Buying Property in Saudi Arabia as a Foreigner
Who can buy property in Saudi Arabia?
Foreigners can buy real estate in Saudi Arabia under certain conditions and restrictions. Those residing in the country with a valid residency permit, or Iqama, are eligible to purchase property for personal use. However, this is subject to approval from the Ministry of Interior. Non-residents generally cannot own property unless through specific projects or investment frameworks.
Ownership in the holy cities of Mecca and Medina is prohibited for all foreigners. Foreign companies, however, may purchase real estate for business purposes or invest in government-approved projects. Additionally, foreigners can indirectly invest in the Saudi real estate market through Real Estate Investment Trusts (REITs), which provide access to property investments without direct ownership.
The real estate landscape in Saudi Arabia is evolving as part of Vision 2030, with the government encouraging foreign investment and expanding opportunities in urban developments such as NEOM and The Red Sea Project. Foreign buyers should work closely with legal and real estate experts to understand the necessary documentation and approval processes, ensuring compliance with local regulations.
Do the research
Investing in Saudi Arabian real estate presents a compelling opportunity due to the nation's strategic location, economic diversification initiatives, and growing demand for modern infrastructure. As the largest economy in the Middle East, Saudi Arabia is undergoing a significant transformation under Vision 2030, a plan aimed at reducing dependency on oil revenues and fostering growth in various sectors, including real estate.
The government's substantial investment in mega-projects like NEOM, The Red Sea Project, and Qiddiya has created a burgeoning market for residential, commercial, and hospitality properties. These developments are not only attracting global attention but also enhancing the quality of life and infrastructure, making Saudi Arabia an increasingly appealing destination for investors. Additionally, the introduction of real estate investment trusts (REITs) and reforms in property ownership laws for foreigners have improved transparency and accessibility in the market.
Urbanization and population growth, coupled with a rising demand for housing and commercial spaces, ensure sustained long-term potential in real estate. With its stable economy, robust infrastructure development, and government-backed initiatives, Saudi Arabia offers a unique combination of growth, innovation, and investment security in the real estate sector.
Here are several sought-after destinations for real estate investments:
- Riyadh - As the capital and economic hub of Saudi Arabia, Riyadh is a premier destination for residential and commercial real estate. Key districts like Al Olaya, King Abdullah Financial District (KAFD), and Diplomatic Quarter are particularly popular for their modern infrastructure, business opportunities, and upscale lifestyle. Riyadh offers a wide array of luxury apartments, villas, and commercial spaces, making it an attractive choice for investors.
- Jeddah - Located on the Red Sea coast, Jeddah is renowned for its cultural significance and vibrant waterfront lifestyle. Areas like Al-Shati, Al-Rawdah, and the Corniche are highly sought after for residential and hospitality investments. Jeddah’s status as a gateway to the holy cities of Makkah and Madinah also drives demand for short-term accommodations and tourism-related developments.
- NEOM and the Red Sea Project - These ambitious mega-projects represent the future of sustainable and luxury living. NEOM, a futuristic city planned in the northwestern region, and The Red Sea Project, a sprawling luxury tourism development, are at the forefront of Vision 2030. They offer unparalleled opportunities in innovative urban planning, hospitality, and eco-tourism real estate.
- Al Khobar - Located in the Eastern Province, Al Khobar is known for its modern lifestyle and proximity to the oil and gas industries. The city boasts areas like Al-Corniche and Al-Aqrabiyah, which are favored for residential developments and waterfront properties. Its location near Dammam and Bahrain enhances its appeal for investors seeking a mix of urban and leisure opportunities.
- Dammam - As a key city in the Eastern Province, Dammam combines industrial growth with a rising demand for residential properties. Areas like Al-Nakheel and Al-Mubarakiyah offer modern housing options and investment opportunities in commercial real estate, catering to the region’s growing workforce.
Where to find properties online:
Financing
Foreign nationals can obtain mortgage loans in Saudi Arabia, though the process differs from that for Saudi citizens. Eligibility requires a valid residency permit (Iqama) with a minimum validity of one year. Foreign ownership is restricted in certain areas, notably Mecca and Medina, where property ownership is generally prohibited for non-Saudis.
Lenders typically require foreign buyers to make a substantial down payment, often around 50% of the property's value. Additionally, a stable income is essential, with some banks stipulating a minimum monthly salary of SAR 25,000 (US$ 6,654) for expatriates. Interest rates and loan terms can vary based on the financial institution and the applicant's profile.
It's important to note that the approval process for foreign buyers can be lengthy, sometimes taking up to a year, as it involves obtaining necessary permits and approvals from the Ministry of Housing. Therefore, prospective foreign buyers should be prepared for a more complex and time-consuming process compared to local buyers.
Given these complexities, it's advisable for foreign nationals to consult with financial advisors or real estate professionals familiar with Saudi Arabian regulations to navigate the mortgage process effectively.
Due Diligence and Sales Contract
Conducting due diligence is a critical component of real estate transactions. Ensuring that properties are free from legal complications such as encumbrances, disputes, or claims that could impede the purchase. This process involves verifying the property's title to confirm the seller's legal authority to sell and assessing compliance with local zoning laws, land-use regulations, and environmental considerations that may affect the property's value or intended use.
In Saudi Arabia, the closing process typically involves the services of a legal advisor or consultant who prepares the necessary legal documents, conducts a thorough title search, and facilitates the transfer of ownership. Engaging a qualified legal professional is essential to ensure that the transaction adheres to Saudi legal standards and that all requisite procedures are meticulously followed. This professional will review all documentation and provide an opinion on the property's title, offering assurance similar to title insurance in other jurisdictions.
Buyers should also be aware of additional costs associated with real estate transactions in Saudi Arabia. These may include a Real Estate Transaction Tax (RETT) of 5% of the property's value, due diligence expenses for consultants who prepare building condition reports and valuations, and legal fees. It's crucial to account for these expenses beyond the purchase price to ensure a comprehensive understanding of the financial commitments involved.
Property Buying Costs and Taxes in Saudi Arabia
| Transaction Costs | ||
| Who Pays? | ||
| Property Transfer Tax | 5.00% | buyer |
| Legal Fees | 1.00% - 2.00% | buyer |
| Notary Fees | 0.00% | buyer |
| Real Estate Agent Fee | 2.50% | seller |
| Costs Paid by Buyer | 6.00% - 7.00% | |
| Costs Paid by Seller | 2.50% | |
| ROUNDTRIP TRANSACTION COSTS | 8.50% - 9.50% | |
| Source: Global Property Guide, PWC, KPMG | ||