PROJECTS: Land tax overhaul, rent freeze mark Saudi Arabia’s biggest real estate reset in years

SA Kader

Saudi Arabia’s real estate sector is entering a new regulatory phase after the government overhauled the White Land Tax (WLT) regime and imposed a five-year rental freeze in Riyadh.

Together, these two measures aim to cool speculation, stabilise prices and accelerate housing development in line with Vision 2030.

Approved by Royal Decree No. (M/244) in April 2025 and published in the official gazette in May, the revised White Land and Vacant Property Tax Law expands the tax scope, introduces progressive rates of up to 10 percent, and strengthens enforcement against land hoarding.

The rent freeze, announced in September 2025, complements the new framework by capping increases across residential and commercial leases in the Saudi capital city, which has been facing affordability pressures in the face of rapid growth.

Revamped land tax

The updated WLT replaces the earlier flat rate - previously set at 2.5 percent - with a tiered structure reaching up to 10 percent of land value, depending on development priority, location and market conditions. The law also extends to vacant buildings in urban areas while retaining the 5,000-square metre (sqm) threshold for applicability.

Malek Al Rifai, partner, King & Spalding told Zawya Projects that the introduction of a dynamic and more granular WLT fundamentally raises the compliance threshold for developers and landowners.

“The new regime links fee assessments not only to land size and location but also to market conditions, inflationary indicators and development activity,” he explained. “This means stakeholders will need robust internal reporting, valuation governance and documentary evidence to justify their positions before the authorities.”

Al Rifai also noted that the Saudi Ministry of Municipal and Rural Affairs and Housing will have greater discretion in the enforcement of valuation criteria and in determining what constitutes an ‘underutilised’ or ‘vacant’ real estate asset.

“Developers will therefore need to pre-emptively align their compliance posture with the new executive regulations, as reactive compliance will no longer be sufficient,” he added.

Al Rifai said the revised law effectively transforms the WLT from a static tax into an anti-speculation policy tool.

“The law allows fees to escalate where inflation, constrained supply or land hoarding are deemed to distort the housing market,” he said.

Expanding scope

From a market perspective, analysts expect the new framework to gradually release land for development.

“The potential for new housing supply stemming from the amendments to the WLT is substantial, but the realisation of the same will likely be medium-to-long-term given that planning and development cycles take time and the land base affected is very sizable,” said Matthew Green, head of research, CBRE MENA.

He told Zawya Projects that as of mid-2025, more than 5,500 vacant plots—covering roughly 411 million sqm of undeveloped land across Riyadh, Jeddah, Makkah and Dammam—have been identified under the WLT regime, forming what is likely to become the core of future urban supply.

“The government's policy lever is viewed to be strong, effectively raising the annual cost of holding land and encouraging increased development activity,” he added

Developer disclosures

Several listed developers have issued statements evaluating the potential impact of the WLT changes. Dar Al Arkan had said it is conducting a portfolio assessment while Saudi Real Estate Co. (Al Akaria) and Arriyadh Development Co disclosed some expected impact.

Developers expecting no material impact include:

• Alandalus Property Co.
• Sumou Real Estate Co.
• Retal Urban Development Co.
• Asas Makeen Real Estate Development & Investment Co.
• Dar Al Majdiah
• View United
• Banan Real Estate Co.
• Hamad Bin Saedan Real Estate Co.

Market analysts said developers with large idle land holdings are likely to face the greatest compliance pressure and may explore joint development or consolidation to reduce exposure.

“One of the most consequential features of the amended White Land and Vacant Property Tax Law is the maintenance of the 5,000 sqm threshold for the imposition of fees,” Al Rifai said.

“While on its face this appears to exclude fragmented plots from immediate taxation, the market should not assume that splitting landholdings into smaller parcels will be an effective strategy to avoid liability.”

He added: “The Ministry has already signalled, both through recent regulatory commentary and enforcement practice, that it will adopt a substance-over-form approach, particularly where multiple plots under common ownership or control collectively exceed the threshold.”

Liwan Real Estate Develpment's board member Abdulsalam Sulaiman Alrajhi told Zawya Projects that developers will need to factor tax costs into feasibility studies and consider the density of their projects.

“I believe it [White Land Tax] is a long-term net positive for delivering quality housing more efficiently and at scale,” he said.

Rental freeze

On the other hand, the five-year rental freeze for properties within Riyadh's urban boundaries is designed to temper price pressures and provide cost predictability for residents and businesses amid rapid urban expansion.

Under the new framework, the rents for vacant residential and commercial units must match the value of the last registered contract on the 'Ejar' digital leasing platform.

Faisal Durrani, partner – head of research, MENA, Knight Frank told Zawya Projects that the rent freeze, effective for five years across Riyadh, comes on the heels of the redesigned WLT and the release of land at SAR 1,500 per square metre (psm) in the north of Riyadh.

“High house prices and high rents are undermining affordability,” he said. “We have already seen a direct impact on transaction values and volumes in Riyadh, for instance, which are down 20 percent and 30 percent respectively over the last 12 months.”

Residential prices in Riyadh climbed 10.6 percent year-on-year in the second quarter of 2025, even as total transaction values dipped by 20 percent to 29 billion Saudi riyals ($7.7 billion), according to Knight Frank.

Durrani added that any measures to help “bridge the gulf” between affordability and current market rates is a “welcome move.”

Complementary tools

The revised WLT and rent freeze “are two complementary measures aimed at improving the balance between supply and demand in Saudi Arabia’s real estate market,” according to Siraj Ahmed, director and head of strategy and consulting at Cavendish Maxwell.

“Together, they form a framework that helps the government manage how quickly new real estate comes to market, keeps housing affordable, and avoids uncontrolled price increases as the city continues to grow and evolve,” he told Zawya Projects.

The rent freeze is expected to stabilise rental values in Riyadh over its five-year duration.

Ahmed added that the intention is to protect tenants – be they residents or businesses – from sharp rent increases that could push up the cost of living and make the city less competitive.

Liwan’s Alrajhi said the rent freeze is “well-timed,” and key to Riyadh attracting the talent it requires to continue its growth trajectory.

“Of course, this is something that developers must also take into account over the next five years because it may reduce their unrealised short-term rental yields,” he noted. “But rentals in the retail sector, for instance, are not rising in the same way that they are in the commercial and office space sector, so the effect on revenue is not uniform.”

Shift towards development-led lending

The new regime could also shift how banks in the Kingdom evaluate real estate exposure.

Green elaborated: “Banks will likely become more cautious about lending based purely on the assumed long-term appreciation of idle land, as the increased WLT now acts as a tangible, ongoing expense that could impair a land's viability as a collateral strategy.”

“Instead, the pressure is now on landowners to build, which in the longer-term will likely translate into higher construction activity and hence increased demand for development financing.”

Market maturity

While short-term challenges are expected, market experts view the dual policy moves as steps toward a more transparent and sustainable real estate framework.

“The broader policy intent is clear: to make holding undeveloped land economically inefficient, thereby shifting the calculus from passive speculation to active development,” said Al Rifai.

Durrani said the rent freeze “acts as a significant deterrent to certain types of new investment,” and “enhances social stability by shifting financial leverage away from speculators, improving housing affordability for first-time buyers, and fostering greater market transparency.”

Ahmed added that, if implemented effectively, WLT and rent freeze could help the Kingdom meet its Vision 2030 population and housing goals by encouraging “responsible, faster, and more inclusive urban development.”

“If they work as intended, the result will be a healthier, more affordable, and more dynamic real estate market that attracts investment, and improves quality of life across Riyadh and beyond,” he concluded.

Read more: Saudi Arabia bets on foreign buyers to fuel real estate boom

(Reporting by SA Kader; Editing by Anoop Menon)

(anoop.menon@lseg.com)

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