Investment in Saudi Arabia
In Saudi Arabia, investing is quite profitable. In fact, a staggering SR13 billion in foreign direct investment was received by the Kingdom in 2018. Additionally, it is ranked 44th in the Global Foreign Direct Investment Country Attractiveness Index for 2020. However, it is not the whole story.
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The goal of the Saudi government’s long-term economic plan is to increase foreign investment in developing industries. Logistics, health, education, infrastructure, entertainment, clean energy, tourism, and mining are all included in this. The basic objective is to diversify the economy and move away from the oil industry.
In the middle of 2015, the Saudi Stock Exchange welcomed institutional investors from outside. Moreover, non-Saudis are permitted to purchase real estate, pending Ministry of Housing permission. Furthermore, the ecosystem of entrepreneurs is growing stronger and stronger. For instance, 100% foreign-owned companies are welcome in the Kingdom.
Consolidated finances, a well-regulated financial system, and a stable economy—albeit one that is subject to regional geopolitical events—underpin all of this. The Kingdom still has to make improvements, for instance, to the legal framework for settling business disputes and the openness of laws pertaining to intellectual property. That being said, Saudi Arabia is a nation of opportunity where the adage “he who dares wins” is extremely true.
Investments in real estate in Saudi Arabia
The real estate sector in Saudi Arabia is developing and growing. Currently, it makes up around 5% of the state GDP, but the government hopes to treble that amount in the next years. In the previous ten years, real estate prices have increased as the economy has grown continuously and robustly and as demand has outpaced supply, particularly in large cities.
As new residential properties enter the market and overall economic growth slows, prices are currently declining. Saudi Arabia is actually the worst-performing country on the index, with prices there down 3.7% from the same time in 2017, according to property consultant Knight Frank’s Global House Price Index Q3 2018.
The most advanced real estate markets in the nation are in Riyadh, Jeddah, and Dammam, where the majority of foreigners reside and work. All three cities are seeing an increase in the number of new residential buildings, ranging from cheap houses to opulent condominiums. Large-scale new urban transportation initiatives, like the Riyadh Metro, should raise real estate costs in the interim, particularly in the vicinity of stations.
Saudi Arabian property laws
Foreign citizens in Saudi Arabia are permitted to purchase real estate, but not land. It cannot be a property purchased only as an investment; rather, it must be the principal residence. All foreign investors and foreign residents are prohibited from entering the holy towns of Medina and Mecca. Anecdotally, most prefer not to buy a property, despite the fact that current statistics on foreign home ownership in Saudi Arabia are unavailable. This is so because contracts for housing are offered to the great majority of foreign nationals.
In Saudi Arabia, real estate investing requires patience. Obtaining a letter of authorization from the housing ministry is the first step. This may need a whole year. The buyer, seller, and middleman—a lawyer or broker, for example—then negotiate the price. The investor will next get certification that the seller is the property’s owner from the local Sharia Court once a private purchase agreement has been established. The Court then stamps the title document to signify the official transfer of ownership after the transfer of title has been recorded.
Investments made by companies in Saudi Arabia
“We are available for business.” The Saudi government is conveying this message to international investors. But the truth is a little more nuanced than that, as it is practically everywhere. Indeed, with the exception of the mining and oil industries, foreigners can and often do participate in all sectors of the Kingdom’s economy. However, according to the World Bank’s 2019 Doing Business Index, the nation is ranked 92nd out of 190 nations. This implies that international investors may not have an easy time of it.
You won’t lack guidance or support if you are an entrepreneur. About one-fifth of the country’s GDP is made up of small and medium-sized businesses, or SMEs. The government intends this percentage to reach 35% by 2030. Approximately 75% of Saudi Arabian respondents to the 2019 Global Entrepreneurship Monitor study said there were strong chances to launch their own company; this was actually the second-highest percentage among the 49 nations examined.
Business establishment protocols
There is a plethora of support and guidance available for entrepreneurs, and business setup processes are getting more efficient. Consult the Small and Medium Enterprises Authority for assistance with finance, marketing, and exportation. Additionally, have a look at Meras, a program that provides a statewide network of one-stop shops and a website for company startups.
Another great resource is the Ministry of Investment in Saudi Arabia. It grants trade permits and offers guidance on other requirements, like as visas, for foreign investors entering the Kingdom. Three company forms are available to foreign investors in Saudi Arabia. They are as follows:
Minimum initial capital required for a limited liability corporation (LLC) is SR500,000. has to be owned by a minimum of two people, neither of whom has to be Saudi; the LLC must undergo an annual audit;
Branch office: available for use by international businesses for business purposes. The entire risk is borne by the parent corporation. SR500,000 is the minimal startup capital. While there are no Articles of Association to approve, this structure is simpler to set up than an LLC;
A Technical and Scientific Office (TSO) can serve as a representative office for a company, enabling it to offer technical support to the local market through a distributor. It is unable to make money or carry on business. Alternatively, a short-term company formed for the purpose of a particular government contract can be registered as a Temporary Company (TC).
