Saudi Arabia’s Economic Cities Authority (ECA) has announced that it will implement a new system for real estate fees starting from February 2018, according to a statement on its website.
The fees aim to enhance the competitiveness of the Saudi Economic Cities and to regulate the real estate sector, the statement added.
The authority will charge a fee of 1 per cent “of the sales value as per the registered Sales and Purchase Agreement or the approved valuation by the Real Estate Department”, whichever is higher, it said. On top of this, it will charge a fee of 100 Saudi riyals for every property registration transaction, and the same amount for covenant registration. Fees will be applicable to off-plan as well as ready units, it said.
Craig Plumb, JLL Mena’s head of research told Zawya that “there is currently no stamp duty or other taxes on the registration of real estate transactions in Saudi Arabia, so this proposed fee would make the economic cities less competitive than other locations within the kingdom.
“It is not clear if it will be applied to all sales, or just those to foreign parties,” said Plumb. “There are currently very few sales to overseas parties within Saudi, so it would have a limited impact if it is restricted to this sector of the market. If extended to sales to GCC nationals, it would make the Economic Cities less attractive than competing locations.”
Mortgage registration will incur a fee of 0.25 percent of registered mortgage agreement, while any period adjustments or mortgage releases will incur a fee 500 riyals, regardless of mortgage value.
Meanwhile, a lease registration service is being introduced, which will cost 150 riyals per lease, whether this is for residential units, offices, or shops.
An issuance service for lost or damaged ownership certificate will cost 250 riyals. A fee of 50,000 riyals will be charged to brokers for a licence for off-plan sales.
ECA is the unified supervisory authority for all of Saudi Arabia’s economic cities - a set of special zones with independent regulations and investment policies aimed at providing an attractive, competitive environment for private sector investors to spur the diversification the Kingdom’s economy.
The largest of these cities is King Abdullah Economic City (KAEC), which is located on the Red Sea coast and developed by Emaar The Economic City alongside several Saudi investors and government entities.
Other key cities include Jazan Economic City, which focuses on the manufacturing and energy sectors, Prince Abdulaziz Bin Mousaed Economic City and Knowledge Economic City.
A reform document outlining Prince Mohammed Bin Salman’s Vision 2030 conceded that there have been difficulties in creating the economic cities, with some of the proposed zones facing challenges that have threatened their viability. But the document highlighted that cooperation was taking place with Saudi Aramco to restructure Jazan Economic City.
“We will strive to salvage other economic cities, especially those with comparative advantages,” the document said.
Speaking at a conference in April this year, Fahd- Al-Rasheed, the chief executive of King Abdullah Economic City, said: “The next three or four years will be challenging for all of us but there is only one way.
“We will have to change and adapt to the two big shifts that have taken place: the change that has overtaken the oil economy as a result of the decline in energy prices; and the economic restructuring and transformation that is taking place.”
© Zawya 2017