Understanding the compensation due when a property is expropriated begins with determining its market value as of the legally prescribed valuation date, but it does not end with that figure alone.
Following the entry into force of the Law of Real Estate Expropriation for Public Interest and Temporary Taking of Real Estate in January 2026, the compensation elements and valuation procedures have become clearer, including the market value, additional consideration, and damages arising from expropriation procedures where applicable.
This highlights the importance of real estate valuation for expropriation and compensation in documenting the property’s characteristics and components and analyzing its value based on market data and approved professional standards.
What Is Real Estate Expropriation?
Expropriation is a legal procedure through which ownership of a property belonging to an individual or entity is transferred to the competent authority to implement a project serving the public interest, in exchange for fair compensation in accordance with the applicable provisions and procedures.
Public interest projects may include:
- Roads, streets, and transportation lines.
- Water, electricity, and wastewater facilities.
- Urban development and planning projects.
- Healthcare, educational, and social facilities.
- Parks and public facilities.
- Energy and telecommunications projects.
- Projects related to environmental and heritage protection.
- Security and military projects.
The law provides that real estate may not be expropriated or temporarily taken except for public interest and in exchange for fair compensation.
The term acquisition is commonly used to refer to expropriation, but the term adopted under Saudi law is the expropriation of real estate for public interest.
What Is the Difference Between Expropriation and Temporary Taking?
Both procedures are related to the public interest, but their nature differs.
Expropriation
Expropriation means the permanent transfer of ownership of the property to the competent authority to implement the project, in exchange for compensation determined in accordance with the law.
Temporary Taking
Temporary taking means using the property for a specified period to serve a temporary public interest, without permanently transferring ownership.
The temporary taking period may not exceed three years, with the possibility of extending it for another period not exceeding three years in accordance with the applicable conditions and procedures, including the property owner’s approval.
The basis of compensation differs between the two cases. Expropriation is linked to the property’s market value, while temporary taking is linked to the market rent, in addition to the additional consideration and compensation for damages where applicable.
How Is Expropriation Compensation Calculated?
Under the current Saudi system, a person whose property is expropriated is entitled to compensation consisting of:
- The market value of the property.
- Additional consideration for expropriation equal to 20% of the property’s market value.
- Compensation for damages arising from the expropriation procedures, where applicable.
In the case of temporary taking, compensation may not be less than the market rent. An additional consideration of 20% of the market rent is added, along with compensation for damages resulting from the temporary taking.
However, certain cases for which a decision to initiate expropriation procedures was issued before the current law came into force may continue to be governed by the previous law. Therefore, the date on which the procedures began should be verified before determining which provisions apply.
What Is the Role of Real Estate Valuation in Determining Compensation?
Real estate valuation represents the technical aspect of determining market value. The valuer develops a professional opinion based on the property’s characteristics, condition, and market data as of a specific date.
The valuer’s role generally includes:
- Identifying the property and the interest being valued.
- Reviewing the deed, plans, and available documents.
- Inspecting the property and documenting its condition.
- Examining its location, size, and use.
- Identifying buildings, plants, and permanent improvements.
- Analyzing comparable transactions and properties.
- Assessing the impact of expropriation on the remaining portion.
- Preparing a report explaining the valuation methodology and conclusion.
The valuer does not issue the expropriation decision, approve or pay the compensation amount. These procedures are subject to the authorities and mechanisms specified by law. The valuer’s role is limited to providing a professional opinion regarding value.
What Is the Market Value of Real Estate?
Market value is not necessarily the price requested by the owner or the highest advertised price for a comparable property. It does not always equal the cost of purchasing or constructing the property.
Instead, it is determined after analyzing several factors, including:
- Property location and neighborhood.
- Land and building areas.
- Dimensions and frontages.
- Permitted and actual use.
- Building condition and age.
- Level of finishes.
- Plants and permanent improvements.
- Surrounding services and infrastructure.
- Accessibility to the property.
- Income generated by the property if it is an investment asset.
- Rights and restrictions associated with the property.
- Comparable transactions and market conditions.
- Valuation date.
A distinction must be made between market value and asking prices. An asking price reflects the amount requested by the seller, but it does not always represent the price at which the transaction can actually be completed.
How Is Real Estate Valued for Compensation Purposes?
Valuation for compensation purposes focuses on determining the property’s market value as of the legally applicable date, while documenting its characteristics, components, and the factors affecting its value.
The process includes:
- Reviewing the deed, plans, and land survey.
- Inspecting the property and identifying buildings, plants, and improvements.
- Determining the area being expropriated and its characteristics.
- Analyzing relevant market data and transactions.
- Assessing the impact of partial expropriation on the value and usability of the remaining portion.
- Preparing a report explaining the methodology, assumptions, and conclusion.
The valuation is not limited to calculating the area being expropriated. It considers the property as a whole and whether the acquisition will affect the use, access, or value of the remaining portion.
What If Only Part of the Property Is Expropriated?
Partial expropriation requires an analysis that goes beyond multiplying the acquired area by the price per square meter. The acquisition may affect the utility or value of the remaining area.
For example, partial expropriation may result in:
- Loss of a main frontage.
- Difficulty accessing the property.
- Reduced buildable area.
- An impact on the building’s use.
- Loss of important parking areas or facilities.
- Reduced income generated by the property.
- The remaining portion becoming unsuitable for use.
Under the applicable law, any reduction in the value of the remaining portion may be included in the assessment where applicable. The entire property may also be expropriated if the remaining portion of the land becomes unusable under the technical regulations, or if the cost of repairing it equals or exceeds the cost of expropriation.
Therefore, the valuation should assess the project’s impact on the entire property, not only the value of the acquired area.
What Should the Owner Review When the Property Is Surveyed?
Documenting the property’s components is an important step in expropriation procedures. The owner or their representative should review:
- Property area and boundaries.
- Description and areas of buildings.
- Current use.
- Plants and permanent structures.
- Level of finishes.
- Completed improvements.
- Entrances and frontages.
- Contracts and interests associated with the property.
- Photos and plans attached to the survey record.
It is also advisable to provide the property deed, plans, land survey, building permits, lease agreements, property income data, and documents proving improvements and property components.
Can the Expropriation Decision or Compensation Be Challenged?
The law allows a person affected by an expropriation decision to submit an objection in accordance with the applicable legal procedures.
An objection is clearer when based on specific grounds, such as:
- An error in the property area.
- Failure to include certain buildings or components.
- Use of unsuitable comparable properties.
- Failure to consider the property’s use or income.
- Failure to account for the impact of expropriation on the remaining portion.
- Reliance on data that does not reflect the valuation date.
- Failure to consider material information in the analysis.
An independent valuation report can help the owner understand the property’s value and technically review the assessment. However, it does not guarantee that the compensation will be amended, as acceptance and determination of objections remain subject to the competent authorities and applicable procedures.
When Can Compensation Be Reassessed?
If compensation procedures have not been completed within three years from the date the decision to initiate expropriation procedures was issued, the owner may request a reassessment unless the delay was caused by the owner.
If the reassessment results in a lower value than the previous compensation, compensation will be based on the higher valuation. Therefore, it is important to retain all notices, records, documents, and dates related to the procedures.
Why Choose Abaad for Expropriation Property Valuation?
Valuing properties subject to expropriation requires expertise in analyzing market value, documenting property components, and assessing the impact of acquisition on both the property and its remaining portion.
Abaad provides real estate valuation services through accredited valuers, using a clearly defined scope of work and professional methodology based on property inspections, market data, and approved standards.
The benefits of working with Abaad include:
- Valuation of land, buildings, residential, commercial, and investment properties.
- Review of property data, deeds, plans, and land surveys.
- Documentation of buildings, plants, improvements, and value-affecting elements.
- Analysis of comparable transactions and properties.
- Assessment of the financial impact of partial expropriation on the remaining portion.
- Clear explanation of valuation approaches, assumptions, and limitations within the report.
- Preparation of independent reports that help owners and their advisors understand and technically review the assessment.
- Commitment to impartiality, confidentiality, and professional standards.
Real estate valuation for expropriation and compensation is not limited to estimating the value of the acquired portion. It requires an understanding of the entire property and the potential impact of expropriation on its value or utility.
If your property is subject to expropriation procedures or part of it falls within a public interest project, Abaad can help you understand its value through a professional valuation that considers its location, components, market conditions, and the purpose of the report. Contact Abaad’s team to review the property information and determine the valuation scope and required documents.
Frequently Asked Questions
Does Compensation Include Buildings and Plants?
Buildings, plants, and permanent components that affect value may be included in the survey and valuation, depending on the property and applicable legal procedures.
Is Damage to the Remaining Portion Considered?
A reduction in the value of the remaining portion may be included in the assessment where applicable, depending on the extent to which its utility and usability are affected.
Can the Owner Obtain an Independent Valuation Report?
Yes. A licensed valuation provider can be engaged to understand the property’s value and technically review the valuation elements, without making the competent authority legally bound by the report’s conclusion.
What Is the Difference Between Market Value and Compensation?
Market value represents the technical basis for the property’s value, while compensation may include additional elements prescribed by law, such as additional consideration and damages arising from expropriation procedures.
Can the Compensation Amount Be Challenged?
Yes. An objection may be submitted in accordance with the applicable legal procedures, and it is preferable for the objection to be supported by specific documents and technical observations.