In a landmark move aimed at bolstering foreign investment and diversifying its economy, Saudi Arabia has announced that foreign investors can now invest in publicly listed companies owning real estate in the holy cities of Mecca and Medina. This decision, unveiled by the Capital Market Authority (CMA) on January 27, 2025, marks a significant shift in the kingdom’s investment policies concerning its most sacred sites.
Key Provisions of the New Policy
The CMA’s announcement specifies that foreign investments will be limited to shares and convertible debt instruments of listed companies operating within Mecca and Medina. Notably, strategic foreign investors are excluded from this provision. Additionally, non-Saudi individuals and entities are prohibited from owning more than 49% of the shares in any given company involved in these cities.
Economic Significance of Mecca and Medina
Mecca and Medina are central to Saudi Arabia’s religious tourism sector, hosting millions of Muslim pilgrims annually for the Hajj and Umrah rituals. In 2019, pilgrimage-related activities generated approximately $12 billion in revenue for the kingdom. As part of its Vision 2030 initiative, Saudi Arabia aims to increase the number of pilgrims to 30 million annually by 2030, thereby amplifying the economic contributions from these religious events.
Alignment with Vision 2030
This policy shift aligns with Saudi Arabia’s Vision 2030, an ambitious reform plan designed to reduce the country’s dependence on oil revenues and foster economic diversification. By opening up investment opportunities in Mecca and Medina’s real estate sectors, the kingdom seeks to attract foreign capital, enhance market liquidity, and support the development of infrastructure catering to the growing number of pilgrims.
Market Reactions and Implications
Following the CMA’s announcement, the Saudi stock market responded positively, particularly within the real estate sector. Companies with significant holdings in Mecca and Medina experienced notable share price increases. For instance, Jabal Omar Development Company and Makkah Construction and Development Company both saw their stock prices surge by approximately 10%.
Analysts view this development as a strategic move to attract international investors and provide liquidity for current and future projects in the holy cities. The policy is expected to stimulate investment in infrastructure, hospitality, and other services essential for accommodating the anticipated increase in pilgrim numbers.
Historical Context and Future Outlook
Traditionally, foreign ownership of real estate in Mecca and Medina has been highly restricted due to the religious significance of these cities. In 2021, the CMA took a preliminary step by allowing non-Saudis to subscribe to real estate funds investing within the boundaries of Mecca and Medina. The current policy further expands foreign participation by permitting direct investment in listed companies owning properties in these areas.
This move is anticipated to enhance the capital market’s competitiveness and provide necessary funding for large-scale projects aimed at improving facilities and services for pilgrims. By attracting foreign investment, Saudi Arabia aims to accelerate the development of its religious tourism infrastructure, thereby supporting its broader economic diversification goals under Vision 2030.
Conclusion
Saudi Arabia’s decision to open Mecca and Medina’s real estate markets to foreign investors represents a significant policy shift with far-reaching economic implications. By aligning this initiative with its Vision 2030 objectives, the kingdom is taking concrete steps toward diversifying its economy, enhancing its capital markets, and ensuring the sustainable development of its most revered cities.