Saudi Housing Ministry Imposes Annual Tax on Undeveloped Land

A new Saudi tax on undeveloped urban land will be equivalent to 2.5 percent of the value of the land held by individuals or non-government entities. REUTERS/Faisal Al Nasser

RIYADH, May 9 – Saudi Arabia has imposed an annual tax on undeveloped urban land, the Housing Ministry said on Sunday, finalising the rules for a system intended to address a politically sensitive shortage of affordable housing.

The introduction of a land tax, first announced by the cabinet in November, marks a major step for the world’s top oil exporting country in addressing a housing shortage frequently griped about by young Saudis.

Analysts estimate that 40 to 50 percent of the land inside major cities remains vacant, much of it owned by wealthy individuals or companies that have tended to hold or trade it for speculative profits rather than developing it for housing.

The new tax would be equivalent to 2.5 percent of the value of the land held by individuals or non-government entities, the ministry said on its Twitter account.

Fines for failure to pay would reach up to the amount of tax owed, the ministry said, tweeting with the hashtag “build it to give it life”. Revenues raised would be spent on public services like roads, water, electricity and sewage systems at ministry housing projects, it said.

Local state-aligned media reported in February that the new tax would enter into effect on June 8, with an unspecified grace period for land slated for development.

The government has announced a series of steps intended to boost home ownership in the past year, including a government-backed mortgage scheme and plans to provide housing to 100,000 low-income families.

Under a broad economic reform plan announced last week, the Saudi government said that it would aim to increase the rate of home ownership among its citizens by at least 5 percentage points by 2020 from 47 percent now.

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