Dubai: Most Saudi real estate-related shares fell in early trade yesterday after the cabinet on Monday approved a proposal to tax undeveloped land in urban areas.
Much urban land in the kingdom is owned by wealthy individuals or companies who prefer holding it as a store of value, or trading it for speculative profits, to the process of developing it.
The cabinet decision aims to push more land out into the market, where it can be developed, in order to address Saudi Arabia’s shortage of affordable housing.
In the long run this could spur the construction and real estate industries, as well as the overall economy. In the short term, however, some investors worry it may hurt listed companies with large land banks.
No timetable
Shares in major real estate developer Dar Al Arkan sank 4.5 per cent in early trade, while Emaar Economic City dropped 3.1 per cent.
Construction firm Abdullah Abdul Mohsin Al Khodari and Sons, which could benefit from new building contracts, climbed 1.5 per cent. The overall Saudi stock index edged up 0.3 per cent. The cabinet gave no details of the likely size of the tax, how it would be implemented, or a timetable for introducing it.
An economic council will make proposals to the Shura Council, a top advisory body.
It is not clear whether land held by companies and specifically property developers will be taxed, or whether the levy will merely target individual land holders.
Comments by individual Saudi investors on trading websites yesterday were mixed, with some viewing the tax as positive for real estate firms and others predicting it would prove negative.
