The determination of fees on white lands has sparked a wide debate in real estate and investment circles, as to what will result from the decision, especially after the Council of Ministers approved the work of mechanisms to implement the decision,

While JLL Group welcomed the policy initiatives aimed at boosting the supply of low-income homes in the Kingdom, the group believes that we must wait to see how effective the proposed fees on vacant land will be in achieving this goal. The next stage of this process will be the announcement of more details about the legislation on how the fees will be set and administered, and only at that stage will we get a clearer idea of how the real estate market will respond to these fees.

While JLL Group welcomes the policy initiatives aimed at boosting the supply of homes for low-income people in the Kingdom, the group believes that we must wait to see how effective the proposed fees on vacant land will be in achieving this goal. In the same vein, JLL expects the fees to be based on their actual value rather than area, so it is reasonable to assume that the proposed fees will result in more land being freed up for construction purposes, but the extent to which this will affect the value of land and thus the sale and rental prices of residential units is less clear.“

JLL Group, according to Jamil Ghaznavi, director of the firm, estimated the shortage of low-income housing units in the Kingdom in 2011 at 400,000 units, a number that is believed to have risen since then. The high cost of land in urban areas is widely believed to be one of the main reasons why house prices have risen to levels beyond the purchasing power of low-income earners.

With land prices hovering in the single digits, the proposed fees will presumably result in the further liberalization of land for construction purposes. With current prices per square meter of residential land hovering between SR2,000 and SR3,000, and land accounting for 40% of total household costs, any move to increase the supply of land and thereby reduce its costs is a welcome addition to Saudi economic policies.

<The extent to which the new proposed fees succeed in achieving the goal of increasing the supply of low-income homes will depend on market reactions. In the absence of any details on how the proposed fees will be administered, set or enforced, it is too early to predict these reactions.