Dar Al Arkan CEO says 5% property tax will support market, drive liquidity

Saudi Arabia’s decision to impose a new 5% real estate transaction tax instead of a 15% value-added tax (VAT) is expected to support and drive liquidity in the property market, Dar Al Arkan Real Estate Development Co. CEO Anand Raheja told Argaam in an exclusive interview.

“The recent amendments made to the real estate taxation are indeed positive for the market. We, together with other players, will benefit from investors continuing to deploy capital in the sector,” he stated.

Real estate is mostly a large ticket investment and the restoration of VAT to 5% (effectively the same level as the original 5% VAT) will support the market and buyers, Raheja stressed.

Read: King Salman exempts real estate supplies from VAT, imposes 5% transaction tax

Though local buyers almost exclusively propel the Saudi real estate market, drivers of residential demand remain solid and anchored in demographic trends around population growth and age profile, the CEO said.

“The Saudi real estate market has been in a positive trend since 2019, and we expect it to continue. The pandemic caused a softening in the general economic climate, and now with the country opening up again, we expect the economic activity to normalize.”

Asked if more Saudis will buy property since the government will shoulder the cost of the real estate transaction tax for first-time homeowners, Raheja said that Saudis are actively encouraged to buy properties, given that one of the pillars of Vision 2030 is to bring Saudi homeownership to 70%.

The recent exemption threshold increase from SAR 850,000 to SAR 1 million is another element that would support that target, he added.

The government is actively supporting homeownership through the Real Estate Development Fund (REDF) and the Ministry of Housing programs such as Sakani and increasing provision of mortgages.

Property prices, tracked by the Ministry of Justice, have been very resilient across the market, and despite the pandemic, have effectively turned positive both year-on-year (YoY) and quarter-on-quarter (QoQ), Raheja said, adding this confirms the healthy levels of demand in the market.

Dar Al Arkan projects are witnessing good pricing performance, the CEO revealed, adding its actively selling projects include Shams Ar Riyadh and Parisiana in Riyadh and Naeem El Jiwar in Madina.

Shams Al Arous in Jeddah is close to launching off-plan sales, while Juman in the Eastern Province is still in the planning phase, Raheja informed.

Write to Parag Deulgaonkar at parag.d@argaam.com