Real estate investments in Saudi Arabia in 2024

Large-scale internal transformations and Saudi Arabia’s policy of modernization and reform significantly expand opportunities and attract the attention of investors, and the quality of new real estate projects in Riyadh and other regions of the kingdom is reaching a completely different level.

In 2024, we are witnessing the implementation of the Saudi Vision 2030 strategy: the country’s authorities have amended investment and housing legislation to stimulate the inflow of foreign capital. New opportunities have not gone unnoticed by global market players, which confirms the rapid influx of foreign investment in Saudi Arabia’s real estate.

The content of the article

1. The attractiveness of Saudi Arabia for investors
   1. Saudi Arabia’s investment climate
   2. Saudi Arabia’s Economy
   3. Demographics of Saudi Arabia
2. Saudi Arabia’s Real Estate Market
   1. Local demand for real estate
   2. Key indicators of the Saudi Arabian real estate market
   3. Saudi Arabia Rental Market
3. The pros and cons of investing in Saudi Arabia
   1. Residence permit of Saudi Arabia for real estate investments
   2. Investor Protection
   3. Development prospects
4. Taxes in Saudi Arabia
   1. Income tax
5. Popular projects and districts in Saudi Arabia
   1. NEOM is a megaproject of the future in Saudi Arabia
   2. The Line is a futuristic city that runs through the whole kingdom
   3. The Mukaab is the largest business center in the shape of a cube

The attractiveness of Saudi Arabia for investors

Since 2016, more than 700 reforms have been carried out in the kingdom, affecting the main areas of the economy. Saudi Arabia’s ambitious goal of becoming one of the 10 most competitive economies in the world by 2030 seems feasible in 2024, and investors should already look at the real estate market of a rapidly transforming country.

Saudi Arabia’s investment climate

The transformation of the economic model, income diversification and reduction of dependence on oil production are the main vectors of Saudi Arabia’s development. The Kingdom is implementing comprehensive reforms designed to increase the country’s competitiveness and ensure the inflow of new sources of capital.

In this context, 2023 marked an important milestone — the equator on the ambitious path of Saudi Vision 2030, launched back in 2016.

10 years ago in Riyadh and in general in Saudi Arabia was literally not allowed to do anything, but the current course of the government is working, and the country is becoming more and more open. Saudi Arabia is actively attracting expats and, it seems to me, is moving towards a successful case of the UAE and Dubai.

The kingdom’s infrastructure sector has finally been opened up to foreign investment, and the government immediately embarked on a truly ambitious project worth $800 billion — over the next decade they plan to double the area of Riyadh and turn it into the economic, social and cultural center of the entire region.

To implement all these plans, the Saudis expect to attract about $ 250 billion in financing from private investors. In addition, Saudi Downtown is actively seeking foreign investment for its development projects in 12 cities of Saudi Arabia at once.

Saudi Arabia’s Economy

The year 2022 was a truly breakthrough year for the kingdom. According to the IMF, Saudi Arabia’s economy showed the largest growth among the G20 countries (+8.7% of GDP). This became possible not only because of Saudi Arabia’s traditional oil revenues, but also due to the active development of the non-resource sector (+4.8%). Serious investments in megaprojects like NEOM, Qiddiya, Red Sea Project and The Line played an important role.

In 2023, the non-oil segment of the economy for the first time in the country’s history exceeded the mark of 50% of total GDP. At the same time, according to the March data of the Main State Administration, in general, the Saudi economy experienced a decrease of 0.8% over the year due to a serious, almost 9% drop in oil revenues, which followed a reduction in production under the OPEC+ agreement. The non-oil sector, on the contrary, gained 3.8%.

All this is happening against the background of a softening of the legal framework for attracting foreign investors. So, in 2016, the government of Saudi Arabia allowed foreigners to issue licenses to own 100% of the capital in wholesale and retail companies, and in 2017 allowed them to own real estate related to commercial activities.

Later, in February 2024, the law was completely changed towards ownership rights without strict restrictions on the use of real estate only in commerce.

In January 2024, the set course is supported by the introduction of new “golden visas” to Saudi Arabia. A residence permit can be obtained by qualified specialists, outstanding cultural figures and athletes, investors, entrepreneurs and property owners.

Demographics of Saudi Arabia

Saudi Arabia is the most populated country in the Persian Gulf. At the time of the launch of the Saudi Vision 2030 strategy (in 2016), about 30 million people lived here, and by 2030 the authorities expect to raise the figure to 46 million.

According to the 2022 census, the population of Saudi Arabia has reached 32.2 million people, 42% of whom are foreigners (mainly citizens of Egypt, the Philippines, Pakistan, Sudan, Ethiopia, India and Bangladesh). The total population growth for the year was 4.5%.

The largest growth was seen in the capital of the kingdom — Riyadh (+5.1% compared to 2021), in the Eastern region (+5%) and in the Mecca region (+4.3%), which includes not only the holy city, but also the large center of Jeddah – a popular destination for real estate investors.

Saudi Arabia’s Real Estate Market

The visa policy and rules for buying real estate in Saudi Arabia for foreigners have historically been very strict. Until recently, real estate could only be bought if the buyer already had a residence permit (business opened, talent visa, etc.), while it was impossible to rent it out — only buying for their own residence or use in commerce.

The situation is seriously changing — all thanks to the decisions taken at the beginning of 2024. The authorities of the kingdom have begun to gradually soften the property legislation in relation to foreigners. Now foreign investors are allowed to obtain ownership rights to real estate in specially designated areas without any additional restrictions.

According to the statements of the head of the REGA Real Estate Department, new laws will be developed in the future, expanding the range of real estate available for foreigners to own.

Local demand for real estate

Attracting foreign investors is an important, but far from the only task that the Saudi authorities set themselves. At the same time, the kingdom is actively stimulating local demand for residential real estate within the framework of the same Vision 2030 project.

One of the key goals is to bring the share of homeowners among Saudis to 70% by 2030, compared with 47% in 2016. Prior to the reforms, local buyers were mainly dependent on the Real Estate Development Fund to obtain loans for the purchase of housing. Sometimes it took more than two decades to wait for mortgage approval.

Now the Saudi authorities have launched a whole range of initiatives: tax incentives for the purchase of housing, government programs for different categories of borrowers and strengthening the mortgage market with the support of a real estate refinancing company.

At the same time, despite the mortgage boom, overheating in the housing market, according to IMF analysts, is not observed. Demand, fueled by low rates, subsidies and regulatory easing, is not outstripping supply.

Key indicators of the Saudi Arabian real estate market

According to the General Directorate of Real Estate of Saudi Arabia (REGA), in 2023, the demand for apartments in Riyadh, the capital of the kingdom, increased by 44.9% compared to 2022, overtaking Jeddah, which earlier in 2022 showed a record growth of 60%. In total, 31.4 thousand apartment transactions were registered in the two most popular regions of Saudi Arabia last year.

The average cost per sq. m. The meter in the apartment segment in Riyadh has been growing steadily for four years and has reached $1,639 — an increase of 13.4% by 2022. Jeddah followed the trend of the capital until 2022, but last year the average cost of sq.m. The meter here showed a decrease of 1%.

Saudi Arabia Rental Market

Against the background of active population growth and the attraction of foreign specialists and workers to the country, the rental market has been showing rapid growth for several years.

In 2023, a record number of lease agreements were observed in two of the most popular regions of the country. In Riyadh, the figure increased by 57% over the year, in Jeddah — by 23%.

According to REGA, the total value of rental agreements in Riyadh and Jeddah increased by 66% and 21%, respectively. CBRE, in turn, notes that in 2023, the actual rent for housing throughout Saudi Arabia increased by 9% (rental of apartments and villas rose by 12.1% and 6.7%, respectively).

The influx of internal migrants and expats to the capital has provoked a whole wave of demand for rental real estate. About 62% of Riyadh residents can only afford to rent a house, but not own it as property.

Problems with housing affordability and the general trend with the rotation of the labor force in the capital are affecting. A considerable part, as many as 40% of local residents, consider themselves temporary residents, internal migrants from other regions of Saudi Arabia.

The pros and cons of investing in Saudi Arabia

Today, Saudi Arabia is a sought—after foreign real estate market, which is trying to repeat the successful experience of the UAE. The kingdom promises a lot of new opportunities for those who are ready to participate in all the transformations of the still young market and experience its possible ups and downs.

Residence permit of Saudi Arabia for real estate investments

In 2024, Saudi Arabia reformed the “golden” residence permit program. Now it can be claimed by real estate investors in the amount of $ 1.07 million or more.

Advantages of a residence permit in Saudi Arabia:

• legal residence in Saudi Arabia for an investor and his family members without a visa;
• the right to work in the private sector;
• the right to conduct business and hire local workers.

Conditions for obtaining a residence permit:

1. Purchase of real estate in the amount of at least 4 million Saudi riyals (1.07 million US dollars).
2. Real estate should be mortgage-free.
3. The property must be residential.
4. Real estate assets must be evaluated by the Office of Accredited Appraisers of Saudi Arabia.
5. The presence of a valid international passport.
6. Passing a medical examination.

Investor Protection

Saudi Arabia has a special regulator that controls the use of a single standard contract and compliance with the regulations of a real estate transaction.

There are very strict rules regarding the timing of housing delivery. The developer is most interested in delivering the project on time, since if construction is delayed by 6 months, the object, at the discretion of the authorities, may be transferred to the state.

The investor has the right to withdraw the money invested in the real estate project at any stage of implementation (literally on the last day of the next installment), and in full, minus a fixed 7% and without penalties for delay.

Development prospects

Many investors view the Saudi Arabian real estate market as an opportunity to enter the “UAE 40 years ago” with all the nuances, hopes and faith that the risks associated with internal transformations will yield great profits.

A strong and stable economy that does not depend on external capital, the development of megaprojects and plans for the large—scale events of EXPO 2030 and the World Cup, which will be held here in 2034, are all key growth factors within the kingdom.

An important advantage over the UAE is the large local population, which, due to the growth of welfare and domestic consumption, can be a stable driver of the economy.

Taxes in Saudi Arabia

Only those who receive income from self-employment or their own business are required to register with the tax authorities and file a declaration.

Income tax

The amount of corporate income tax is 20%.

Investment income and capital gains in Saudi Arabia is not taxed.

Non-residents who receive income from a Saudi source may be taxed at rates from 5% to 20%, depending on the nature of the services:

On a bilateral basis, Saudi Arabia has signed double taxation treaties with 29 countries, including Russia.

In January 2024, the Russian Ministry of Finance proposed to revise the agreement and switch to the 10-10-10 formula (10% withholding tax rates for dividends, interest and royalties), but the initiative did not meet with the support of the Saudis.

Terms of Russia’s Double Taxation Avoidance Agreement with Saudi Arabia:

Popular projects and districts in Saudi Arabia

In the last decade, Saudi Arabia announced the launch of several megaprojects at once, which are designed to change the image of the kingdom and attract foreign investors.

NEOM is a megaproject of the future in Saudi Arabia

This is a grandiose undertaking, the first of its kind to build from scratch an entire tourism ecosystem consisting of high-tech business clusters and resort areas. A very ambitious project to build a linear metropolis and a cluster of different promising cities.

A fabulous starting budget of $500 billion has been allocated for the implementation of the project from the funds of the state investment fund of Saudi Arabia. International investors will also be attracted here.

The first stage of the project is planned to be put into operation by 2025.

The highlight of NEOM is the incredible concentration of innovation within a single project. This includes Oxagon, an advanced maritime hub, and Troena, a ski resort right in the desert, and, of course, The Line, a futuristic linear city with all communications and high—speed transport under the surface, and untouched nature above it. At the same time, the entire infrastructure is designed in such a way that any object is within walking distance for residents.

The project still raises a lot of questions, but there is almost no information about it. Local developers keep everything in the strictest confidence. It is completely forbidden to disclose any details of the construction and even more so to distribute videos from the construction site.

The Line is a futuristic city that runs through the whole kingdom

A linear city with a length of 170 kilometers, connecting the western and eastern parts of Saudi Arabia. A giant terrestrial chain of interconnected pedestrian areas and public parks harmoniously integrated into the natural landscape.

All necessary infrastructure, transport communications, and utilities will be located under the surface of The Line. All this should be integrated on two levels — physical and digital, and done so thoughtfully that there will not be a single car or a gram of emissions into the atmosphere in the city itself. Moreover, developers guarantee that 95% of the environment will remain intact.

By 2030, the authors of The Line promise to create 380,000 new jobs and bring $48 billion to the kingdom’s economy.

The Mukaab is the largest business center in the shape of a cube

A giant skyscraper in the shape of a cube with a height of 400 meters will be built in the Al-Kirawan district in Riyadh.

According to the architects’ idea, Mukaab will become not just another high-rise, but a full-fledged megastructure city, where shopping galleries, cultural facilities, and tourist attractions will be located on 2 square kilometers. Moreover, it is planned to build a huge aquarium inside the cubic skyscraper, stretching almost to its entire height.

Mukaab will be the center of a new area of 19 square kilometers, which will house thousands of residential apartments, hotel rooms, office and retail spaces.

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