Saudi Arabia property market will see the drastic increase in construction and development after an introduction of the new white land tax by the government and the push on affordable housing. The increased real estate activity will be through the public investment fund, the listing of further Reits (Real Estate Investment Trusts), taxation reforms and a series of public-private partnerships, according to the regional head of JLL research, Craig Plumb.
The white land tax on the undeveloped plots levied by the government is believed to be the prime reason for this estimation. As per the proposal approved by Saudi Arabia’s council of ministers, there will be a 2.5 per cent of white land tax on all undeveloped residential and commercial plots in urban areas if it is not developed within 12 months at most.
The proposal is passed in order to address housing shortage problem as owners would seek to redevelop their land to avoid paying tax. The policy will increase the supply of new properties especially boost the development of more affordable housing. It is being rolled out in three of the kingdom’s biggest cities: Riyadh, Jeddah and Dammam.
The kingdom plans to enhance contribution, what property makes to the GDP, to 10 per cent by 2020. Also, the focus will be on increasing the residential units to 30 per cent.
“The government is recognising the biggest opportunities for affordable housing in the Saudi Arabia market and they are trying to encourage more development of affordable housing across all parts of Saudi. That’s going to have major implications for developers, investors and operators,” says Mr. Plumb.