Making good use of white lands in Saudi Arabia
In May 2013, the Saudi Shoura Council approved the preparation of regulations governing idle lands or white lands, as they are called in the Kingdom, within urban areas across the country.
The regulations included the imposition of a tax on these lands as well, which had an impact on the real estate sector.
White lands are vacant or undeveloped plots designated for residential or commercial use and situated within the boundaries of a city.
Due to rapid urbanization, it is necessary to achieve a balance between the supply and demand of residential spaces and commercial properties that could spur economic growth.
The main purpose of imposing an annual fee or tax is to achieve a balance in the real estate sector and ensure reasonable prices by promoting fair competition and combatting monopolistic practices.
The annual fee will be imposed on white lands owned by one or more persons of a natural or nongovernmental legal entity at a rate of 2.5 percent of the land’s actual market value.
There is an approved criterion to estimate the value of a vacant plot, and a government entity is charged with this responsibility. For the authorities to impose fees on land, there are certain factors that must be taken into consideration, such as the location of the land, its possible uses, and access to public facilities.
The implementation of fees on idle lands and developed lands will be carried out in four phases. In the first phase, an annual fee will only be imposed on undeveloped plots with an area of 10,000 square meters or more. In the second phase, developed lands owned by one proprietor in an approved housing scheme exceeding 10,000 square meters will also be liable to pay the fee.
The third phase will include developed lands owned by one proprietor in one approved housing scheme if their total area exceeds 5,000 square meters. In the final stage, the fee will be imposed on developed lands belonging to one owner in a city, if the total area exceeds 10,000 sq. m.
The government’s White Land Fee Program is set to implement its first phase in 17 Saudi cities and its second phase in Riyadh, Dammam, and Jeddah.
With regard to penalties and fines, a violator will be penalized with fines that do not exceed the amount owed on his land. If the owner wants to submit an objection, he has the right to submit the objection in writing to a committee formed by the housing minister within 60 days from the date he was informed of the decision.
According to the law, collected fees and fines will be deposited in a special account with the Saudi Arabian Monetary Agency. The collected funds will be used on housing projects and the delivery of public facilities to those projects.
The development of these idle plots will ultimately contribute to the growth of the real estate sector and provide many options for investors, whether for trade or housing. It will also help resolve the housing issue for many Saudis, as they will have more options to choose from.
Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif