Rights and obligations of foreign buyers in Saudi Arabia

In 2000, Saudi Arabia allowed foreigners to purchase real estate for the first time, but the conditions for this are strictly regulated. A foreigner who is not a citizen of a member state of the Gulf Cooperation Council can only buy one residential property for personal use, provided they have a local residence permit and special permission from the Ministry of Interior. The purchase of real estate in the holy cities of Mecca and Medina is prohibited for foreigners; however, they have the right to inherit such property.

In 2019, a "golden visa" was introduced, allowing foreign investors to obtain permanent residency for a payment of 800,000 Saudi riyals ($213,000), or temporary residency for $26,700. A special online platform has also been created for applying for the "golden visa."

Foreign residents of the Gulf Cooperation Council are allowed not only to purchase residential properties but also to acquire up to 3,000 square meters of land across the country. International companies registered to conduct business in the country are permitted to buyreal estate for their employees and operations. In Mecca and Medina, foreign companies can only purchase real estate for businesses that benefit the state.

The Kaaba in Mecca, sacred to Muslims, plays a key role in Islam, which is why foreigners are prohibited from acquiring real estate in this region due to the constant flow of pilgrims. Holders of a "golden visa" can rent property in Mecca and Medina for up to 99 years.

The main rules for acquiring real estate in Saudi Arabia apply to citizens of the member states of the Gulf Cooperation Council. The primary condition is the right to acquire only one residential property or up to 3,000 square meters of land for personal use.

Rules for foreign citizens

The laws of Saudi Arabia establish strict rules for foreign citizens wishing to invest in real estate in the country. If the construction of housing is delayed for more than three to five years after the property registration, the state has the right to confiscate the property and put it up for sale, returning the amount to the buyer. Foreigners can purchase or lease housing and land only for commercial purposes. However, in the cities of Mecca and Medina, it is prohibited to acquire or lease real estate. Foreigners who are not part of the Gulf Cooperation Council are allowed to purchase or lease only one residential property, provided they have residence permits, and they require permission from the Ministry of Interior.

Company investments

Companies from outside the Gulf Cooperation Council can purchase or lease real estate in Saudi Arabia only for their operations, construction, or to provide housing for their employees. However, they must obtain permission from the General Investment Authority and the Ministry of Foreign Affairs. The investment amount in a construction project must be no less than 8 million dollars, and the entire investment must be made within five years from the date of land acquisition, and the construction must also be completed.

Rights and obligations

• Confiscation of property:In case of violation of the rules, the state has the right to confiscate property.
• Restrictions on the disposal of property:The rights of foreignreal estate buyers are limited. The sale of the acquired property is only possible five years after its purchase.
• Obtaining permanent resident status:To obtain this status, it is necessary to have lived in the country for at least ten years. Individuals who have lived in the country for the last five years with a residence permit can apply for permanent resident status.

Obtaining citizenship in Saudi Arabia

To obtain citizenship in the Kingdom of Saudi Arabia, not only is residency required, but also a certain number of points must be accumulated based on various criteria, including education, religion, proficiency in the Arabic language, and other achievements. The maximum number of points required for naturalization is 33, while the minimum is 23. Acquiring real estate in this country also comes with certain obligations. For example, every owner is required to pay utility bills, although this can be relatively inexpensive. Additionally, property owners outside of Saudi Arabia must inform tax authorities about their foreign accounts.

Real estate search

To search for housing in Saudi Arabia, you can use various methods, including contacting brokers and real estate agents. It is also possible to reach out to local developers or look for listings through online portals. The property registration process in this country involves several key stages, including a technical inspection of the property and an expert appraisal. It is important to consider all aspects before purchasing real estate in Saudi Arabia. Preparing for this step requires careful study of all the rules and requirements related to acquiring property in this country.

Expert examination of the object

The expert will inspect the property and prepare a detailed report on its condition and potential improvement works that could affect its value. The report will indicate the current market price and the value of the land. The cost of preparing the report ranges from 500 to 1000 Saudi riyals.

Completion of the transaction

When discussing the price of a property, a sum is often proposed that is higher than what the seller expected, in case of negotiations.

Buying real estate in Saudi Arabia

To buyreal estate in Saudi Arabia, it is essential to conduct a thorough check of the legal documents confirming ownership. Start the process by contacting the notary office of the Ministry of Justice to verify the authenticity of the documents and check for any encumbrances.

Document verification

• The seller must provide the cadastral number of the property and the date of ownership registration.
• The verification can also be done through the online portal of the Ministry of Justice or by requesting a certificate of previous transactions.
• Important:Document verification is provided free of charge.

Drafting a sales contract

After agreeing on the details of the deal, the agent prepares a purchase and sale agreement that includes the property's address, the transaction amount, the parties' obligations, and the payment distribution. After the contract is signed, the notary prepares the title of ownership (SAQ) and certifies it.

Completion of the purchase and sale

Participants are invited for a repeat visit to obtain a new title. Payment is made on the same day before the documentation is changed. The purchase and sale are usually completed within a few hours.

• Important:The buyer is required to provide a receipt of full payment in the presence of a notary.
• Electronic copies of documents are available on the online portal of the Ministry of Justice for further verification and access.

Documents for individuals:

For individuals residing in Saudi Arabia and wishing to purchase real estate, the following official documents are required:

• Legal documents for the property
• Permission from the Ministry of Internal Affairs
• Sales contract executed by the bank
• Site plan or building drawings

Documents for legal entities:

Legal entities with residency in Saudi Arabia that also wish to purchase real estate are required to provide the following documents:

• Valid residence permit
• Legal documents for the property
• Permission from the Ministry of Foreign Affairs and the General Investment Authority
• A receipt with the bank's signature confirming the payment receipt
• Site plan or building drawings

If the deal is concluded by a representative of the buyer, a power of attorney must be provided. Additionally, the company's founding documents, an extract from the state register, and a cover letter from the real estateagency will be required.

There is an opportunity to purchase real estate in Saudi Arabia remotely through a representative or a real estate agency.

Mortgage registration:

To arrange a mortgage in Saudi Arabia, the following conditions must be met:

• The employment contract is for at least six months.
• The salary should be in the range of $800-$1400.
• The down payment ranges from 5% to 15% of the property's value.
• Monthly payments should not exceed 33.33% of income.
• The maximum loan term is 30 years.

A mortgage application is usually processed within a week to a month.

Additional Costs:

When purchasing real estate in Saudi Arabia, additional expenses should be taken into account:

• Realtor's fee
• Real estate appraisal report
• The property purchase tax, which currently amounts to 5% of the property's value.

Most real estate transactions are subject to a tax that is regulated by the General Authority of Zakat and Tax in Saudi Arabia.

Real estate transactions and taxation

Ownership and transactions involving real estate in Saudi Arabia are subject to strict regulation and taxation. The entire process of buying or selling property requires declaration and payment of the relevant taxes. The seller is responsible for paying taxes to the tax authorities and for making these payments on time. If the established deadlines for tax payments are not met, the seller may face penalties of up to three times the amount of the tax.

Changes in real estate prices

Real estate in Saudi Arabia has significantly changed in value over the past few years. From 2014 to 2019, property prices decreased by 18.2%, and when adjusted for inflation, this amounted to 20.4%. This decline in value was caused by several factors, including falling oil prices, slowing economic growth, and a decrease in the number of foreign specialists working in the country. In response to these challenges, the government has taken a number of measures to stabilize the real estate market. Subsidized mortgage programs have been introduced, and the property purchase tax has been reduced by three times. By 2020, a gradual recovery in property prices is observed.

Demand for real estate

Saudi Arabia is characterized by a rapidly growing population that demands housing and corresponding infrastructure, especially in major cities like Riyadh, Jeddah, Dammam, and Khobar.

The "Vision 2030" program

The government of Saudi Arabia has made significant efforts to diversify the economy and reduce dependence on oil revenues. The "Vision 2030" reform program, launched with the involvement of Prince Mohammed, aims to modernize society and attract foreign investments. As part of this program, there are plans to create a special economic zone at Riyadh's international airport, build a resort area in the northwest of the country, and establish the city of Neom with advanced technologies.

“Golden visas” for investors and citizenship programs for foreigners

In 2019, Saudi Arabia began issuing "golden visas" for investors, and in 2021, a citizenship program for talented foreigners was launched.

Centers of economic activity and demand for real estate

Riyadh and Jeddah, the capital and the second largest city of Saudi Arabia, are key centers of economic activity and places with high demand for real estate.

The right of foreign citizens to own real estate

Foreign citizens with resident status have the right to purchase real estate in the country, with the exception of the holy cities of Mecca and Medina. Individuals can buy property for personal use. Holders of the Saudi Premium Residence investment visa are allowed to own property in Mecca and Medina, but only under long-term lease conditions for 99 years (usufruct).

Conclusion

In conclusion, it can be emphasized that the acquisition of real estate in Saudi Arabia by foreign citizens is a complex and regulated process. The rules and restrictions set by the kingdom are aimed at ensuring control over the real estate market and protecting the interests of the country.

Foreigners are presented with certain opportunities for purchasing real estate; however, these come with restrictions, requirements, and rules that must be strictly followed. Despite this, with the introduction of the "golden visa" and the expansion of opportunities for investors, Saudi Arabia is becoming a more attractive place for foreign real estate buyers, contributing to economic development and attracting foreign investments to the country.