As part of its broader transformation agenda, Saudi Arabia has introduced a 10% annual tax on undeveloped urban land, expanding its previous policy and tightening enforcement mechanisms. The goal is to stimulate construction, curb land speculation, and reduce housing prices in major cities like Riyadh, Jeddah, and Dammam.
The tax, approved by the Ministry of Municipal, Rural Affairs and Housing (MOMRAH) and overseen by the Idle Land Program Committee, reflects the country’s commitment to the goals of Vision 2030 — aiming to create livable, economically dynamic urban centers.
Tax Scope and Implementation
Starting in Q2 2025, landowners holding undeveloped plots within urban boundaries will be subject to a 10% annual levy based on the plot’s current market value if the land is neither built upon nor under active development.
Key features of the updated regime include:
- Wider application: The tax now covers not only plots in core urban districts but also secondary metropolitan zones.
- Updated valuations: Land will be assessed annually, reflecting prevailing market rates and local demand.
- Digital monitoring and enforcement: A centralized platform will detect violations, and penalties may include fines or even land repossession.
- Exemptions: Granted only if there is a valid building permit and visible construction progress.
Purpose and Policy Goals
The Saudi government highlights several core motivations for the tax:
- Boosting residential construction: The country faces a housing shortage, particularly in fast-growing urban centers like Riyadh.
- Discouraging speculative holding: Landowners have historically held large tracts unused, anticipating price inflation.
- Lowering property prices: Releasing land supply should stabilize or reduce the cost of housing and rentals.
- Accelerating urban development: Efficient land use is essential for large-scale infrastructure projects.
According to MOMRAH, as of 2024, more than 450 km² of land in Riyadh alone remained undeveloped — nearly 15% of the city’s total urban area.
Expected Market Impact
Market analysts anticipate several direct outcomes following implementation:
- Land prices may drop 5–15% within 12 months as supply increases.
- Landowners may rush to sell or develop plots to avoid tax liability.
- Private developers will gain more access to affordable land, particularly in the mid-income segment.
- Faster project timelines due to greater land availability and streamlined approvals.
The reform shifts the economic logic from landholding to land use, rewarding development over speculation.
Reactions from Stakeholders
Saudi developers broadly support the reform, citing improved land access and project viability. However, many individual landowners — particularly those who acquired plots as long-term investments — have voiced concern.
Some of their proposals include:
- Grace periods for large tracts under planning review
- Installment plans for tax payments by low-income landholders
- Exemptions for families owning land for over two decades with documented financial hardship
Still, the government remains firm. As the housing minister stated, “Urban land must serve the economy — not be frozen in speculation.”
Budget Revenue and Reinvestment
Saudi Arabia’s Ministry of Finance projects that the tax could generate €1.2–1.5 billion per year. These funds are earmarked for:
- Public infrastructure development, including utilities and roads
- Mortgage subsidy programs for low- and middle-income families
- Public transport expansion in emerging districts
Thus, the tax is both a development lever and a revenue tool supporting urban policy objectives.
Global Context and Comparative Models
Saudi Arabia joins a group of countries using land taxation to encourage development. Notable examples include:
- Singapore: Imposes heavy penalties on undeveloped land left idle for over two years
- United Kingdom: Councils may charge a “vacant land tax” to discourage hoarding
- South Korea: Uses progressive taxes and monitoring to push land into productive use
These examples show that land taxes are effective when combined with transparent regulations, efficient permitting, and incentives for compliance.
Challenges and Risk Factors
Despite its potential, the new policy faces implementation challenges:
- Valuation discrepancies: Especially in fringe zones with weak market signals
- Limited municipal capacity: Local authorities may struggle to monitor compliance effectively
- Legal disputes: Owners may contest taxation on partially used or disputed land
- Social resistance: Some perceive the policy as punitive toward landowning families
Experts recommend a phased rollout, starting with central zones and larger landholdings, before expanding nationally.
Conclusion
The introduction of a 10% annual tax on idle land marks a pivotal moment in Saudi Arabia’s urban development policy. Designed to unlock land supply, reduce speculation, and make housing more affordable, the tax reflects a broader shift toward productive, transparent land management.
If successfully executed — with fair valuation, clear exemptions, and robust enforcement — the tax could serve as a model for other fast-urbanizing nations facing similar housing and land-use challenges.
Ultimately, Saudi Arabia’s new approach positions land not as a passive asset, but as a strategic driver of national growth and urban inclusion.
