What Property Owners and Investors Need to Consider
Owning property in Lebanon has traditionally been viewed as relatively inexpensive once the purchase and registration process is completed. For many owners—particularly those holding vacant apartments, inherited properties, second homes, or investment units—the annual carrying cost has often remained modest compared with the market value of the asset.
The proposed Lebanese State Budget for 2027 could begin to change that calculation.
As of September 2026, however, an important distinction must be made: the 2027 budget is still a proposed budget and its provisions are not yet final law. The Council of Ministers is continuing to discuss the draft. The government has also stated that its current approach involves adapting existing taxes and fees to the exchange rate rather than simply creating a new series of taxes. (Prime Minister’s Office)
Consequently, property owners should not yet treat proposed rates or amendments as legally enforceable obligations.
What Do We Mean by the “Operating Cost” of a Property?
The operating—or carrying—cost of real estate is different from its purchase price.
It is the amount an owner must spend each year merely to own, maintain, operate and legally administer the property.
For a Lebanese residential property, this can include:
- built-property tax;
- municipal fees;
- common building and condominium expenses;
- electricity and generator or alternative-energy costs;
- water;
- elevator operation and maintenance;
- cleaning and common-area expenses;
- insurance where applicable;
- repairs and preventive maintenance;
- property-management expenses;
- administrative and compliance costs; and
- potentially, under the proposed 2027 rules, an increased tax burden associated with keeping certain residential properties vacant.
Therefore, investors should increasingly distinguish between gross rental yield and net rental yield after operating costs and taxation.
The Most Important Proposed Change: Vacant Residential Property
One of the most consequential real-estate provisions reported in the draft 2027 budget concerns vacant residential buildings and apartments.
Under the proposal discussed in relation to Article 37 of the draft, the existing treatment of residential vacancy would be modified.
According to the published analysis of the draft, a vacancy period would initially be permitted:
For buildings constructed by building traders: up to three years from construction.
For buildings constructed by persons other than building traders: up to one year from construction.
After the applicable vacancy period expires, the property could become taxable on the basis of 50% of its estimated income. Once occupied, the tax calculation would revert to 100% of the relevant income basis.
The proposal also reportedly provides for a six-month transitional period after the legislation enters into force. (Legal Agenda)
This is significant because the financial question facing an owner would no longer simply be:
“How much does it cost me to maintain this empty apartment?”
It could increasingly become: “How much does it cost me in maintenance and taxation to keep this apartment empty?”
This Is Not Simply a New “Vacant Property Tax”
The distinction is legally important.
The proposal has been characterized not as the creation of an entirely separate tax on vacant homes, but as a partial removal or limitation of the existing exemption applicable to vacant residential property. (Legal Agenda)
Lebanon’s built-property tax is fundamentally based on the annual net revenues of buildings. The Ministry of Finance explains that taxable income can be determined from actual rental contracts or, in specified situations, through an administratively estimated rental value. (Ministry of Finance)
This makes the concept of estimated rental value particularly important for investors.
A property producing zero actual rent does not necessarily imply zero taxable value if legislation allows taxation to be calculated using estimated income.
Why This Could Change Property Investment Strategy
Consider two apartments with the same market value.
Property A — Occupied and Rented
The apartment generates annual rent.
From that rent, the investor pays taxes, municipal charges, building expenses, maintenance, utilities attributable to the owner, management costs and other expenses.
What remains is the investor’s net operating income.
Property B — Vacant Investment Apartment
The apartment produces no rental income.
Nevertheless, the owner may still incur:
building maintenance + common expenses + repairs + administration + security + deterioration + capital tied up in the property.
If the proposed 2027 vacancy provision is enacted in substantially its current form, the owner could additionally face built-property taxation after the permitted vacancy period. The financial disadvantage of prolonged vacancy would therefore increase.
A New Way to Calculate the Real Cost of Ownership
Property owners and investors should begin using a more comprehensive calculation:
Annual Property Carrying Cost =
Built-Property Tax
- Municipal Charges
- Building/Common Expenses
- Maintenance and Repairs
- Utilities Paid by Owner
- Insurance
- Property Management
- Administrative/Compliance Costs
- Vacancy-Related Tax Exposure
- Reserve for Major Repairs
For an income-producing property, investors should then calculate:
Net Operating Income (NOI) = Gross Annual Rental Income − Annual Operating Expenses
And:
Net Rental Yield = NOI ÷ Property Acquisition or Market Value × 100
This is more informative than advertising a property solely according to gross rental yield.
Example: A $150,000 Apartment
Assume an investor owns an apartment worth approximately $150,000.
Suppose it could generate $9,000 per year in gross rent.
The gross rental yield would be:
$9,000 ÷ $150,000 = 6%
At first glance, this looks like a 6% investment.
But suppose annual ownership and operating expenses total $2,000.
Net operating income becomes:
$9,000 − $2,000 = $7,000
The effective net yield becomes:
$7,000 ÷ $150,000 = 4.67%
If taxes, municipal charges or vacancy-related costs increase, the net return falls further.
This is why investors should not evaluate Lebanese real estate using the purchase price and expected rent alone.
Vacant Apartments Could Become Less Attractive as Passive Assets
The proposed provision is especially relevant to owners who purchase apartments primarily as a store of wealth and leave them unused.
Historically, an investor could sometimes tolerate a long vacancy period because the direct carrying cost was limited.
If the proposed mechanism becomes law, the economic calculation changes.
A vacant apartment could simultaneously:
generate no cash flow, incur maintenance expenses, absorb capital and create a tax liability based on estimated income.
This may encourage some owners to place properties on the rental market, sell underused units, furnish them for medium-term rentals, or otherwise put them into productive use.
The draft’s stated policy rationale is indeed to encourage owners to rent or sell vacant residential units and thereby increase housing supply. (Legal Agenda)
The Scale of the Vacancy Issue
The measure could affect a substantial segment of the Lebanese property market.
According to figures cited in an analysis of the draft, 380,781 residential units were declared vacant in Ministry of Finance data for 2023, with approximately 62% located in Beirut and Mount Lebanon. (Legal Agenda)
The International Monetary Fund has previously recommended removing the vacant-property exemption from built-property taxation, arguing that the exemption reduces revenue, complicates administration and can encourage inaccurate vacancy declarations. (IMF)
The 2027 proposal therefore fits into a broader debate over how Lebanon taxes unused real-estate assets.
What About Municipal Fees?
This issue requires caution.
The current draft provision concerning vacant residential units should not automatically be interpreted as imposing every municipal fee on vacant apartments.
An analysis of the draft specifically observes that the existing vacancy exemption extends beyond built-property taxation to municipal fees and argues that municipal treatment should also be reconsidered. That observation itself indicates that the two issues must be distinguished legally. (Legal Agenda) Owners should therefore wait for the final enacted legislation before assuming that a particular municipal exemption has disappeared.
Inflation and Exchange-Rate Adjustment of Government Fees
A second factor affecting the broader cost of property ownership is the government’s policy of adapting existing fees and taxes to the exchange-rate environment.
The Council of Ministers stated during its September 2026 budget discussions that the process involved adjusting existing fees and taxes to the exchange rate rather than creating new taxes. (Prime Minister’s Office)
For property owners, this distinction matters.
Even where the nominal category of a fee remains unchanged, recalibration can materially increase its effective cost compared with historical Lebanese-pound amounts.
Consequently, investors should not rely on operating-cost assumptions developed several years ago.
The Budget’s Broader Tax Direction
The draft 2027 budget projects substantially higher overall tax revenue than the 2026 budget. Published analysis places projected tax revenue at approximately LBP 528.2 trillion, compared with approximately LBP 439.6 trillion in the 2026 budget. Interestingly, the aggregate property-tax revenue category is projected lower overall, while other tax categories rise significantly. (annahar.com)
This is another reason not to make the simplistic claim that “all property taxes are increasing.”
The effects depend on the specific tax, property status and final wording of the legislation.
The Investor’s New Question: What Is My Net Yield?
For professional real-estate investment analysis, four figures should increasingly accompany every income-producing property:
1. Purchase Price
The total capital required to acquire the asset.
2. Gross Annual Rent
The rent before expenses.
3. Annual Operating and Tax Cost
All recurring costs associated with owning and operating the property.
4. Net Yield
The actual return after operating expenses.
A property advertised as producing a 7% gross yield might ultimately produce only 4.5%–5.5% after realistic operating expenses.
Conversely, a well-managed property with stable occupancy and controlled costs may provide a considerably stronger net return than another property with the same advertised gross yield.
Impact on Developers
Developers could also be affected.
If residential inventory remains unsold beyond the proposed permitted vacancy period, holding completed units may become more expensive.
This would make inventory turnover an increasingly important financial metric.
Developers could respond by:
- pricing completed inventory more competitively;
- introducing installment plans;
- offering rent-to-own structures where legally and financially appropriate;
- renting completed units temporarily;
- accelerating marketing before construction completion; or
- incorporating expected carrying costs into project feasibility studies.
The relevant question would no longer be merely how much profit exists between construction cost and selling price.
It would also be:
How much does each unsold unit cost the developer for every additional year it remains in inventory?
Impact on Property Valuation
Operating costs ultimately affect value.
An investor purchasing an income-producing building typically values the property according to its ability to generate sustainable net income.
If recurring ownership costs rise while rents remain unchanged, NOI falls.
And when NOI falls, the investment value of the property can also come under pressure.
This is particularly relevant for apartment buildings, commercial investment portfolios, furnished-rental operations and properties purchased primarily for yield.
Implications for Lebanese Property Owners
If the final 2027 budget retains the vacancy provisions currently being discussed, owners of multiple residential properties should consider conducting a property-by-property carrying-cost review.
For every property, determine:
Market Value → Potential Annual Rent → Occupancy Status → Built-Property Tax → Municipal Cost → Maintenance → Common Expenses → Management → Expected Major Repairs → Net Annual Income → Net Yield
Vacant units deserve particular attention.
An apartment that has remained empty because the owner is waiting indefinitely for a higher selling price may no longer represent the most efficient allocation of capital if its annual carrying cost rises.
Implications for Buyers
Buyers should also change the questions they ask before purchasing.
Instead of asking only:
“What is the price per square meter?”
they should ask:
“What will this property cost me every year after I buy it?”
Before acquisition, a buyer should request information concerning building charges, municipal obligations, maintenance history, elevator costs, generator or energy expenses, water systems, reserve funds, management charges, rental potential and applicable property taxes.
A cheaper apartment with unusually high annual expenses may ultimately be a worse investment than a more expensive but efficiently managed property.
Implications for the Lebanese Real-Estate Market
If enacted substantially as proposed, the 2027 budget could gradually encourage a shift from passive property ownership toward productive property management.
Properties would increasingly be evaluated according to three variables:
Capital Value + Income Potential − Carrying Cost
This could encourage owners of unused residential units to either rent them, sell them or actively manage them rather than leave them vacant indefinitely.
For investors, the most important metric would consequently become not simply appreciation in property value, but total return after taxes and operating expenses.
Conclusion
The proposed Lebanese State Budget for 2027 should not be described as imposing a universal new annual tax on every property owner. That would overstate what is presently known.
The more precise conclusion is that the draft signals a potentially important change in the economics of holding certain residential properties, particularly units kept vacant beyond specified periods.
If the vacancy provision is ultimately enacted, property owners will need to treat taxation as part of the carrying cost of unused residential real estate.
For buyers and investors, this strengthens an already important rule:
Never calculate a real-estate investment from purchase price and gross rent alone. Calculate the complete annual operating cost and the net return after taxes, maintenance, vacancy and management expenses.
For developers, brokers and investors, the 2027 environment may therefore require a transition from asking:
“How much is the property worth?”
to asking:
“How much does the property cost to hold, how much can it earn, and what is its real net return?”
Legal Notice
This article is based on the proposed Lebanese 2027 State Budget and publicly available information as of 14 September 2026. The draft remains subject to amendment by the Council of Ministers and Parliament. No proposed tax, fee, exemption, deadline or calculation method should be treated as final until the budget law is approved and published in the Official Gazette. Property-specific tax calculations should be verified with the Lebanese Ministry of Finance and qualified legal or tax professionals.
This angle complements your earlier article on the property fees and legal impact of the 2027 proposal: that article addresses transaction/legal exposure, while this one focuses on annual carrying cost, vacancy, NOI and investment yield. Your earlier Viraluxe article also correctly noted that the complete final schedule of property-related changes was not yet officially promulgated. (Viraluxe Real Estate)