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Tax on land: a lever to lower real estate prices in urban areas Given that the government is giving landlords a grace period in order to either develop or sell land to developers, we perceive the newly approved land tax as a lever to lower real estate prices. Ultimately, this would improve household affordability, reduce social tensions and indirectly tackling energy subsidies as it frees up potential household income to spend on electricity and gasoline. Land tax could generate up to US$11bn/yr from the major urban cities We estimate that the government could potentially collect up to US$11bn per annum of tax related to undeveloped land in the top 5 urban Saudi cities which accommodate more than 50% of the Saudi population. While the law will not be effective until end- 2016, we do not expect the tax proceeds to be significant early on. Table 20: Land tax proceeds estimates for the 5 major urban cities Land tax could generate up to US$11bn per annum in first phase Annual Land tax proceeds City Selected urban land area(sqm) White land value (SARbn) @ 2.5% (SARbn) Riyadh 1,300,000,000 494 12.4 Jeddah 1,686,000,000 481 12 Mecca 850,000,000 485 12.1 Medina 293,000,000 88 2.2 Dammam 200,000,000 48 1.2 Total 4,329,000,000 1,595 39.9 Source: SAMA, BofA Merrill Lynch estimates for white land and proceeds Table 21: NTP objectives and KPls affecting the real estate sector Strategic objective KPI ; , Regional _Int'l Unit Baseline 2020 target Biman bimark Ministry of Housing Enable citizens to obtain a house Real estate sector contribution to GDP % 5 10 13 20 Improve performance of real estate Average time required to license new Day/ Permit 730 60 44 6 sector residential new projects Enable citizens to obtain a house Housing unit cost multiples of gross hee . 10 5 67 3 individual annual income Enabling citizens to obtain suitable Real estate financing to non-oil GDP % 3 15 16 5 housing financing Source: Saudi National Transformation Plan Table 22: NTP government costs related to the consumer and real estate sectors Consumer SAR (000) Ministry of Economy and Planning 3,293,255 Ministry of Commerce and Industry 4,313,050 Ministry of Environment, Water and Agriculture 13,942,405 Ministry of Haj and Umrah 333,600 Ministry of Labor and Social Development 7,931,710 Total 29,814,020 Real Estate SAR (000) Ministry of Housing 59,166,666 Source: Saudi National Transformation Plan 66 GEMs Paper #26 | 30 June 2016 es Merrill Lynch HOUSE_OVERSIGHT_016176