Saudi Gazette report

RIYADH — The Saudi Capital Market Authority (CMA) has announced that foreigners are allowed to invest in listed Saudi companies that own real estate in the cities of Makkah and Madinah, effective from Monday, Jan. 27.

The Saudi capital market regulator said in a statement that this move 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," the statement pointed out.

The CMA decision 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 said that as per the decision, foreign investment in these companies would be limited to shares of these Saudi companies listed on the capital market, as well as to convertible debt instruments, or both. However, people without Saudi nationality would not be allowed to own more than 49 percent of shares of the companies involved. Strategic foreign investors, who are not permitted to own shares or convertible debt instruments in these companies, would be exempted from owning shares of these companies.

The new rules 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.

At the same time, CMA grants Saudi listed companies 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.

It is noteworthy that the Capital Market Authority 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 the boundaries of 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 Saudi capital market attractive to both local and foreign investments.

The approval of the controls came after the CMA published on 15 November 2023, the “Regulations of Foreign Investors' Ownership of Shares in Saudi Listed Companies that have Investment Properties in Makkah and Madinah" on the Public Consultation Platform “Istitlaa," affiliated with the National Competitiveness Center, and the CMA's website for public consultation for the purpose of approving the final text.