CMA allows foreign investment in listed real estate firms operating in Makkah, Madinah

Logo of Capital Market Authority (CMA)

The Capital Market Authority (CMA) announced that foreigners are allowed to invest in Saudi-listed companies that own real estate within Makkah and Madinah from today, Jan. 27.

This follows the approval of the Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange (Tadawul) from the Meaning of the Phrase (Non-Saudi) in accordance with the Law of Real Estate Ownership and Investment by Non-Saudis.

The CMA noted that the step aims to stimulate investment, enhance the attractiveness and efficiency of the capital market, and strengthen its regional and international competitiveness while supporting the local economy. This includes attracting foreign capital and providing the necessary liquidity for current and future projects in Makkah and Madinah through the investment products available in the Saudi market, positioning it as a key funding source for these distinctive developmental projects.

According to the approved controls, foreign investment in companies owning real estate within Makkah and Madinah will be limited to shares of these Saudi-listed companies, convertible debt instruments, or both. However, the ownership of natural and legal persons jointly who do not hold Saudi nationality shall not exceed 49% of the company's shares. An exception applies to strategic foreign investors, who are not permitted to own shares or convertible debt instruments in these companies.

The approved controls allow non-Saudi investors to benefit from the economic advantages of existing and future projects without violating the relevant laws, regulations, and instructions, particularly the Law of Real Estate Ownership and Investment by Non-Saudis, whether during the companies' operations or liquidation.

Saudi-listed companies were also granted the right to acquire ownership, easement, or usufruct rights over properties allocated for their headquarters or branch offices within Makkah and Madinah. This is contingent upon the property being fully utilized for this purpose and in accordance with the Exclusion Controls Exemption Regulations under the Law of Real Estate Ownership and Investment by Non-Saudis.

Meanwhile, the CMA indicated that it has undertaken, and continues to implement, numerous efforts and measures to enhance the attractiveness of the Saudi capital market and facilitate the entry of foreign investors, both directly and indirectly.

These efforts include allowing foreign residents to directly invest in the Saudi stock market, enabling foreign investors to access the market through swap agreements, permitting qualified foreign capital institutions to invest in listed securities, allowing foreign strategic investors to acquire strategic stakes in listed companies, and enabling foreign investors to directly invest in debt instruments.

These initiatives reflect the completeness and diversity of the capital market's funding options available for projects in Makkah and Madinah.

In 2021, the CMA allowed non-Saudis to subscribe to real estate funds investing within Makkah and Madinah. This move contributed to the reliance on the capital market as a diverse financing channel and supported the objectives of Saudi Vision 2030, which aims to make the domestic capital market attractive to local and foreign investments.

The approval of the controls came after the CMA published on Nov. 15, 2023, the “Regulations of Foreign Investors' Ownership of Shares in Saudi Listed Companies that have investment properties in Makkah and Madinah" on the Unified Electronic Platform for Consulting the Public and Government Entities (Istitlaa), affiliated with the National Competitiveness Canter (NCC), and the CMA's website for public consultation for the purpose of approving the final text.

According to data compiled by Argaam, the Saudi-listed companies investing in Makkah and Madinah that don’t allow foreign investment in their shares include Jabal Omar Development, Taiba Investments, Makkah Construction and Development, and Knowledge Economic City.

Controls for the Exclusion of Companies Listed in Saudi Stock Exchange (Tadawul) from the Meaning of the Phrase (Non-Saudi) in accordance with the Law of Real Estate Ownership and Investment by Non-Saudis: