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Sun 22 Nov 2015 02:26 PM

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Saudi land tax could raise $13bn a year – report

New legislation on unused land could boost coffers as kingdom faces budget deficit in 2015

Saudi land tax could raise $13bn a year – report
Saudi money, Saudi currency, Saudi economy, Saudi finance, GCC currencies

A potential tax on unused land in Saudi Arabia’s largest cities could provide up to $13 billion (SR50 billion) worth of revenues annually for the government, property experts have told the Saudi Gazette.

Saudi Arabia's Shura Council, the body that advises the government on legislation, has endorsed a tax on undeveloped land aimed at encouraging development and solving a housing crisis, the state-affiliated Al Riyadh newspaper reported last week.

Fees will be imposed as a percentage of the land's value, the legislative body decided, rejecting a cabinet proposal to limit fees to 100 riyals per square metre, the newspaper said.

“Many real estate owners will not be able to hold their land paying the tax, which will bring at least SR50bn to the state coffers annually,” real estate agent Mohammad Al Dossary told Al Hayat, according to Saudi Gazette.  “Even if they sell 10 percent of land, it will solve the problem to a great extent.”

Another agent said that the new law would help to cool the housing market.

“The rise in prices was one of the main reasons that prevented citizens from having their own homes,” Mohammed Al Faraj told the newspaper, calling for swift implementation of the legislation.

“The new law will make keeping plots of land unused for long periods unprofitable and force real estate owners to sell them to avoid taxation. When they start selling the prices will go down to reasonable levels,” Faraj added.

The legislation will be passed to the king for his approval and the cabinet will set the date of implementation.

Much urban land in the kingdom is owned by wealthy individuals or companies which prefer holding it as a store of value, or trading it for speculative profits, to the process of developing it. The tax could change that and spur home building activity.

In 2013, the Housing Ministry estimated that 40 percent of the land in Riyadh was made up of empty plots, at a time when the kingdom has announced plans to build 1.5 million units.

However, Al Faraj said that the ratio had risen to 49 percent in Riyadh, 50 percent in Dammam and 40 percent in Jeddah.

The government has been considering for years whether to use taxes to push owners into developing or selling such land. Many less well-off Saudis cannot buy their homes or afford rising rents.