The Saudi stock market witnessed a remarkable positive reaction, as real estate company shares rose collectively in today's trading. This strong rise came in response to the announcement by the Saudi Capital Market Authority of the adoption of new regulations allowing listed companies, investment funds, and special purpose entities to own real estate within the Kingdom, including real estate located within the boundaries of the cities of Mecca and Medina.
Real estate stock performance in the market
The decision was immediately reflected on trading screens, with the real estate company's stock jumping by more than 3.6% at the start of the session, reflecting investor optimism about the sector's future. Dar Al Arkan's stock also rose by approximately 1%, Makkah Development's stock climbed by 1.4%, while Emaar Economic City's stock saw a slight increase of 0.2%. This performance indicates a positive market sentiment regarding the anticipated financial impact of these new regulations on the financial statements of real estate companies.
Details of the new regulations
Under the new regulatory amendments, listed companies, investment funds, and licensed special purpose entities are now permitted to own real estate or acquire other real rights to it in various regions of the Kingdom, including explicitly in Mecca and Medina. However, the Capital Market Authority (CMA) has established specific controls to ensure the proper governance of such ownership. For example, listed companies must own real estate within the boundaries of the Two Holy Mosques (Mecca and Medina) for their operational use, headquarters, or branches, thus ensuring that the ownership serves the company's core business activities.
The economic dimension and Vision 2030
This move comes within a broader context aligned with the objectives of Saudi Vision 2030, which aims to diversify the economy, attract foreign investment, and deepen the financial market. Real estate investment in Mecca and Medina has always been highly sensitive and subject to strict regulations. However, opening the door for investment funds (which may include non-Saudi investors) to invest in these holy cities represents a significant shift. This decision is expected to enhance the attractiveness of Real Estate Investment Trusts (REITs) and attract substantial liquidity from global markets seeking exposure to the Saudi real estate market, particularly in the two holy cities, which enjoy sustained and growing demand for real estate.
Promoting foreign investment and transparency
Regarding investment funds, the Authority has permitted financial market institutions to accept subscriptions from non-Saudis in funds that invest wholly or partially in real estate assets within the Kingdom, including those in Mecca and Medina. The Authority emphasized the necessity for funds and special purpose vehicles to adhere to the Law on Non-Saudi Ownership of Real Estate and its implementing regulations, particularly when handling requests for in-kind redemption or during fund liquidation. This balance between economic openness and compliance with regulatory controls enhances market transparency and increases the confidence of both local and foreign investors in the Kingdom's legislative environment.
