Saudi Arabia Introduces Comprehensive New Expropriation Law for Public Interest

New Legal Framework Approved

Saudi Arabia has officially introduced a new Law on Expropriation for Public Interest and Temporary Possession of Real Estate, marking a significant update to the Kingdom's legal framework governing compulsory acquisition. The new law, approved by Council of Ministers Resolution No. (177) on August 26, 2025, and subsequently issued by Royal Decree No. (M/56) on September 4, 2025, replaces the previous 2003 framework. It is set to become effective 120 days after its publication in the Official Gazette.

The legislation is designed to enhance transparency, improve governance, and ensure fair compensation for property owners, aligning with the ambitious objectives of Saudi Vision 2030. Officials have stated that the law aims to balance the Kingdom's rapid development needs with the protection of individual property rights.

Key Provisions and Enhanced Compensation

The new law introduces a detailed structure for both expropriation and temporary possession of real estate for public interest projects. A core feature is the enhanced compensation mechanism:

• For expropriated properties, owners will receive compensation based on the fair market value of the property, along with an additional 20% premium and direct damages.
• In cases of temporary possession, compensation will include the rental value plus a 20% premium and damages. Temporary possession is capped at three years, with a possible one-time extension subject to owner consent and approval from the Saudi Public Governance Authority (SPGA). If the need persists beyond this, full expropriation is required.

Property valuations will be conducted by a panel of three accredited valuers, overseen by either the Saudi Public Governance Authority (SPGA) or the Saudi Authority for Accredited Valuers (TAQEEM), to ensure impartiality and fairness.

Defining Public Interest and Financial Discipline

The law provides a clear definition of 'public interest,' encompassing a wide range of projects including infrastructure, utilities, health, education, heritage protection, national security, and initiatives connected to the Two Holy Mosques. It mandates that authorities must first demonstrate that state-owned land cannot fulfill public interest requirements before private property can be considered for acquisition.

Furthermore, the new framework introduces stricter financial discipline, generally prohibiting projects from proceeding without approved funding or the provision of substitute land. This measure is intended to prevent unfunded commitments and protect property owners from uncertainty.

Additional Protections and Reforms

Beyond compensation, the law includes several other provisions aimed at safeguarding property owners' rights and streamlining processes:

• The possibility of non-cash compensation, such as alternative land or shares in a project.
• Tax and fee relief, including exemptions from Real Estate Transaction Tax for reinvestment in replacement properties within five years.
• Explicit recognition of rights for tenants, mortgagees, and usufruct holders.
• Provisions for reacquisition rights if a project is cancelled.
• A dedicated committee within the SPGA will manage requests for expropriation and temporary possession, with participation from relevant government entities.

The law also mandates a significant change in utilities billing, requiring ministries to shift electricity and water bills from property owners to actual occupants within one year, a reform aimed at aligning costs with actual usage.