Foreign ownership rights and restrictions: who can own real estate in Saudi Arabia?


CCG nationals

In accordance with Article 1 of the Cooperative Council for the Appropriation of Real Property by the Citizens of the Cooperative Council of the Arab States of the Gulf and the Executive Regulations, the citizens of the Cooperative Council of the Gulf (“CCG”), in their capacity as an individual , can own property in Saudi Arabia. The property can be land or a building located in a residential area. Regarding the land, the area of ​​the land must not exceed (3,000 m2).

The right of ownership is intended for the housing of the owner or his family, without the right to use the property for other purposes, except as permitted by the law of the state in which the property is located.

If it is land, the owner must begin construction within three years from the date of registration of title, and the building must be completed within five years from that date, otherwise the property may be forfeited and sold (in which case the owner will be compensated if he is able to demonstrate convincing reasons for any delay in construction).

GCC citizens are also allowed to rent real estate in Saudi Arabia for the purpose of personal residence.

The above does not apply to real estate located within the city limits of Mecca and Medina, which are dealt with separately below.

CCG company (100% owned by CCG nationals)

A GCC company 100% owned by GCC nationals is authorized to rent or own real estate in Saudi Arabia when its use is for the conduct of the authorized business activity of the company.

The above does not apply to real estate located within the city limits of Mecca and Medina, which are dealt with separately below.

Other foreign nationals (non GCC)

Foreign natural persons with legal resident status in Saudi Arabia can:

  • own real estate, for personal use, subject to obtaining authorization from the Ministry of the Interior; Where
  • rent real estate, for use as a personal residence.

The above does not apply to real estate located within the city limits of Mecca and Medina, which are dealt with separately below.

Foreign companies (non GCC)

Even the smallest stake held by a non-GCC natural or legal person will make a legal person a “foreign” company, triggering the requirement for a foreign investment license from the Ministry of Investment (including conditions stipulating the amount of capital to be invested, and the timing of this investment). In addition, Saudi Arabia has a strict anti-fronting law, which must be carefully considered when structuring investments through a legal person.

In accordance with Article 1 of the Non-Saudi Real Estate Ownership and Investment Law and subject to meeting the foreign investment license requirements of the Ministry of Investment, a non-GCC company may :

  • own or rent real estate for the exercise of its professional, technical or economic activities;
  • owning real estate for the purpose of real estate development, in the case of specific projects (see next paragraph);
  • own or rent private residences to house the employees of an authorized project; Where
  • own or rent real estate for residential use by its employees who benefit from a normal legal status of residence.

With particular regard to foreign real estate developers, it should be noted that when the authorized activity of a foreign company includes the purchase of buildings or land for development and investment (by sale or rental), the Total investment amount must not be less than thirty million Saudi Riyals (approximately US $ 8 million) (this amount may be changed by the Council of Ministers). In addition, the development of the property must be completed within five years of its acquisition, unless the Ministry of Investment approves an extended deadline for completion.

The above does not apply to real estate located within the city limits of Mecca and Medina, which are treated separately below, nor to areas specifically excluded from the ownership of foreign companies by Royal Decree.

Ownership and rental of real estate located within the city limits of Mecca and the Medina

Generally speaking, non-Saudi nationals or entities are not permitted to own or rent real estate located within the city limits of Mecca and Medina (except as mentioned below):

Under a recent amendment to the Non-Saudi Real Estate Ownership and Investment Law (by Royal Decree No. (M / 94), of 15-9-1439 AH), non-Saudi entities ( whether or not they are from the GCC) may own or rent real estate near Mecca and Medina, provided that they fall under the following exemptions:

  • banks and real estate finance companies approved by the Saudi Arabian Monetary Authority (hereinafter referred to as “SAMA”), provided that their acquisition of real estate is for the purpose of financing Saudi nationals, for their offices or branches, or for the exercise of their activities in accordance with the regulations established by SAMA;
  • listed companies that do not carry out real estate activities, provided that all of the real estate is intended for their offices or branches, or for the exercise of their activities in accordance with the rules issued by the Capital Markets Authority ( “CMA”); Where
  • other entities designated by the Council of Ministers.

In accordance with Article 2 of the Premium Residence Regulations, non-Saudi nationals with premium resident status may acquire a right of usufruct over real estate near Mecca and Medina for a period not exceeding 99 years.

Foreign missions

Foreign diplomatic missions in Saudi Arabia may, on a reciprocal basis, own the property where the official premises and the chancellery and residences of the members of the mission are located. In the cases other than those above, the President of the Council of Ministers can grant the approval to the real property for purposes of private dwelling.

Economic cities

There are a number of developing “economic cities” in Saudi Arabia. At the date of this article, they are: the Economic City of King Abdullah (Region of Mecca, on the West Coast, near Jeddah); the Economic City of Knowledge (Medina region); Prince Abdulaziz bin Mousaed Economic City (Ha’il Region, in the North of the Kingdom); and the economic city of Jazan (in the southwest of the Kingdom). In accordance with article 15 of the statute of the Economic Cities Authority, natural persons or foreign companies may own or be granted a right to use real estate in economic cities, in accordance with the rules set by the Council of administration of the Economic Cities Authority. .

Regulations have been issued by the Economic Cities Authority for the registration of all foreign companies established in economic cities, the registration of all land titles in the name of foreign entities established in economic cities, and the registration of all land titles in the name of foreign entities established in economic cities. licensing and other approvals to service providers including district cooling, warehousing and logistics in economic cities.

Tadawul REITs or listed companies

Foreign non-resident investors are also permitted to trade in units of real estate investment funds (“REITs”) and shares of companies listed on the Saudi Stock Exchange (“Tadawul”).

In particular, the CMA introduced (in 2016) new rules for listing REITs on Tadawul. The REIT portfolio must include developed and income-generating real estate (at a rate of at least 75 percent) of the total portfolio. It is also mandatory for REITs to distribute at least 90 percent of their net earnings to unitholders as dividends, with only 10 percent of such net earnings available for reinvestment.

From a macro perspective, REITs contribute to the goals of the Saudi Vision 2030 and the National Transformation Plan (‘NTP’) which aim to boost the real estate sector and increase its contribution to overall GDP.

From a microeconomic perspective, they also offer investors in Saudi Arabia attractive dividend yields and, in many cases, exposure to a diverse portfolio of real estate assets that might otherwise not be readily available to such investors.

The above, coupled with the CMA’s proactive approach to regulatory challenges, has enabled Saudi Arabia to lead the GCC countries with the highest number of established REITs.

Conclusion

The initiatives stemming from the Saudi Vision 2030 and the NTP were seen as a powerful impetus both for the encouragement of foreign investment in Saudi Arabia in general and also for the real estate sector.

Needless to say, Saudi Vision 2030 will create even more opportunities in the real estate industry, with the goal of making the Kingdom of Saudi Arabia a real estate jurisdiction of choice.


Source link

Previous CBRE opens a searchable property listings platform for 10 Indian cities
Next Bigfoot just photobombed this million dollar real estate ad in central California

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *