Saudi Arabia has outlined the rules for an upcoming annual tax on undeveloped urban land, in an announcement made on Sunday by its housing ministry.
The tax has been set at 2.5% of the value of land held by individuals or non-government entities, the ministry said via its Twitter account.
Vast swathes of urban land in cities such as Riyadh and Jeddah is empty, something the new law aims to address, given the current shortage of affordable housing in the kingdom.
Tweeting with the hashtag “build it to give it life”, the ministry said fines for non-payment would be as much as the tax owed and the money raised from the proceeds would be spent on public services and utilities, such as roads, water, electricity and sewage systems.
According to media reports in Saudi Arabia, the new tax comes into effect on June 8 with a grace period, which has not been specified yet, for land already earmarked for development.
The tax was passed by the kingdom’s cabinet in November last year and seeks to stop the common practice of landowners keeping their plots vacant while waiting for land values to rise, or to trade the plots for speculative profits.
According to a Reuters report, analysts estimate that 40-50% of land inside major cities remains vacant, which has caused a lack of affordable housing, especially for young Saudis.
The new tax comes in the wake of the government announcing a series of steps last year to boost home ownership, including plans to provide housing to 100,000 low-income families and a mortgage scheme.
Under an economic reform plan unveiled last week, the country is also aiming for a 5-percentage-point increase in the rate of home ownership among Saudi citizens by 2020, up from the present level of 47%.