RIYADH: The government is targeting so-called white land – undeveloped blocks of property that mark large areas of Saudi Arabia’s cities – by constructing an enhanced regulatory framework for developers as part of the Kingdom’s National Transformation Plan (NTP). In mid-June the cabinet approved a series of regulations including the implementation of a 2.5% tax on these undeveloped zones for residential or commercial purposes.
Between 40% and 50% of land within Saudi Arabia’s major cities remains vacant, according to local media reports, primarily due to companies and individuals building up land banks that in turn push up prices and lead to speculation.
These new regulations, coupled with government plans to release state-owned land for development, are designed to tackle the housing shortage, lead to a drop in land prices and hopefully improve affordability for middle-income families, which account for more than two-thirds of the population, according to press reports. Though an exact timetable has yet to be set out for the implementation of the tax, indications are that it will be introduced in stages. The levy will first be imposed on owners of undeveloped plots larger than 10,000 sq metres within certified master planned developments, followed by single owners of similarly sized blocks.
In later stages, single landowners of smaller plots of developed land – land serviced with horizontal infrastructure such as roads and power but no vertical development - exceeding 5000 sq metres in the certified master planned developments and single landowners of plots exceeding 10,000 square metres in one city will be subject to the tax. While broadly welcomed by property developers and brokers, the new land tax is seen as just one step in broadening the home ownership base and encouraging more investment in the residential market.
Further measures and support mechanisms, such as expanded mortgage laws, should be implemented to facilitate the full execution of the new law, according to Mowaffaq Al Hashimi, president of Saqifat Al Safa, a local property developer and real estate management firm. “The fees on vacant land should accelerate residential housing developments and reinvigorate the market, but like any other regulation, it should be stretched over a reasonable amount of time, rather than hurried throughout the course of a single year,” he told OBG.
