Saudi property sector awaits its own freehold boom

Riyadh, Dubai: Saudi Arabia approved a programme that offers permanent residency for some foreigners to attract investments, the latest sign of how the quest for non-oil revenue is prompting Gulf Arab countries to rethink the role of expats in their societies.

Under the law, which allows foreigners to own property, those eligible can apply for an indefinite stay or a one-year renewable residency, according to the official news Agency. The government will detail the programme’s rules within 90 days after the cabinet gave its final approval on Wednesday.

There are more than 12 million foreigners in Saudi Arabia, according to official statistics — over a third of the total population. Requirements for the residency include that the applicant have sufficient funds and pay a so-far unspecified fee.

Saudi Arabia is “opening up for investors and skilled professionals,” Economy Minister Mohammed Al-Tuwaijri said in a statement. “This ensures that residents and expatriates — including those who have lived in the kingdom for decades — are an active part of Saudi Arabia’s economy. This will strengthen the state’s revenue and robustly support the Saudi economy.”

The announcement is a landmark move in a region where many expats are subject to some of the world’s most restrictive residency rules, including the need for a local sponsor and permission to leave the country. The UAE approved a plan to allow wealthy foreigners to apply for a 10-year stay.

The Saudi move’s biggest beneficiaries will be thousands of wealthy Arabs, some of whom resided in the kingdom for decades “without being able to as much as own the homes they live in,” said Mazen Al-Sudairi, head of research at Al Rajhi Capital.

Al-Tuwaijri, the economy minister, said the plan would benefit “multinational corporations, both those operating in the kingdom or those that want to enter the market.”

While Saudi Arabia is seeking to encourage the affluent to stay, monthly fees imposed on foreign workers and their families, along with sluggish economic growth, have prompted hundreds of thousands to leave the country. The levy is designed to encourage private businesses to hire Saudi nationals.

“The special residency is for doctors, engineers, innovators, investors and residents who contribute to the development of Saudi Arabia and lead to a prosperous future,” said Lina Almaeena, a member of the consultative Shura Council. The appointed body approved the programme last week, with 76 members voting in favour and 55 against.

The system is a “step in the right direction” but not a “permanent solution,” said Nasser Saidi, president of Nasser Saidi & Associates and former chief economist at the Dubai International Financial Centre. “If you really want to move forward and innovate, the whole sponsorship system needs to be abolished.

“Only then you’ll have a truly dynamic economy and people would want to invest in the country instead of sending their money back home.”

Still, even the more limited permanent residency system is likely to be controversial among Saudis at a time when citizen unemployment is at 12.7 per cent and xenophobia is not uncommon. Slogans like “Saudi is for Saudis” are common on social media, and a recent opinion piece in a Saudi newspaper argued that the kingdom could deport all its Lebanese residents without consequence.

“Despite the benefits of the special residency system, some are fearful of it, and that it could be exploited in a way that affects the stability of Saudi businesses,” Saudi economist Ahmed Al Shehri said on Twitter.

— Bloomberg

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The idea for a long-term Saudi residency programme was first floated in 2016 by Crown Prince Mohammed bin Salman as a part of his plan to reduce the economy’s reliance on oil and boost foreign direct investment. At the time, the prince estimated that the programme would generate about $10 billion in annual revenue by 2020.