The Kingdom of Saudi Arabia are set to start levying White Land Tax in April
According to reports, Saudi Arabia will roll out its White Land Tax in Jeddah by April.
Last year, the KSA government announced regulations for its White Land Tax – a game-changing reform in the real estate sector.
Under the new law, owners of empty plots of urban land designated for housing or office in towns and cities must pay a tax of 2.5% of the value of the land each year. The government as part of its 2020 and 2030 visions have decided to tackle the issues and will therefore the taxes will apply to urban undeveloped land plots of 10,000 sqm or more. According to Forbes Middle East, one condition for exemption will be provided if a land owner succeeds in developing his lands within a grace period of 12 months.
According to Forbes, the government has encouraged white land owners in the cities of Riyadh, Jeddah, Makkah and Dammam to register their lands via an online system. The first stage of issuing the tax bills started at the end of March for white lands in the capital, Riyadh, to be followed by lands in Jeddah.
For JLL Country head for KSA, Jamil Ghaznawi: “The new law will result in a fundamental change in Saudi Arabia's real estate market and help stimulate further development to address the severe shortage of middle income housing.”
JLL expect the new law to result in:
- - Some land owners bringing forward plans and beginning development to avoid the additional tax burden of holding undeveloped land;
- - Lower land values will make development more financially viable and therefore stimulate additional activity;
- - Others will seek to sell sites to other developers which should help reduce land values, which have been soaring over the last few years amounting to 30% - 50% of the cost of developing;
- - Revenues from the tax will allow the government to undertake additional housing projects with the Ministry of Housing already announcing several major projects targeting the affordable housing sector
Knight Frank agrees. The tax aims at encouraging land owners to develop more homes to tackle the shortage of housing in the kingdom and avoid speculative land trading.
“Over the medium-to-long terms these development strategies are expected to transform cities for the better, improving the quality of life while maintaining the affordability and safety of local communities – a central objective of the kingdom’s leadership,” states a Knight Frank report from last year.