The real estate sector is entering a new period of uncertainty following the approval and implementation of value-added tax (VAT) at the start of 2018, and despite the efforts of the Zakat and Income Authority to clarify matters and the method by which the tax will be imposed on real estate, it has failed to convey a comprehensive and clear picture to real estate professionals for many reasons, including the diversity of the segments operating in the real estate sector—such as marketers, developers, individuals, endowments, financiers, residents, and government agencies, as well as the various methods of property transfer, such as gifts, inheritance, investment, and partnerships, among others, which further complicated the matter.

Therefore, we will address a new cost that falls under the category of hidden costs in commercial real estate, the most important of which are ten costs, as follows:

1- Cost of capital: This is the cost of money to the investor, measured using scientific methods, or the cost of financing if the investor borrows the same amount from a bank.

2- Opportunity cost: This is the cost measured by assuming that you invested this amount or directed it toward another area; what value would it yield for you?

3- Value-Added Tax (VAT): This is 5% on the purchased property.

4- Brokerage fee: This is commonly 2.5% in the market.

5- Collection costs: Up to 5% of the rental value.

6- Time-related costs: Either the time required to vacate the leased premises or the duration of construction.

7- Electricity costs: For the building’s hallways, fences, and common courtyards.

8- Water costs: Because the water tank is shared.

9- Cost of non-payment or late payment: This cost may extend over several months.

10- Maintenance and cleaning costs: These are ongoing costs that require monitoring, and the risk lies in their higher expenses.

Most of these hidden costs, as well as zakat and others, must taken into account and carefully considered by the real estate investor; because some or all of them may lead to the deterioration of the investor’s financial situation and the loss of all or most of their wealth due to neglecting them.

These days, we have begun to see some banks seizing the properties of certain real estate investors who were unable to repay their capital costs due to loans, and some real estate borrowers have even resorted to mortgaging or selling their own homes to settle some of their financial obligations for the same reason.

Therefore, risk management is essential to avoid market disasters, and one must turn to specialists in management and finance to benefit from their expertise as consultants in developing optimal strategies and solutions, to achieve the desired success and minimize risks, so that we do not have to search for solutions and ways out when the market declines, at which point you may find no one willing to offer you a helping hand.