Saudi housing minister says aiming to tax undeveloped land

Policy could help to end a shortage of homes and spur economic growth in Gulf kingdom
Cranes stand beside new high rise buildings under construction in the King Abdullah financial district of Riyadh, Saudi Arabia, on Monday, April 9, 2012. Saudi Arabias gross domestic product expanded 6.64 percent in the fourth quarter from a year ago, the kingdoms statistics agency said. (Bloomberg)
By Reuters
Wed 14 Jan 2015 03:20 PM

Saudi Arabia's housing ministry is moving to tax undeveloped land, official media quoted the housing minister as saying, in a policy that could help to end a shortage of homes and spur economic growth.

Much urban land in the kingdom is owned by wealthy individuals or companies who prefer holding it as a store of value, or trading it for speculative profits, to the process of developing it.

The government has been considering for years whether to use taxes to push owners into developing or selling such land; last September the issue was referred to the Supreme Economic Council, a top policy body chaired by King Abdullah.

Housing minister Shuwaish Al Duwaihi's comments this week, quoted by the Saudi Press Agency, suggested increasing political momentum for the tax, which could provide the government with welcome revenues to offset the plunge of oil prices.

"The housing ministry is pushing towards passing a law to tax undeveloped land," Duwaihi said. "The ministry has submitted a detailed study in this regard, in which it supported fast approval of the decision, which will have a positive impact on land price hikes and the monopolisation of land."

Duwaihi was speaking after he attended a session on Monday of the Shoura Council, an advisory body to the government, to give details of the country's housing programme and answer members' questions.

Riyadh is at the top of the list of Saudi cities suffering a shortage of land supply, Duwaihi said, adding that some of the land which the ministry had acquired to build housing so far was in villages and places far from urban areas.

Many less well-off Saudis cannot buy their homes or afford rising rents. After social discontent prompted unrest elsewhere in the Arab world in 2011, King Abdullah announced a $67 billion plan to build 500,000 homes over several years, but bureaucracy as well as land shortages have delayed the scheme.

Duwaihi said this week that over 750,000 Saudi families were eligible for housing aid and that a timetable would be worked out to deliver assistance to them "in the shortest period possible".

He said the ministry had adopted a mechanism to cooperate with the private sector on providing housing. The first such project will be the construction of apartments in multi-storey buildings in Riyadh, he said without elaborating.

This may reflect a shift in strategy, as so far there are few multi-storey residential buildings in the city.

In the last few weeks, local media have reported that the justice ministry has cancelled ownership certificates for large parcels of land totalling some 2 billion square metres, on the grounds that the land was owned in illegal ways. The identity of the owners of the land and the timing of the cancellations are not clear.

Asked about this by the Shoura Council, Duwaihi said his ministry was coordinating with the justice ministry on using this land for housing projects. However, local media reported a tweet from the justice ministry's Twitter account saying that while the land would revert to state ownership, the ministry had no authority to transfer it to any particular government entity.

Al Watan newspaper quoted Duwaihi as saying 62 percent of the roughly 20 million Saudi citizens owned their own homes. The International Monetary Fund has estimated that excluding people living in traditional housing, the ratio is 36 percent.

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