Saudi Arabia's 2025 Law On Expropriation Of Real Estate For Public Interest And Temporary Taking Of Property: Key Takeaways On The New Legal Framework

Introduction

The Saudi Council of Ministers recently enacted the Law on Expropriation of Real Estate for Public Interest and Temporary Taking of Property (the "2025 Expropriation Law"), published in Umm al-Qura Newspaper, issue No. 5108, dated 27-03-1447H (19 September 2025). The 2025 Expropriation Law will come into effect 120 days after publication, replacing the previous Law on Expropriation of Real Estate for Public Benefit and Temporary Taking of Property (Royal Decree No. M/15 of 2003). This reform represents a key element of Saudi Arabia's ongoing legislative efforts under Vision 2030, aiming to drive infrastructure development, support urban growth, enhance procedural governance, and protect the rights of property owners.

Main Objectives of the Reform

The 2025 Expropriation Law in Saudi Arabia is designed to ensure that expropriation measures are undertaken exclusively in situations where there is a distinct and legitimate public interest at stake. This approach aims to prevent arbitrary or unjustified expropriation and to reinforce the principle that the public good must be clearly demonstrated before any property rights are affected.

A key focus of the reform is to elevate procedural standards by introducing processes that are both streamlined and transparent. By doing so, the legislation seeks to provide clarity and predictability for all parties involved, reducing bureaucratic delays and enhancing trust in the expropriation system.

Another central objective is to guarantee fair and equitable compensation for property owners. The law balances this commitment with the need to safeguard public finances, ensuring that compensation is just but does not place an undue burden on the state's resources.

Finally, the reform aims to align expropriation practices with current legislative and regulatory trends. By harmonising with modern legal frameworks, Saudi Arabia ensures that its approach remains relevant and effective in a rapidly changing environment.

What Procedural Safeguards and Rules Have Been Introduced?

Under the 2025 Expropriation Law, a number of procedural safeguards and rules have been introduced to regulate the expropriation process and structure its key stages, as follows:

Notification Requirement

Project proponents are mandated to notify the competent authority within 90 days in the event that expropriation becomes necessary, whether during the course of project execution or following its completion. This statutory timeframe is designed to ensure timely regulatory oversight and procedural integrity.

Limits on Temporary Possession

The statute imposes a maximum duration of three years for temporary possession of property. Extensions for an additional three-year period are permissible solely upon approval by the Expropriation Committee, safeguarding against indefinite or arbitrary occupation.

Termination of Procedures

In circumstances where the necessity for expropriation ceases prior to formal notification of the property owner, the process must be terminated forthwith. This provision upholds the principle of minimal interference with property rights.

Compensation for Non-Owners

The Law confers the right to compensation upon tenants, lawful users, and other parties adversely affected by expropriation or temporary possession, ensuring redress for any losses incurred as a result of such actions.

How Is Financial Oversight and Valuation Managed?

The 2025 Expropriation Law establishes specific mechanisms to regulate financial oversight and property valuation, as follows:

Secured Appropriations

Expropriation proceedings may only commence once dedicated compensation funds have been formally allocated, ensuring the financial security of affected parties from the outset.

Independent Valuation

All property subject to expropriation must be appraised by a panel of three valuers accredited by the Saudi Authority, guaranteeing a robust and impartial assessment of market value.

Compensation Formula

Owners are entitled to receive the prevailing market value of their property, supplemented by an additional 20%—applicable to both expropriation and temporary possession scenarios.

Tax Relief

Specific tax exemptions are provided to owners whose properties are expropriated, further mitigating the financial impact of compulsory acquisition.

Centralised Oversight

A unified supervisory authority now governs all matters related to expropriation and temporary possession, promoting consistency, transparency, and adherence to statutory standards.

How Do Expropriation and Temporary Taking of Possession Differ?

To clarify the distinction between permanent expropriation and temporary taking of possession under the 2025 Expropriation Law, the table below outlines the key legal and practical differences between the two mechanisms. While both serve public interest objectives, they differ in terms of legal effect, duration, ownership consequences, and the basis for compensation, each being subject to a distinct regulatory treatment:

What Compensation Is a Person Entitled to under the 2025 Expropriation Law?

A person whose property has been subject to expropriation is entitled to compensation as follows:

• Compensation is calculated based on the market value of the property, with an additional 20% added to that value.
• Compensation for any damages resulting from the expropriation procedures.
• In certain cases, compensation may be provided in kind, in accordance with the Law.

A person whose property has been subject to temporary taking of possession is entitled to compensation as follows:

• Compensation is calculated based on the rental value of the property, with an additional 20% added to that value.
• Compensation for any damages arising from the temporary possession.

What Exemptions Are Available?

The 2025 Expropriation Law introduces specific tax exemptions aimed at mitigating the fiscal impact of compulsory acquisition on property owners and facilitating their ability to acquire replacement property. These exemptions are intended to ease the financial burden associated with expropriation and to support a smoother adjustment process for affected individuals, as follows:

Real Estate Transaction Tax

Property owners whose land has been expropriated are not required to pay this tax when purchasing a replacement property, provided this occurs within five years and the value does not exceed the compensation received.

White Land Tax

Owners are exempt from this tax if the compensation comes in the form of substitute land, as stipulated by the law.

Conclusion

The 2025 Expropriation Law represents a qualitative legislative shift in the regulation of state intervention in private property. It reflects a more mature approach centred on strengthening governance, reinforcing procedural discipline, and achieving a fair balance between public interest and the protection of individual property rights. The law frames expropriation within clearer parameters of public purpose, while enhancing legal certainty and transparency, thereby contributing to a more controlled and proportionate use of this exceptional power.

In this context, the legislator has recalibrated the institutional and procedural framework governing expropriation by consolidating supervisory authority, restructuring decision-making and implementation stages, and linking the legality of initiating procedures to the prior availability of dedicated compensation appropriations. These reforms promote greater regulatory discipline and reduce the risk of inconsistent application. The law also strengthens procedural transparency through clearer notification mechanisms, defined timelines for inventory and valuation, and more structured rules governing temporary possession, while extending protection to non-owners and other affected parties.

Nevertheless, the practical impact of these reforms will ultimately depend on the effectiveness of implementation, particularly in terms of institutional coordination, the technical capacity and consistency of valuation practices, compliance with statutory timelines, and the efficiency of grievance and review mechanisms, which remain critical determinants of the Law's ability to achieve its intended objectives in practice.

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