New 'Land Vacant Law' prevents land owners to leave land undeveloped, prompting activity across the country
Saudi Arabia has witnessed a surge in hospitality developments following the drop in oil prices a little over 12 months ago, experts at the Gulf and Indian Ocean Hotel Investors’ summit said.
“There has been a lot of domestic development than international development with new projects. And we are seeing this across the entire country; historically [developments] were strong in Jeddah, Riyadh and the Holy Cities,” an industry stakeholder said at a roundtable discussion, according to a report by Hotelier Middle East.
Defining the term ‘domestic development’ Hyatt Hotels VP acquisitions and development Peter Penev said: “A lot of people are focussing on developing hotels and looking at opportunities in hospitality over the past 24 months. Historically investors considered developments in Saudi, but then went ahead with investing in the UAE and Europe instead.”
Penev also said that ever since the ‘crisis’ people have started looking ‘inward’ and investment opportunities within have hence been on the up. The plummeting costs of construction has also made it lucrative to develop real-estate in Saudi Arabia, experts divulged.
“Apart from construction costs, the government recently introduced a fee on vacant land,” said Riyada International Hotels and Resorts founder and managing director Mohammad Al Amir.
“In the past there were no penalties for just having a piece of land in the middle of the city. [People would] leave it vacant, let it appreciate and then sell it off. But a decision was made late last year to impose fees if you simply hold on to it, and do not develop any anything there,” Al Amir said informing delegates that the amount to be paid in penalties is 2.5% of the land’s evaluation.
He also said that the rule, to begin with, applies to land that is 10,000 m2 and more in area. “At the second stage it will be applied to sub-10,000 m2,” he added indicating the rule has left land lords with no other option than to start developing on it.