Saudi Arabia Opens Property Investments in Mecca and Medina to Foreigners

Saudi Arabia is set to allow non-Saudis to invest in publicly-traded companies that own real estate in the holy cities of Mecca and Medina.

This significant move is detailed in a statement from the Capital Market Authority.

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Key Details

Investment Opportunities

• Effective Date: Starting Monday, foreigners will be permitted to purchase shares and convertible debt instruments in firms that own private or public real estate in Mecca and Medina.
• Restrictions: Despite this development, there remains a ban on non-Muslims directly owning property in these cities.

Economic Context

• Significance: Mecca and Medina are major hubs for Muslim pilgrims, drawing millions annually for the Hajj and Umrah pilgrimages, which provide steady income for hotels and related services.
• Economic Dependency: Saudi Arabia continues to rely on oil revenue to fund its economic transformation, with the International Monetary Fund estimating that the Kingdom needs oil prices at $96 per barrel to balance its budget, approximately $20 above current levels.

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Shifts in Investment Strategy

• The Kingdom has recently shifted spending focus from international investments to its domestic market.
• In 2024, the UAE’s Mubadala surpassed Saudi Arabia’s Public Investment Fund (PIF) as the world’s most active sovereign wealth fund.
  • The PIF’s spending fell by 37% to $19.9 billion in 2024 from $31.6 billion the previous year, according to Global SWF.

Foreign Interest

• While direct foreign investment in Saudi projects has been limited, there is strong international interest in Saudi debt.
• Investor bids for a recent $12 billion bond exceeded $30 billion, and Saudi Arabia sold $17 billion of international bonds in 2024, ranking second only to Romania among emerging markets.

This initiative to open property investments is part of Saudi Arabia’s broader strategy to diversify its economy and attract foreign capital, particularly in sectors beyond oil.

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