Medical Facility
Synonyms: Healthcare Facility، Medical Property، Healthcare Real Estate، Private Health Institution
Last updated: 2026-09-25
Short Definition
A medical facility is a property, or part of one, that is fitted out and licensed to provide healthcare services, such as hospitals, medical complexes, clinics, laboratories, imaging centres and pharmacies; it may operate only after obtaining a licence from the competent health authority.
Overview
Legal Basis
Private healthcare establishments are governed by the Private Health Institutions Law issued by Royal Decree No. (M/40) dated 3/11/1423H and its implementing regulation, and may operate only under a Ministry of Health licence. The Saudi Food and Drug Authority licenses pharmaceutical establishments (factories, warehouses and scientific offices) under the Law of Pharmaceutical and Herbal Establishments and Products issued by Royal Decree No. (M/108) dated 22/8/1441H, while the pharmacy provisions of the earlier Law of Pharmaceutical Establishments and Products (Royal Decree No. M/31 dated 1/6/1425H) continue to apply until specific provisions are issued. The lease itself is governed by the Civil Transactions Law, and 15% VAT applies to non-residential rent under Article 30 of the VAT Implementing Regulations.
Practical Example
A dentist leases a 300 m² ground floor in Al-Malqa, Riyadh, to convert into a dental complex at an annual rent of SAR 180,000. Before signing, she confirms that the site can obtain health and municipal licences and agrees with the owner on a four-month rent-free fit-out period. The contract is documented on Ejar as a commercial lease for 5 years, so documentation fees are SAR 200 for the first year and SAR 400 for each additional year, SAR 1,800 in total. Because the owner is VAT-registered, 15% is added to the rent (SAR 27,000), bringing the annual payment to SAR 207,000. As the property lies within Riyadh's urban boundary, the owner may not raise the total rent during the five-year freeze on annual increases that started on 25 September 2025.
Common Mistakes
- ✗Signing the lease before confirming that the site can obtain health and municipal licences, then discovering that the building or land use does not permit the activity.
- ✗Assuming any shop can serve as a clinic, although healthcare facilities have specific requirements for spaces, entrances, ventilation and safety.
- ✗Leaving out of the contract the fit-out period, who pays for structural alterations and what happens to them when the lease ends.
- ✗Omitting the 15% VAT on rent from the feasibility study when the landlord is VAT-registered.
- ✗Confusing pharmacy licensing with the licensing of drug factories and warehouses, which falls to a different authority.
International Differences
In most countries the medical activity is licensed by the health authority and the building separately by the municipality. In the UAE the licensing body depends on the emirate, for example the Dubai Health Authority or the Department of Health in Abu Dhabi. In Turkey, the Ministry of Health licenses private healthcare facilities. Globally, healthcare real estate is a distinct asset class with long leases and stable tenants, but its specialised design reduces flexibility to re-let it for another use.
