Saudi Arabia approves 2.5% ‘white land tax’
A 2.5% annual tax on the value of undeveloped land designated for residential and residential/commercial use will be implemented in Saudi Arabia within the next 12 months
Saudi Arabia has approved proposals for a 2.5% ‘white land tax’, which will apply to undeveloped residential and residential/commercial plots within urban boundaries.
The law will come into force six months after the Ministry of Housing’s release of detailed regulations, the publication of which will take place within the next six months.
Once implemented, proceeds from the tax will be deposited into an account of the Saudi Arabian Monetary Agency, and will be used to fund housing and related infrastructure projects in the Kingdom.
Commenting on the tax, Jamil Ghaznawi, national director and country head of JLL KSA, said: “We expect to witness a fundamental change in Saudi Arabia’s real estate market once the new fee on undeveloped land takes effect, as the developers will be the main players and land owners will start to seriously consider different partnering options in order to develop their land holdings.”
The law is intended to stimulate further development to meet the demand for middle-income housing in Saudi Arabia.
JLL predicts that some land owners will bring forward plans and begin development in order to avoid the additional tax burden of holding undeveloped land. Others, it suggests, will seek to sell sites to other developers, which should help to reduce land values.
“Lower land values will make development more financially viable and therefore stimulate additional activity. Revenues from the tax will allow the government to undertake additional housing projects,” added the analyst.