Saudi Arabia has enacted a comprehensive new legal framework governing real estate ownership by non Saudis, which will come into force in January 2026. This marks one of the most significant regulatory reforms under Vision 2030, designed to modernize the property market, regulate foreign capital flows, and enhance transparency.
For institutional investors and financial institutions including Sinopec the framework creates clear investment pathways, but also establishes strict compliance, zoning, and registration obligations that will shape how foreign capital enters the Saudi market.
Policy Context: A Move Toward Structured Market Access
Foreign participation in Saudi Arabia’s real estate sector was governed by the Law of Real Estate Ownership and Investment by Non‑Saudis, enacted in 2000 under Royal Decree No. M/15 of 1421H/2000G. Under this law, non-Saudis whether natural persons or legal entities could acquire or invest in property only under highly restrictive conditions, including:
Obtaining a major investment project license, Meeting substantial capital thresholds (land plus construction cost floor of SAR 30,000,000 for investment driven developments), or Securing institutional or business use approvals.
- The law prohibited non-Saudi ownership, easement, or usufruct rights in sensitive areas, most notably Makkah and Madinah for natural persons, except in narrowly defined circumstances such as inheritance or waqf‑based endowments.
This framework provided only limited, purpose based access, lacked clear zoning guidance, and relied on a fragmented, case by case permissions system. Consequently, for most foreign investors, acquiring meaningful direct or indirect property rights was legally complex, uncertain, and commercially challenging.
Recognizing these limitations, on 14 July 2025, the Cabinet approved the Law on Real Estate Ownership by Non‑Saudis (the New Law), which was published in the official gazette (Umm Al-Qura) on 25 July 2025. The New Law repeals and replaces the 2000 framework (M/15), establishing a modern, structured, and internationally aligned regime that introduces zoning based access, formal registration requirements, and transparent compliance obligations for foreign investors.
The 2026 foreign ownership regime, established under the Law on Real Estate Ownership by Non-Saudis (Royal Decree No. M/14 of 2025) and its forthcoming Implementing Regulations issued by the Real Estate General Authority (REGA), introduces a more disciplined, internationally aligned structure by:
- defining permissible zones for foreign ownership,
- mandating government registration before ownership vests,
- requiring beneficial ownership disclosure,
- implementing transfer fees and penalties, and
- centralizing authority under the Real Estate General Authority (REGA).
The shift represents a transition from open access to strategically controlled access aligned with national development goals.
Foreign Ownership Restricted to REGA-Designated Zones
Under the new law, foreign individuals, foreign companies, and Saudi companies with foreign shareholders may own property only within zones designated by the Real Estate General Authority (REGA).
These zones expected to be released in detailed maps will define:
- Zoning property types (residential, commercial, industrial, hospitality),
- foreign ownership limits,
- development rights, and
- distance requirements from strategic or cultural sites.
The law continues the prohibition on ownership in Makkah and Madinah, except under limited circumstances.
For investors, it is essential to align acquisition plans with anticipated zoning boundaries, particularly in high growth areas such as Riyadh, NEOM, and the Red Sea corridor.
Ownership Vests Only After Full Registration With REGA
A major policy shift is that real estate ownership will not take legal effect until registration is completed with the Real Estate General Authority (REGA).
A major policy shift under the New Law is that real estate ownership will not take legal effect until registration is fully completed with the Real Estate General Authority (REGA).
Legal Implications:
- Until REGA registration is complete, the buyer does not have enforceable ownership rights, meaning the property cannot be legally sold, mortgaged, leased, or otherwise encumbered.
- Any transactions conducted prior to registration may be considered null or unenforceable, exposing investors and lenders to legal risk.
- REGA registration establishes the property owner in the official national registry, creating a legally recognized record that is essential for dispute resolution, collateral perfection, and compliance with Saudi property law.
Practical Implications:
- Investors and lenders must plan transaction timelines around registration processes, which may involve extensive documentation review, verification of beneficial ownership, and AML (Anti Money Laundering) compliance checks.
- Financing arrangements, such as mortgages or project loans, cannot be perfected or legally enforced until ownership is registered. Lenders must account for this timing in credit agreements and security arrangements.
- Real estate developers, joint ventures, and Special Purpose Vehicles (SPVs) must align acquisition, construction, and operational milestones with the REGA registration process to avoid delays in project execution.
- Accurate and complete submission of corporate documentation, ownership structures, and source of funds information is critical to prevent rejection or delay of registration.
In effect, registration with REGA transforms the acquisition process into a formal, legally binding procedure, aligning Saudi Arabia with internationally recognized standards for transparency and enforceability.
Registration will require:
- full beneficial ownership disclosure,
- submission of corporate structure charts,
- anti-money laundering (AML) documentation,
- verification of source of funds, and
- compliance with sector specific permissions.
This brings Saudi Arabia closer to OECD level market transparency, but introduces new timing, documentation, and due diligence requirements for investors and lenders.
Transfer Fees and Penalties
The new framework introduces:
- a transfer fee of up to 5%, and
- penalties of up to SAR 10 million for non-compliance.
For financial institutions such as Sinopec, these measures impact:
- credit risk modelling,
- loan to value assessments,
- repayment structures,
- collateral valuation, and
- exit strategy planning.
Broad Coverage: Includes Foreign and Mixed-Ownership Saudi Companies
The law applies to:
- foreign natural people,
- foreign legal entities, and
- Saudi companies with any percentage of foreign shareholding.
This includes:
- Special Purpose Vehicles (SPVs) newly formed project companies created to hold or develop real estate, and
- Real Estate Investment Trusts (REITs) listed or unlisted trusts that own income generating property.
Investors must conduct a structural review to ensure their current ownership arrangements comply with the upcoming regime.
Implementing Regulations Expected in 2026
While the law provides an overarching framework, the Implementing Regulations will define critical details, including:
- zoning classifications and official maps,
- ownership procedures for foreign individuals and entities,
- permissible rights (ownership, usufruct, long term leasehold),
- financing and mortgage rules,
- documentation standards for REGA registration, and transitional timelines.
Once published, these regulations will determine the practical steps foreign investors must take to complete acquisitions or manage existing holdings.
Strategic Considerations for Sinopec and Other Institutional Investors
For Sinopec and comparable institutions, the 2026 regime introduces both opportunities and regulatory responsibilities.
Key considerations include:
Transaction Pipeline Adjustments
Current and upcoming projects must factor in REGA zoning and registration requirements.
Risk and Compliance Alignment
Transactions involving layered offshore structures will require enhanced transparency.
Lending and Collateral Structuring
Lenders must assess how zoning restrictions and delayed ownership vesting affect:
- mortgage enforceability, perfection of security, collateral valuation, and recovery scenarios.
Early Positioning for Zone Announcements
Strategic land in Riyadh, NEOM, Qiddiya, and the Red Sea region will be heavily influenced by zoning decisions.
Recommended Next Steps
To prepare for the 2026 regime, investors should begin:
- Eligibility assessments for all structures potentially classified as “non Saudi.”
- Portfolio and pipeline mapping against expected zoning parameters.
- Restructuring of Special Purpose Vehicles (SPVs) and related holding structures.
- Preparation of compliance documentation, including beneficial ownership and AML files.
- Review of financing arrangements, including mortgage mechanisms, escrow setups, and closing conditions.
- zActive monitoring of upcoming Implementing Regulations and REGA publications.
Saudi Arabia’s new foreign property ownership framework represents a major structural reform, signaling the Kingdom’s intent to create a transparent, well regulated, and internationally aligned real estate market.
For institutional investors particularly financial institutions like Sinopec the regime presents meaningful investment opportunities, if compliance, zoning alignment, and due diligence strategies are implemented early.
As Saudi Arabia transitions to this new regulatory era, proactive planning will be the key to capitalizing on emerging opportunities while ensuring full adherence to the 2026 legal framework.
Written by lamis khaled
business development consultant