Saudi land tax to spur development – JLL

Tax likely to see project plans brought forward and prompt a drop in urban land values

An aerial view of Jeddah. (Shutterstock)

An upcoming tax on vacant land in urban areas of Saudi Arabia will spur development in the kingdom, consultancy JLL has said.

Saudi Arabia’s cabinet this week approved details of the tax, which is being introduced as a way to address the kingdom’s housing shortage.

The new law is likely to see some landowners bring forward building plans to avoid the tax burden, JLL predicts, according to report by Arab News.

Others landowners are likely to seek to sell plots to other developers, which should help reduce land values, further stimulating activity. Revenues from the tax will also allow the government to undertake additional housing projects, the report added.

“The new law will result in a fundamental change in Saudi Arabia’s real estate market and help stimulate further development to address the severe shortage of middle income housing,” Jamil Ghaznawi, head of JLL in Saudi Arabia, is reported as saying.

Fees on undeveloped lands will be introduced in stages, according to an earlier statement by the state news agency SPA.

It will first be applied to undeveloped land with an area of 10,000 square metres and more, and later apply to plots of more than 5,000 square metres.

“The Ministry of Housing shall collect the applied fees in this regard as well as the fines imposed for violation of the rules or regulations, and take the necessary measures to prevent evasion of the payment of these fees and fines,” SPA reported.

The Saudi housing ministry in May outlined the rules of the upcoming annual tax, saying that the rate has been set at 2.5% of the value of land held by individuals or non-government entities.

Analysts estimate that 40-50% of land inside major cities remains vacant, which has caused a lack of affordable housing, especially for young Saudis.


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