JEDDAH: Real estate shares led losses in the Saudi stock exchange Tuesday after a proposal to tax undeveloped land.

Saudi real estate developers hold significant amounts of land and could face taxes in the short term, unless lenders can loosen their stance on construction loans — a process that faces delays and hurdles in Saudi Arabia.

“The tax will put pressure on the real estate market, which will lower prices of empty land and make housing more affordable,” said Abdullah Alawi, assistant general manager and head of research at Aljazira Capital.

“This should shift more funds toward the stock market.”

Saudi investors generally store wealth in undeveloped land and the stock market, so tax in one will make the other more attractive.

The real estate sector’s measure slipped 1.0 percent. A wider benchmark declined 0.6 percent.

UAE EXTENDS GAINS

Elsewhere, UAE’s two main benchmarks rose as bargain hunters took steady oil prices as an opportunity to increase risk exposure.

Dubai’s measure climbed 0.5 percent, extending gains from Sunday’s 11-month low.

Shares in Drake & Scull rose 4.1 percent, recovering from Monday’s record low, after reporting a third-quarter profit slump.

“There are some opportunities, with stocks under-performing and quality names are doing much better than others,” said Ali Adou, portfolio manager at Abu Dhabi’s investment firm TNI.

Adou said UAE markets should be differentiated from other Gulf bourses because the depend less on oil and should gain from a push for economic diversification.

Abu Dhabi’s benchmark climbed 1.5 percent with telecom operator Etisalat the main support with a 2.9 percent gain.

Most Gulf markets are in line with the MSCI emerging market index, which is down 13.9 percent so far this year, as a slump in oil prices and worries of global growth sparked selling.

Brent crudeslipped 0.72 percent to 44.25 dollars per barrel at 1230 GMT, down 62 percent from its June 2014 peak.

Egyptian stocks fell to a two-year low on Tuesday after the Kremlin said a bomb brought down a Russian passenger plane in Egypt. Saudi shares fell after a legislative body endorsed a tax on undeveloped land.

The crash of a Russian aircraft on Oct. 31 in Egypt’s Sinai Peninsula, which killed all 224 people on board, was “a terrorist act,” Russia’s foreign minister said. The accusation is likely to hit Egypt’s tourist industry, a mainstay of its economy.

“The market is reacting badly to Russia’s statement on the Sharm crash,” said Simon Kitchen, head of strategy at EFG-Hermes.

“The short-term outlook is poor ... but the market is trading well below long-run price to book multiples, suggesting deep value.”

All but two shares fell on Cairo’s benchmark index, which slipped 1.1 percent to its lowest since December 2013. The index has now fallen seven of the past eight sessions.