– A copy of your current passport, along with another copy of your initial passport registered upon your first entry into the Kingdom.
– A copy of your valid residence permit and that of your spouse.
– A letter from your employer to prove your income, good conduct, and behavior.
– A copy of the property deed.
– A copy of the building permit (if any).
– A copy of the survey report.
– A copy of the bank statement for the last six months.
– A building map to clarify the dimensions of the property and its surroundings.
– A written statement confirming that the property is for residential use.
We review each of these documents and tell you how to use them in our property pack for Saudi Arabia.
How are the property prices decided in Saudi Arabia?
In Saudi Arabia, property prices for private and commercial land are determined by the Property Shaikh, known as Shaikh Al Aqar, rather than property owners or estate agents.
People can easily access his services when buying or selling property. It’s not mandatory. Nonetheless, during price negotiations, you can confidently use the property’s value as determined by Shaikh’s written estimate as a reference for your offers.
You have to know that he has a fixed 2.5% fee on all property sales, motivating them to secure the highest possible price for their selling clients.
To evaluate a property, you can invite Shaikh Al Aqar to conduct a survey and inspection.
After the survey, he provides a written evaluation, considering factors like location, type, size, and condition of the property, as well as potential improvements. He offers two prices in the report: the current market price of the property and the price of the land it occupies.
Even if you’ve already bought a property, Shaikh Al Aqar can still survey it and provide a report. This report can be used to revise a purchase agreement if you believe you paid too much or encountered unforeseen issues.
Saudi people trust and respect his property evaluations due to his reputation for honesty and integrity. His office is accountable to both the government and the public, ensuring accuracy and fairness in his price assessments.
Do banks offer loans to foreigners in Saudi Arabia?
In theory, foreigners can get property loans in Saudi Arabia, subject to certain conditions and eligibility criteria.
If you are a foreigner planning to obtain a property loan in Saudi Arabia, consider exploring Sharia-compliant financing options offered by local banks, such as Murabaha or Ijara, in accordance with Islamic principles.
Some banks in Saudi Arabia that can grant a mortgage to a foreigner include Al Rajhi Bank, National Commercial Bank, Riyad Bank, Saudi British Bank (SABB), Arab National Bank, and Bank AlJazira.
If you’re planning to secure financing through a bank, your salary must be at least 25,000 SAR and your job should be in the government sector or semi-government sector.
Also, you’ll need to make an upfront payment equal to 50% of the total property price. For instance, if a property is valued at 500,000 SAR, you must provide 250,000 SAR and obtain the remaining 250,000 SAR from a bank.
Furthermore, in Saudi Arabia, mortgage rates for a 20-year term range between 2% and 6%, providing borrowers with highly competitive conditions for securing financing. The maximum loan period is 10 years.
What are the taxes related to a property transaction in Saudi Arabia?
Here is a breakdown of taxes related to a property transaction in Saudi Arabia.
| Tax | Description | Calculation | Who pays |
|---|---|---|---|
| Real Estate Transaction Tax (RETT) | Tax on property transfer | 5% of the property sale price | Buyer |
| Zakat | Islamic wealth tax | 2.5% of the property value | Seller |
| Capital Gains Tax | Tax on capital gains from property sales | 30% on the net capital gains (difference between sale and cost prices) for businesses | Seller |
| Rental Income Tax | Tax on rental income generated from the property | 5% on the gross rental income for non-residents | Owner |
For a more detailed calculation, refer to:
– the Zakat and Tax Authority, Saudi Arabia’s website
What fees are involved in a property transaction in Saudi Arabia?
Below, you’ll find a list of fees involved in a property transaction in Saudi Arabia.
| Fee | Description | Calculation | Who pays |
|---|---|---|---|
| Municipality Fee | Fee imposed by the local municipality | Varies depending on the municipality and type of property | Buyer |
| Real Estate agent Commission | Fee paid to real estate agent or broker | 2.5% of the value of the sold property | Seller |
| Notary Fee | Fee for notarizing property transfer documents | Varies depending on the notary office | Buyer |
| Title Registration Fee | Fee for registering the property transfer | 1% of the property sale value or the approved valuation by the Real Estate Department, whichever is higher | Buyer |
