The National Transformation Plan identifies the property sector as a key player in diversifying the Kingdom’s economy and reducing its dependence on oil
DUBAI, United Arab Emirates: Earlier this year, the Kingdom of Saudi Arabia released a set of strategic objectives and key performance indicators aimed at expanding the non-oil economy. The National Transformation Plan identifies the property sector as a key player in diversifying the Kingdom’s economy and reducing its dependence on oil.
Under the new plan, both the public and private sector are encouraged to take a role in ensuring the growth of the property sector through a number of initiatives:
Introducing a real estate investment trust. This is likely to institutionalize the real estate market and attract foreign investments into commercial property such as office buildings, retail centres and hotels. In turn, this will provide diversity, long term growth and stability.
Levying a white land tax on undeveloped land. An annual 2.5% tax on the land value of undeveloped plots of 10,000 sq m aims at encouraging land owners to develop more homes to the market to tackle the current shortage of housing.
Developing a home-building programme. The Ministry of Housing announced plans to create its own property company and offer a mortgage guarantee fund to boost the rate of lending.
Stefan Burch, Head of Knight Frank KSA commented “Over the medium-to-long term these development strategies are expected to transform cities for the better, improving the quality of life while maintaining affordability and safety of the local communities. In the short run, the approval of a white land tax on undeveloped land is expected to see land owners review their holdings and portfolios in order to be well positioned in light of the proposed tax. Meanwhile, others might seek to sell their sites which should help reduce land values and consequently make development more feasible. This in turn is likely to increase development activity across the Kingdom”.
Knight Frank has a strong presence in the Middle East with offices in Abu Dhabi, Dubai, Bahrain and Saudi Arabia. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants.
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and together with its New York-based global alliance partner, Newmark Grubb Knight Frank, operate from over 411 offices, in 59 countries, across six continents and has over 13,000 employees.