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Wed 17 Sep 2014 05:53 PM

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Saudi Arabia to consider taxing unused urban land

Supreme Economic Council will study plan as part of efforts to end serious housing shortage

Saudi Arabia to consider taxing unused urban land
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)

Saudi Arabia's Supreme Economic Council, a top policy body chaired by King Abdullah, will study whether to tax undeveloped urban land as part of efforts to end a serious housing shortage in the world's top oil exporter.

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 in the country over several years.

But progress in implementing the plan has been slow, partly because of difficulties in obtaining land. Much urban land 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 housing ministry said last year that it had only secured a third of the land it needed for its projects. A quick drive around Riyadh reveals large empty plots; analysts estimate there may be around 4 billion square metres of undeveloped land in Riyadh alone.

Taxing owners of unused land could prompt them to develop it with housing or commercial projects, or to sell it to developers.

Saudi Arabia's Shoura Council, an advisory body to the government, began considering the idea of a tax in early 2012 but no decision was reached as members were split.

The Council of Senior Scholars, the country's highest religious body which advises the king on a range of issues, met on Tuesday to discuss the issue, Saudi media reported on Wednesday.

The council's secretary general Fahad bin Saad al Majid was quoted as saying the members listed to a presentation from housing minister Shuwaish Al Duwaihi and asked him over 30 questions about the issue.

He said the council then decided to refer the issue to the Supreme Economic Council, which includes ministers with portfolios related to the economy.

The Supreme Economic Council is to discuss the impact of the proposed tax at its next meeting; it is not clear when that will take place. The matter would then be returned to the Council of Senior Scholars, which would make a decision.

There have been signs that the government is becoming increasingly determined to end the bottlenecks caused by limited supplies of land.

In June, Saudi Telecom Co said the government had seized a plot of land in the Al Faisaliah district of Riyadh from it. It did not reveal why the government had taken the land, which had a book value of SR105 million ($28 million); it said the government had not yet disclosed how much it would pay in the compulsory purchase.

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