Saudi Arabia’s cabinet, in a meeting chaired by King Salman, finalized a 2.5% fee on undeveloped land within city limits intended for residential or commercial use, according to the SPA and reports.
Property experts told the Saudi Gazette that the fee could raise up to $13 billion (SR50 billion) worth of revenues annually for the government. The fees will be automatically deposited into an account for the kingdom’s central bank, Saudi Arabian Monetary Agency (SAMA), to fund the development of other housing projects.
A land tax of 2.5% may raise up to $13 billion annually.
“Many real estate owners will not be able to hold their land paying the tax,” a 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.”
The tax on undeveloped land would nudge property owners to build on or sell the land, which is connected to roads and utilities and is otherwise suitable for development.
“The fee will force real estate brokers to sell properties they own, creating a balance in demand and supply,” the Shoura council said.
The tax comes into effect in 6 months, and land will be assessed for its value to determine the amount owed by each landowner.
Last week, Saudi Arabia’s Shoura Council approved a plan to tax so-called “white properties.” As SUSTG reported in March, some estimate that the total effect of the tax could nearly halve the price of housing for most Saudis, but it is a politically sensitive decision, “because it may hurt the interests of influential people” in Saudi Arabia – the landowners that inherited swaths of land from previous generations or even from Saudi royalty.
Empty plots of land made up around 40 percent of the capital city Riyadh in 2013, according to Saudi Arabia’s housing authority.
