Jun 26, 2023
Terms for Selling and Buying Real Estate in Saudi Arabia
Before you commence on any real estate transaction, whether buying or selling, you must familiarize yourself with the laws governing real estate in KSA, as these laws were put in place to guarantee the rights of all the transaction parties, both the seller and the buyer, by detailing the rights and duties of each of them, as well as ensuring the housing eligibility of the property itself.
These laws represent a set of rules governing real estate transactions and everything related to them in the Kingdom of Saudi Arabia, including:
Principles of owning and sorting real estate units.
Provisions governing non-Saudi ownership and investment in real estate.
Conditions of real estate ownership for GCC citizens.
Sorting real estate units
Real estate units are sorted according to the approved national identity of the property, and according to the serial number allocated to it within the forms approved by the Real Estate General Authority.
In order to complete the sorting process, several types of information are required, including the legal or formal title deed, the property information, licenses and authorization, whether it is joint or not, in addition to the cadastral report licensed by the engineering office and approved by the Real Estate General Authority. Also, if the property is under mortgage, the mortgagee’s consent must be secured as well. Of course, all of this must be accompanied by the approval of the community, the owners’ association, or each of the owners.
If the property has been previously sorted, the consent of the previously sorted property owner, or a proof of it, will also be required if the property re-sorting process leads to any change in the ratio of the common parts or the common land area of the sorted property.
After fulfilling these procedures, the sorting or re-sorting request is submitted to the authority to be considered, and to issue the approval document, if approved, which includes all data related to the property and the type of sorting or re-sorting process.
Foreigners’ ownership in the Kingdom of Saudi Arabia
Legal residents of the Kingdom of Saudi Arabia, of any nationality, have the right to own real estate in the Kingdom, as long as they adhere to certain legal standards that have been developed to demonstrate the residents' illegibility to own a property, their rights and duties.
- First, foreigners can own real estate provided they have legal residency in the Kingdom.
- Secondly, foreigners may own the property for the purpose of personal residence, or may rent it as a personal residence, after obtaining a permit from the Ministry of Interior.
This applies to all real estate in Saudi Arabia, except for Makkah and Medina, being subjected to their own set of laws.
Terms of foreigners’ ownership or leasing of real estate units located in Makkah and Medina
Generally, it is not allowed to own or rent Makkah and Medina real estate to foreigners or even non-Saudi establishments, except for the following:
After the amendment implemented on the ownership and investment system for real estate by non-Saudis (pursuant to Royal Decree No. (M / 94) dated 9/15/1439 AH), non-Saudi institutions (whether Gulf-originated or otherwise) may own or rent properties within Makkah or Medina, provided that it falls under the following exemptions:
Banks and real estate finance companies licensed by the Saudi Arabian Monetary Agency (“SAMA”), provided that their acquisition of the property is for the purpose of financing Saudi citizens, their offices or branches, or for carrying out their activities in accordance with the regulations set by the Saudi Arabian Monetary Agency.
Listed companies that do not engage in real estate activities, provided that the property is fully allocated to their offices or branches, or to carry out their activities in accordance with the rules defined by the Capital Market Authority (“CMA”), or other entities determined by the Council of Ministers.
As for holders of the Saudi Premium Residency, according to the regulations corresponding to Article 2, non-Saudi citizens who own Premium Residency may obtain a usufruct right over properties adjacent to Makkah and Medina for 99-year period of time.
As for the regulations governing property ownership by non-Saudi nationals in the Kingdom, it stipulates the following:
1- Allowing foreigner residents to own properties for the sole reason of residence. Also, he must obtain a license from the Ministry of Interior, and his request must be subjected to certain conditions, namely:
- He must have a valid residence permit, and its validity must not be expired.
- He must also provide all information about the property.
In addition, a copy of the title deed must be provided.
If a resident is allowed to own a property, he can own only one property.
- Of course, the non-Saudis resident applying to own a property must have a clean record and must not be wanted to justice.
2- If the property is designated for investment, the cost of the project land plot must not be less than 30 million SAR, and the Council of Ministers has the right to amend this amount when it deems it appropriate. Also, it is required that the investment process takes place within 5 years of obtaining the ownership.
3- As for foreign entities, international and regional institutions, in addition to the aforementioned regulations, they are required to obtain a license from the Minister of Foreign Affairs, in accordance with the reciprocity principle in foreign transactions.
The rules governing property ownership by GCC citizens in KSA:
1- GCC citizens are more privileged when it comes to property ownership in KSA, as they are allowed to own up to three properties in residential areas, provided that the area of the property does not exceed 3,000 sqm. However, the competent authorities have the right to allow the ownership of more than three properties if they deem it appropriate.
2- GCC citizens are allowed to own property for residential purposes, either for the owner or his family, but they do not have the right to use any of their properties otherwise, unless permitted by the laws of the country.
3- GCC citizens licensed to practice various economic crafts and activities which are authorized to be carried out, now or in the future within GCC, are allowed to own properties.
4- GCC citizens, who meet the basic prerequisites, are allowed to rent and use the land. They also retain the freedom to dispose of this right by selling and mortgaging in accordance with what is required by the laws of the Kingdom.
5- As for the properties located within the borders of Makkah and Medina, they are excluded from the provisions listed here.
6- These provisions do not, in any way, fall into conflict with the state's right to expropriate the property for the public interest, in return for fair compensation for the owner according to the applicable laws.
Conditions for GCC citizens’ ownership of property in Saudi Arabia:
1- The purpose of ownership must be residential for the owner or his family, and he is not entitled to use the property otherwise, unless the state laws permit that.
2- If the property is a land plot, the owner must start the construction operations within the limits of three years from the date of registering the ownership, and the construction must be completed within five years from this date. Exceeding this period may expose the property to confiscation and sale, (in this case the owner will be compensated if there proved to be a compelling reason for the delay in construction).
3- The property owner is not entitled to transfer its ownership until four years have passed from the date of its registration to his name. Some exceptions may be made if the owner obtains prior permission from the competent authorities.
4- As for GCC citizens licensed to practice various economic crafts and activities which are authorized to be carried out, now or in the future, within GCC, they are allowed to own properties according to the following conditions:
1- That the property be allocated for the practice of the permitted and licensed profession, craft, or activity.
2- That the property area size be compatible with the requirements of the profession, craft, or activity the owner wishes to practice, as determined by the competent authority in KSA.
3- Not to dispose of the property by transferring its ownership, except after quitting the profession, craft, or activity for which they basically purchased the property, or if they change their place of work.
To read more blogs on real estate related topics, go to the Related Blogs section at Mada Properties.
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