Government Policies Impacting Saudi Real Estate Investments

Saudi Arabia’s real estate market is undergoing a transformation. Policies and regulations introduced under Vision 2030 are reshaping the sector, making homeownership more accessible and attracting both local and foreign investors. But how did we get here? Let’s break it down step by step.

The Housing Challenge and the First Steps Toward Change (2017-2018)

For two decades, homeownership rates in Saudi Arabia stagnated between 40% and 50% (PwC, 2024). In 2017, around 1.6 million Saudis were on government housing waitlists, struggling with high mortgage rates and long delays in securing interest-free loans (PwC, 2024). To tackle this, the government launched multiple initiatives to improve affordability, expand financing options, and increase housing supply.

One of the most impactful reforms was the reduction of down payment requirements. Before 2017, homebuyers needed a 30% down payment to secure a mortgage; an entry barrier for many Saudi families. The Saudi Arabian Monetary Authority (SAMA) reduced this to 5% for first-time homebuyers, making homeownership more accessible (PwC, 2024).

The Saudi Real Estate Refinance Company (SRC) was also established in 2017 under the Public Investment Fund (PIF) to inject liquidity into the mortgage market. By the end of 2020, SRC’s loan portfolio reached SAR 6.5 billion, and the company planned to refinance 20% of the total residential mortgage market by 2025 (PwC, 2024).

The 2018 Housing Programme: Reshaping Homeownership

Building on these efforts, Saudi Arabia launched the Housing Programme in 2018 with a goal to increase homeownership to 70% by 2030. This program overhauled the system, shifting from slow, government-led processes to a more dynamic, private-sector-driven approach.

Key initiatives included:

• Tax reforms to encourage home purchases.
• Reduced down payments to make mortgages more accessible.
• New mortgage products that widened financing options.
• A stronger rental market, providing alternatives for those not yet ready to buy.
• Foreign ownership reforms, allowing non-Saudi investors to own properties in designated zones, expanding investment opportunities.

One of the program’s biggest successes was the Sakani Programme, launched to provide government-backed financing solutions. By 2021, Sakani had helped over 1.2 million Saudi families purchase homes, significantly boosting ownership rates (PwC, 2024). As a result, homeownership in Saudi Arabia rose to 62% in 2020, with a target of 70% by 2030 (PwC, 2024).

Foreign Investment Reforms: A New Era

Historically, foreign ownership in Saudi real estate was highly restricted. However, as part of Vision 2030, the government has actively eased regulations to attract international investors.

One of the most notable changes was the introduction of Real Estate Investment Funds (REIFs) under the Capital Market Authority (CMA). These funds allow foreign and local investors to participate in Saudi real estate projects without direct property ownership, reducing risk and increasing market accessibility (PwC, 2024).

Additionally, the government opened up select real estate zones to foreign ownership, particularly in economic cities and special development zones. This policy shift aligns with global best practices, making Saudi Arabia more competitive with real estate hubs like Dubai and Singapore (Insights, 2024).

Tax Reforms and Market Incentives

The Saudi government has also used tax policy as a tool to stimulate the real estate sector. One of the most impactful measures was the exemption of first-time homebuyers from the 15% VAT on property transactions, making housing more affordable (PwC, 2024). Instead, a 5% real estate transaction tax (RETT) was introduced to ensure a more balanced tax structure while still promoting investment.

In parallel, the government implemented Zakat and income tax exemptions on certain real estate transactions to further incentivize property purchases and streamline the investment process for developers (Insights, 2024).

A Growing Rental Market

Not all real estate investment in Saudi Arabia is focused on ownership. The government has made strategic moves to strengthen the rental market as well. The introduction of the Ejar system, a government-backed electronic leasing platform, has improved transparency and regulation in the rental sector, providing a safer environment for both landlords and tenants (PwC, 2024).

Additionally, new mortgage-backed rental products have been introduced, allowing investors to purchase rental properties with financing tailored for leasing rather than resale. These measures create a more structured and investor-friendly rental market (PwC, 2024).

A Booming Market and Future Outlook

Saudi Arabia’s real estate market now plays a major role in the national economy, contributing 7% to the GDP and generating over 40,000 jobs (PwC, 2024). As the country’s population grows, so does housing demand, requiring 1.2 million new homes by 2030.

With Vision 2030 pushing for further expansion, private sector involvement will increase, ensuring that the sector remains resilient across economic cycles.

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The government aims to raise the real estate sector’s GDP contribution to 10% and boost the mortgage market’s reach through further refinancing initiatives (PwC, 2024).

Why It Matters

Saudi Arabia’s real estate reforms are not just about housing but also about economic growth, job creation, and financial accessibility. The Kingdom’s commitment to making property investment easier, both for locals and foreign investors, is setting the stage for long-term stability and prosperity.

For investors, these policies mean a more dynamic and structured market with growing opportunities. For Saudi families, it means homeownership is no longer just a dream—it’s an achievable goal.

References:

• https://insightss.co/blogs/regulatory-landscape-of-real-estate-investing-in-saudi-arabi/
• https://ahysp.com/impact-of-vision-2030-on-real-estate-investment/?utm_source=mondaq&utm_medium=syndication&utm_content=articleoriginal&utm_campaign=article
• https://www.pwc.com/m1/en/publications/transforming-the-housing-sector-in-saudi-arabia.html