Saudi Arabia Opens Mecca and Medina to Foreign Investment? Find Out the Details

Saudi Arabia, in an effort to attract foreign capital and diversify its economy, has announced an important step. From 27 January 2025, foreigners will be able to invest in public companies that own real estate in the holy cities of Mecca and Medina. The decision was a significant change in the kingdom’s investment landscape, although direct ownership of property by non-Muslims is still prohibited.

The announcement made by the Capital Market Authority (CMA) opens up opportunities for foreign investors to acquire shares and convertible debt instruments of companies that own private or public real estate in Mecca and Medina. These cities, home to Islam’s holiest sites, attract millions of Muslim pilgrims each year, making them attractive for stable and profitable investments.

A Strategic Move Amid Economic Challenges

The decision comes as part of Saudi Arabia’s ambitious economic transformation, known as Vision 2030. The aim of this programme is to reduce the kingdom’s dependence on oil revenues. Despite significant efforts to attract foreign investment, the country remains heavily dependent on oil. The International Monetary Fund (IMF) estimates that Saudi Arabia needs an oil price of $96 per barrel to balance its budget, $20 above current prices.

By opening up access to real estate investment in Mecca and Medina to foreigners, Saudi Arabia aims to tap into the growing demand for Sharia-compliant investment and leverage the cities’ status as global religious centres. The move is expected to strengthen the kingdom’s property sector, which is already showing growth thanks to the flow of pilgrims and the development of luxury hotels and infrastructure.

Mixed Reactions and Cautious Optimism

While the decision has been welcomed by investors, it has also sparked debate. Some analysts warn that the ban on direct property ownership for non-Muslims could limit interest from certain investors. But others believe that the ability to invest in companies with large assets in Mecca and Medina offers an opportunity to make good money in the long term.

“This is a strategic move that is in line with Saudi Arabia’s broader economic goals,” said Ahmed Al Suwaidan, a Riyadh-based economist. — By allowing foreigners to invest in property companies, the kingdom is opening up a new source of income while preserving the sanctity of its holy cities."

Emphasis on Domestic Investment

The decision also reflects Saudi Arabia’s overall shift towards domestic investment. In 2024, the country’s sovereign wealth fund (PIF) cut its overseas spending by 37 per cent to focus on local projects. As a result of this refocus, the UAE’s Mubadala fund overtook the PIF to become the most active sovereign fund in the world.

Despite the reduction in overseas spending, Saudi Arabia has managed to attract international interest in its debt. The kingdom has floated $17bn worth of international bonds in 2024, with investor demand far outstripping supply. 

A new Chapter for Mecca and Medina

Opening up property investment in Mecca and Medina to foreigners is expected to have a positive impact on the local economy. The hospitality, retail and transport sectors in these cities are likely to benefit from increased investment, further improving their infrastructure and services for pilgrims.

So while the world watches this new phase in Saudi Arabia’s history, the kingdom is balancing economic ambitions with cultural and religious values.