Rights short of outright ownership are offered more often than foreign buyers expect. They can be perfectly good deals, provided you understand what you are holding.
Not every interest in a Saudi property is freehold ownership. A right to use and benefit from a property for a defined period, or a long lease over land, can be granted and can be valuable. Foreign buyers meet these structures particularly in planned developments and in arrangements over land that is not being sold outright. The errors come from treating such a right as ownership, or from dismissing it as worthless because it is not.
How to test a claim like this
Three questions separate a usable right from a decorative one. What exactly may the holder do, and is that written down or implied? For how long, and what happens at the end of that period? And can the right be transferred, mortgaged or passed on, or does it die with the holder? A structure that cannot answer the third question clearly is one you cannot sell, which affects its value more than anything else.
Myth 1: A long lease is basically the same as owning.
Reality: It is a right for a term, granted by someone who retains the underlying ownership. What you may do is defined by the instrument that created it rather than by the general incidents of ownership. At the end of the term the right ends unless something provides otherwise, and the question of what happens to anything you built is a matter for the agreement.
How to check it yourself: Read the grant itself and list what it permits, then ask what is not on your list and whether you need it.
Myth 2: A usufruct cannot be sold or passed on.
Reality: Whether a right can be transferred, mortgaged or inherited depends on how it was created and on the applicable framework. Some rights are freely dealt with and some are personal to the holder. This is the single most value relevant question about such a right, and it is answered by the documents rather than by general principle.
How to check it yourself: Ask your adviser specifically whether the right is transferable, chargeable and capable of passing on death.
Myth 3: Because it is not ownership, it must be cheap.
Reality: A long term right over a well located asset can be priced close to freehold value where the term is long and the rights are broad. Equally, a short term right with narrow permissions can be worth very little. Price follows duration, breadth of rights and transferability, not the label.
How to check it yourself: Value the right on the cash flows it supports over its actual remaining term, not as a discount to freehold.
Myth 4: The term can always be extended.
Reality: Extension is only available if the instrument provides for it or the grantor agrees. An expectation of renewal that rests on reasonableness is not a right. As the remaining term shortens, the absence of an extension mechanism becomes the dominant factor in value.
How to check it yourself: Find the extension clause, read it, and if there is none, model the asset on the assumption the term simply ends.
Myth 5: I can use the property for whatever I like during the term.
Reality: Use is defined by the grant and constrained by the same planning and licensing requirements that apply to any occupier. A right granted for residential use does not become a commercial right because the holder would prefer it to be. Operating activity needs its own permissions regardless of the interest you hold.
How to check it yourself: Match your intended use against the permitted use in the grant and against the licensing requirement for that activity.
Myth 6: A structure like this is a workaround for ownership restrictions.
Reality: Arrangements presented as a way around eligibility requirements deserve the most careful scrutiny of all. The question of whether a particular structure is recognised and enforceable for a particular party is a legal question with a real answer, and the answer should come from a licensed adviser before money moves, not after.
How to check it yourself: Ask your adviser directly whether the structure proposed is recognised for someone in your position, and get it in writing.
What this changes in your decision
- Obtain the instrument that creates the right and read it before you read any marketing material.
- Write down the remaining term in years and model the asset over that term rather than in perpetuity.
- Establish transferability, mortgageability and inheritance as three separate confirmed answers.
- Check what happens at expiry to anything you build or install.
- Have a licensed Saudi adviser confirm how the structure is treated for a party in your position, bearing in mind that the framework in this area is developing and must be checked when you act.
Domira works on the ownership side of a Saudi property for owners based abroad: verifying title and boundaries, assessing the building, handling registration and handover, and managing the asset afterwards. For legal and tax questions, work with a licensed adviser; Domira will tell you plainly what the property itself supports.
Frequently Asked Questions
What is a usufruct right over property in Saudi Arabia?
Broadly, it is a right to use and take the benefit of a property for a defined period, while the underlying ownership remains with someone else. What the holder may do, for how long, and whether the right can be transferred or passed on all depend on the instrument creating it and on the applicable framework, so read the grant rather than relying on the label.
Can a foreigner hold a long lease instead of buying in Saudi Arabia?
Arrangements short of outright ownership exist and are used, particularly in planned developments. Whether a specific structure is available and enforceable for a specific party is a legal question that depends on the party, the property and the current framework, including the regulations issued through REGA. Confirm it with a licensed adviser before committing.
How do you value a long leasehold interest?
On the income or use it supports over its actual remaining term, with the end of the term treated as the end unless there is a contractual extension mechanism. The three drivers are duration, how broad the permitted use is, and whether the interest can be transferred. An accredited valuer should carry out the work where the figure matters.
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