Saudi Arabia’s effort to transform its holy cities into global investment hubs reached a significant milestone this week as Indonesia’s newly formed sovereign wealth fund, Danantara, finalized a 2 billion riyal ($533 million) acquisition in Mecca. The deal represents the first time a foreign state entity has been permitted to own property in the city, which is considered the holiest site in Islam.
The transaction includes the purchase of a hotel and several development plots within the Thakher Mecca project, a massive master-planned development situated less than a mile from the Grand Mosque. Faisal Shaker, the chief executive of Thakher Development, confirmed the deal and noted that it signals a new era for real estate in the kingdom. Shaker indicated that the agreement opens the door for further high-value sales to other Muslim-majority states looking for a permanent foothold in the region.
The move follows a pivotal policy change enacted by the Saudi government in January, which opened real estate ownership in Mecca and Medina to Muslims from abroad and selected foreign institutions. Previously, ownership was largely restricted to Saudi nationals and citizens of Gulf Cooperation Council (GCC) states. According to Shaker, while Saudi nationals remain the primary buyers, there has been a surge in interest and capital from Gulf investors and, more recently, from major international institutional players.
“Investment into the two cities is driven by faith and not by cycles,” Shaker said, emphasizing the unique resilience of the real estate market in Mecca compared to traditional global markets.
The Danantara deal is expected to be the first of many for the developer. Thakher Development is currently preparing to launch sales for another major Mecca project, Mathabah, in the coming year. Shaker indicated that the company is already in negotiations with multiple international stakeholders and expects future foreign transactions to match or exceed the $533 million benchmark set by the Indonesian fund.
The opening of the Mecca real estate market is a critical component of Crown Prince Mohammed bin Salman’s Vision 2030. A central pillar of this economic diversification strategy is the expansion of the kingdom’s religious tourism sector. Saudi officials aim to more than double the number of religious visitors—including those performing Hajj and Umrah—to 50 million by 2030, up from approximately 20 million recorded last year.
Achieving this target requires a massive expansion of hospitality and residential infrastructure. Beyond Mecca, Danantara is reportedly weighing additional investments in Medina, the second-holiest city in Islam. By securing a direct stake in the holy city’s infrastructure, Indonesia—the world’s most populous Muslim nation—is positioning itself to better serve its citizens who travel to the kingdom in hundreds of thousands each year. For Saudi Arabia, the deal provides a blueprint for how other sovereign funds and institutional investors can help finance the ambitious infrastructure goals necessary to accommodate the projected influx of pilgrims.
