Saudi Arabia’s New Foreign Ownership Law: Key Implications for Real Estate M&A

Key Takeaways

• Saudi Arabia’s new Law on Real Estate Ownership by Non-Saudis (the “New Law”) replaces a restrictive, purpose‑based regime with a zoning‑driven framework effective 21 January 2026.
• Non‑Saudis may own real estate or in rem rights within designated Geographical Zones, with detailed parameters to be set in a forthcoming Geographic Scope Document and implementing regulation (the “Regulation”).​
• The New Law distinguishes between foreign‑incorporated entities, Saudi companies with foreign ownership and listed vehicles/funds, creating new options for acquisition and holding structures.​
• A new real estate transaction fee of up to 5% on transfers involving Non‑Saudis applies in addition to the existing 5% Real Estate Transfer Tax (“RETT”), raising pricing and allocation questions in transaction documents.
• The reforms come against the backdrop of a growing real estate market and deepening institutional capital base, with Saudi real estate revenues estimated at around USD 132 billion in 2024 and projected to reach more than USD 200 billion by 2030, and real estate accounting for a significant share of fund AUM ¹Grand View Research (2022) Saudi Arabia Real Estate Market Size & Outlook, 2025-2030..

Background

On 14 July 2025, the Council of Ministers approved the Law on Real Estate Ownership by Non-Saudis, repealing the 2000 Law of Real Estate Ownership and Investment by Non-Saudis. The New Law was published in the Official Gazette on 25 July 2025 and entered into force after 180 days, on 21 January 2026.

The New Law is part of a broader reform trajectory under Vision 2030, against a market backdrop where Saudi real estate revenues are estimated at USD 132.3 billion in 2024 and projected to grow to USD 201.4 billion by 2030, at a forecast CAGR of around 7.5%. Residential sales alone are reported to have reached approximately SAR 118 billion (around USD 32 billion) in 2024, with continued robust growth expected through 2025 ²Deloitte (2025) Residential Sales in Saudi Arabia reach SAR 118 billion in 2024.. In parallel, Saudi asset management AUM is estimated at around USD 295 billion by early 2025, with real estate representing a substantial share of private fund allocations ³SaudiMergersAcquisitions.com (2025) 1.6M Investors Drive Saudi Real Estate M&A Boom..

In this context, a more permissive, clearer foreign ownership regime is intended to support inflows of foreign capital, platform roll‑ups and new exit routes for real estate assets and operating platforms.​

Overview of the New Regime

Non‑Saudi ownership in Geographical Zones

The New Law defines “Non‑Saudi” broadly to include non‑Saudi individuals, foreign‑incorporated companies, foreign non‑profit entities and other legal persons designated by the Council of Ministers.

Non‑Saudis may own real estate or acquire in rem rights in designated Geographical Zones to be set by the Council of Ministers, based on proposals from the Real Estate General Authority (“REGA”) and the Council for Economic and Development Affairs. For each zone, the Council will determine:

• Permitted in rem rights.
• Maximum ownership limits for Non‑Saudis.
• Maximum terms of usufruct rights.
• Conditions for Non‑Saudi ownership or acquisition of in rem rights.​

REGA is expected to publish a Geographic Scope Document containing maps and detailed ownership parameters once the Geographical Zones are approved.​

Separately, a legally resident Non‑Saudi individual may own one residential property outside the Geographical Zones, subject to conditions and religious limitations in Makkah and Madinah, which will be fleshed out in the Regulation.

Unlisted companies

A key distinction is drawn between Non‑Saudis and non‑listed Saudi companies with foreign ownership, which are not treated as Non‑Saudis for the purposes of the New Law. Such companies may:

• Own property or acquire in rem rights within the Geographical Zones, including in Makkah and Madinah.
• Subject to the Regulation, acquire real estate for business purposes and employee housing both inside and outside the Geographical Zones.

This provides an important tool for sponsors considering Saudi‑incorporated holding structures with foreign shareholders.

Public companies and funds

Publicly listed companies, investment funds and licensed special‑purpose entities established under Saudi law may acquire real estate and in rem rights, including in Makkah and Madinah, in accordance with financial market laws and the Regulation.

This aligns with the Capital Market Authority’s earlier “Controls for the Exclusion of Companies Listed in the Saudi Stock Exchange (Tadawul) from the Meaning of the Phrase (Non‑Saudi)”, which effectively allowed foreign investors exposure to assets in Makkah and Madinah through listed vehicles.​

Registration, Fees and Penalties

Registration and REGA’s role

The New Law designates REGA as the competent authority for foreign ownership and makes registration in the Real Estate Registry a condition for validity of any real rights involving Non‑Saudis. Transactions that are not registered will not be legally effective.

Transaction fee and RETT

The New Law introduces a real estate transaction fee of up to 5% of the transaction value on disposals involving Non‑Saudis, in addition to RETT and other applicable levies. Given that land transfers are already subject to RETT at 5%, the combined burden for qualifying transfers could reach up to 10% before considering any other charges, making fee allocation a material negotiation point in transaction documents.

Penalties

Violations of the New Law or the Regulation may lead to warnings or fines of up to 5% of the property value, capped at SAR 10 million, with detailed penalty bands to follow in the Regulation. REGA‑appointed committees will review violations, with a right of appeal to the Administrative Court within 60 days.

Where a Non‑Saudi intentionally provides false or misleading information to acquire real estate or in rem rights, sanctions can include fines, compulsory sale and referral to the Public Prosecution. In a court‑mandated sale, the violator receives the lesser of the net sale proceeds (after taxes, fees and costs) or the original purchase price, with any excess being paid to the State.​

Implications for Real Estate M&A

Broader investor universe and competitive tension

By repealing capital thresholds, licensing conditions and tight development‑timeline constraints under the previous regime, the New Law is expected to widen the pool of eligible foreign investors for Saudi real estate assets and platforms. This comes at a time when:​

• Saudi real estate revenues are projected to grow from USD 132.3 billion in 2024 to around USD 201.4 billion by 2030.​
• Residential transactions alone have been reported at approximately SAR 118 billion in 2024, with further growth anticipated.
• Real estate accounts for a significant share of private fund allocations, with some estimates indicating that close to half of private fund AUM is invested in real estate.​

Combined, these factors point to increased competitive tension in auctions and bilateral sales, which may support valuations in zones open to Non‑Saudi ownership.

Structuring and choice of vehicle

The New Law’s treatment of foreign‑incorporated Non‑Saudis, Saudi companies with foreign shareholders and listed vehicles allows sponsors to revisit how they structure acquisitions and holding chains:

• For some transactions, a Saudi‑incorporated holding company that is not classified as Non‑Saudi may offer broader geographic coverage, including the ability to own assets in Makkah and Madinah, subject to the Regulation.
• Existing offshore or regional SPV structures may be re‑evaluated in the context of platform M&A, pre‑sale reorganisations and recapitalisations, including possible re‑domiciliation or insertion of Saudi holding entities.

These decisions will drive merger‑control analysis, sector approvals, CP design, and risk allocation around future regulatory changes.

Security, financing and exit

The zoning‑based approach and registration requirement will be central to lender analysis and exit planning:

• Lenders will need to confirm the enforceability of security over assets held by Non‑Saudis in different zones, including any caps on in rem rights or duration that could affect recovery assumptions.​
• In sectors where long‑term usufruct or leasehold rights have historically been used instead of freehold, the Geographic Scope Document’s limits on terms and rights will feed directly into pricing, feasibility and exit strategies.​

The clearer status of public companies and funds under the New Law, together with the depth of Saudi REIT and fund markets, may also increase the attractiveness of listed and fund platforms as acquisition and exit routes for foreign‑backed portfolios.​

Legacy structures and regularisation

Structures developed under the previous regime, including nominee arrangements and indirect exposure through funds or regional SPVs, will need to be reviewed. As the New Law takes effect, buyers and sellers may choose to regularise ownership chains in the context of M&A, recapitalisations or group reorganisations, moving towards structures that rely more directly on the new zoning and entitlement regime.​

Implementing Regulation and Next Steps

The New Law provides that the Regulation will be issued within 180 days and will be subject to public consultation. It is expected to cover, among other things:

• Procedures for acquiring in rem rights.
• Requirements for Non‑Saudi non‑residents.
• Detailed rules for calculating the new transaction fee.
• Conditions for any exemptions or 0% rate transactions.​

The Geographic Scope Document will define which areas are open to Non‑Saudi ownership, what rights can be granted and on what terms. Until these instruments are published, M&A documentation should build in regulatory risk allocation around zoning outcomes and fee mechanics, including targeted conditions precedent, covenants and material adverse change concepts.​

What This Means for Deal Teams

For real estate‑heavy M&A transactions involving Saudi assets from 21 January 2026 onwards, sponsors, corporates and lenders should:

• Map zoning and rights: Confirm whether the target assets fall within Geographical Zones and what ownership and term limits apply to the contemplated buyer type.
• Select the right vehicle: Decide early whether to acquire through a Non‑Saudi entity, a Saudi company with foreign shareholders, or a listed/fund structure, and reflect that choice in the deal timetable and approvals plan.
• Model fees and tax: Quantify the combined impact of RETT and the new transaction fee and allocate both clearly in the SPA and finance documents.
• Align documentation with the New Law: Calibrate representations, covenants and CPs to the registration requirements, information standards and penalty regime under the New Law.
• Review legacy structures: Identify nominee or indirect holding structures and consider whether to regularise them as part of the transaction.

A more detailed, technical update is likely to be appropriate once the Regulation and Geographic Scope Document are issued, particularly for investors looking at specific zones, sectors or listed/fund‑based strategies.