The increasing overall surplus year after year on account of upward moving oil prices and the resultant liquidity has proved to be a boon for the real estate sector that is now sought to be the highest income yielding investment in the Sultanate. The demand for real estate is growing across the different usage groups residential, commercial and tourism related activities. The Sultanate’s focus on the oil and natural gas and education sectors is now being shifted to a great extent to the manufacturing and tourism sectors in view of its commendable efforts to diversify the economy. Despite the recent increase in the real estate prices, Oman still remains a competitive market in terms of prices as compared to other GCC countries.
According to Mazaya real estate, the total volumes of concluded deals jumped to the highest levels reaching 24.2m sq.m in 2007 compared to 13.7m sq.m in 2005 increasing by 43.4%. The investment during the period was RO1.61bn compared to RO0.29mn during 2005. The average price per square meter for residential land increased by 253% to RO52 in 2007 compared to RO16.3 in 2006 and RO14.7 in 2005. The residential sector captured the biggest share, registering 94.6% of the total number of plots in 2006, and the capital city "Muscat" having around 26.2% of the total plots in 2006.
On the commercial front, volume of deals increased by 27% reaching 2.7m sq.m in 2007 compared to 1.97m in 2005. The total value the deals increased by 314% reaching RO397.8m in 2007 compared to RO96m in 2005. The average price per square meter of land for commercial use was RO151 compared to RO48 in 2005.
Also, an ambitious free zone project in Oman’s southern Dhofar region bordering Yemen has evoked considerable interest among local and foreign investors. This is due to the new amendments to visa rules and legislation governing foreign ownership of real estate, a new visa system was in place and a number of changes had been made in the law governing land ownership by foreigners, pointing out that non-Omanis could now own real estate in certain tourist projects. The Capital Investment Law now permitted up to 70% ownership by foreigners in projects and the tax law had been revised to promote investor confidence. The project covers an area of 2,000 hectares. Phase 1, currently being developed, encompasses 200 hectares. The entire cost of the infrastructure development is borne by the government of Oman.
Yenkit Tourism Development LLC is developing a US$2bn luxury Integrated Tourist Resort Complex at Yenkit in Muscat Governorate. The project will be an 'Integrated Tourism Complex' as designated by the Ministry of Tourism, and will consist of four 5-star hotels with approximately 900 rooms, an 18-hole international golf course; a wide range of tourist facilities, including sports and leisure facilities, a resort village, nature reserve and visitors centre, beach club, heritage and craft centre and major open spaces; 1,400 residential villas and up to 1,900 residential apartments and townhouses. The project responds to a major initiative of the Omani government to create a world-class tourism corridor, stretching down the scenic coast between Muscat and Sur to the south. Few other factors that have contributed to the increasing real estate demand apart from the Sultanate’s focus on manufacturing and tourism are listed below.
Firstly, the ownership laws are relaxed to encourage foreign ownership on the following lines:
• The Royal decree 12/2006 extending foreign ownership rights to include non-GCC nationals (however only in certain designated areas)
• The increasing demand for housing on account of about more than 65% of the Omani population being below the age of 24
• The increase in commercial projects has envisaged the influx of expatriates further fuelling the demand for residential rentals. The number of expatriates in the Sultanate was 638,447 in 2007 representing a y-o-y growth rate of 25% over 510,713 as at end of 2006. During the previous year the expatriate population had grown at a y-o-y rate of 20.2% from 424,788 to 510,713. The increasing sequential y-o-y expatriate population growth rate is expected to hold the northbound trend in 2008 as well and lead to a paucity of residential facilities.
Secondly, the recent surge in the Construction Cost Index (CCI) in the Sultanate underpins the increasing real estate demand. The CCI for Commercial space registered a 3.5% y-o-y growth in 2Q06 compared to the 0.2% y-o-y growth during the 1Q06 period. For residential space, the CCI had grown at a y-o-y rate of 3.4% in 2Q06 as compared to 1.2% y-o-y growth during the 1Q05 thus representing an increased level of activity on a sequential basis.
Thirdly, the Muscat Wholesale Price Index for Building materials has also grown by 8% from 131.1 in 2006 to 141.6 in 2007. The real estate in Oman is continuing its strong growth. The latest available data from the ministry of national economy indicate that the total number of total plots have increased from 35,414 in 2004 to 71,263 in 2005, a whopping increase of 101%.
We expect further growth in demand in 2008 for commercial land as a result of vigorous commercial activity in manufacturing and tourism sectors as a result of Sultanate’s focus on these sectors during the current plan period.
