The Saudi
Arabian cabinet has approved the fine print of a controversial new tax on
undeveloped land aimed at making it more expensive for owners of urban land to
keep it empty.
Under the
new “White Land" tax that was approved yesterday, owners of empty plots of
urban land designated for housing or offices in towns and cities have to pay a
tax of 2.5 per cent of the value of the land each year, according to the
official Saudi Press Agency.
The taxes
will apply to urban undeveloped land plots of 10,000 square metres or more.
The Saudi
ministry of housing will specify which lands fall under the new tax law and
will collect the taxes, the agency reported.
Officials
are introducing the tax as part of a package of measures aimed at reducing land
speculation and providing more affordable homes in a country where an acute
shortage of accommodation is coupled with a rapidly growing population.
Last week
the Saudi Arabian government published details of the housing element of its
National Transformation Plan, a blueprint published under the auspices of the
deputy crown prince, Mohammed bin Salman, aimed at reducing the country’s
reliance on crude revenue following the oil price crash.
The plan
proposes to increase the annual growth rate in the property sector from about 4
per cent now to 7 per cent in four years’ time, and to reduce the cost of
housing from what averages out as about 10 times gross salaries to five times.
The plans
also envisages increasing the percentage of Saudi families owning their own
homes to 52 per cent from today’s 47 per cent, and to reduce the average time
required to approve and licence new housing projects down to two months from
more than two years.
According to
local property brokers, the new tax is already increasing the number of homes
being developed.
“Before
these changes, there used to be significant land appreciation in Saudi Arabia
and that meant that the rules were not encouraging anyone to develop,"
said Imad Damrah, the managing director of property consultants Colliers in
Saudi Arabia.
“Since these
changes, already Colliers has been involved in a number of agreements between
developers and the ministry of housing regarding affordable housing."
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