RIYADH: Dar Al-Arkan Real Estate Development Co., one of Saudi Arabia's largest listed property firms, said a planned tax on undeveloped land was unlikely to be applied to its huge land bank or push the Kingdom's land prices down sharply.

The cabinet's announcement of the tax, designed to deter hoarding of land and force more of it into the market where it can be used to resolve a housing shortage, shook up the Saudi stock market on Tuesday.

Shares in construction and building supplies firms jumped on hopes of an increase in home building, while shares in real estate developers sank as investors feared their land banks would be taxed. Dar Al-Arkan tumbled 6.5 percent.

The company's land bank, which it valued at SR14.5 billion ($3.9 billion) at the end of 2014, totals almost 40 million square metres concentrated in Saudi Arabia's major cities; 60 percent is in Jeddah, 12 percent in Riyadh, 21 percent in Makkah and 7 percent in Madinah and Eastern Province.

But Dar Al-Arkan Chairman Yousef Al-Shelash told Reuters that he did not expect the tax to be applied to this land, since the company was in the process of developing it and the government was targeting "white" or totally undeveloped land.

"DAAR welcomes all initiatives by the administration to improve the housing solutions and facilitate a faster development process, and we are working with the municipalities for master plans and zoning approvals for our land, and we are collaborating with utilities companies to provide services for these lands," he said by email on Wednesday.

"Therefore, taxation on these lands would be unlikely, as it applies to white lands."

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 Shoura Council, a top advisory body.

Dar Al-Arkan's projects mainly focus on development of basic infrastructure on undeveloped land and the sale of such land.

According to its latest financial report, its revenue from land sales was SR2.9 billion in 2014, out of total revenue of SR3.1 billion.

To insulate itself from the volatility of the Saudi land market, the company has launched a diversification plan which envisages obtaining only 50 percent of its revenue from selling

land and housing units. Forty percent is to come from leasing housing and commercial units, and 10 percent from investment in equities and bank deposits, by around 2019.

Shelash said he did not expect the new tax to cause a sharp fall in Saudi land prices, predicting only a moderate change. He noted that government officials had been discussing the idea

since mid-2014.

"The impact has been largely discounted in the market already," he said, adding that in the past two quarters, land prices had stopped increasing and transactions had declined.

In a step to address the housing shortage, the government in 2011 allowed "off-plan" sales of housing units — those which are still in the process of being built. But the regulations include time-consuming requirements for developers, including a license for each off-plan development.

Shelash said that if the government followed the land tax with measures to make off-plan housing sales easier, his company would step up its home building.