Saudi Arabia’s market regulator announced on Monday that it will permit foreign investment in listed companies owning real estate within Islam’s two holiest cities, Makkah and Madinah, as part of the kingdom’s efforts to attract more foreign capital.
This decision allows foreign investors to buy into companies whose revenues are heavily tied to the Islamic pilgrimage, a major source of income for the oil-rich nation. According to the Capital Market Authority (CMA), this move is designed to draw foreign capital and increase liquidity for ongoing and future projects in the two cities.
Saudi Arabia has set a target to welcome 30 million pilgrims annually for Hajj and Umrah by 2030. In 2019 alone, the kingdom earned approximately $12 billion from these pilgrimages, according to official data.
The annual Hajj pilgrimage plays a significant role in Saudi Arabia’s economy and is a key component of the Vision 2030 reform agenda, which aims to reduce the country’s dependence on oil revenues.
Following the announcement, Saudi Arabia’s benchmark stock index rose 0.2%, driven by a 10% surge in shares of both Jabal Omar Development Company and Makkah Construction and Development Company, which own real estate in Makkah.
The Saudi stock market, the largest in the Gulf region with a market capitalization of 10.2 trillion riyals ($2.72 trillion), opened to foreign investors in 2015 to attract more funds and has since witnessed a surge in new listings.
Under the new regulations, foreign investment will be limited to shares, convertible debt instruments, or a combination of both, excluding “strategic foreign investors.” Additionally, non-Saudis will not be allowed to own more than 49% of the shares in the involved companies.
This follows a 2021 decision allowing non-Saudis to invest in real estate funds operating within the boundaries of Makkah and Madinah.