The recent fall in oil prices did not have any major adverse impact on the real estate sector in Oman. As a result, real estate developers are proceeding with their ambitious projects in view of a stable market outlook. It is not far to seek the reasons for a steady and robust market outlook for real estate sector. A reasonable growth rate in population, affordability, integrated tourism complexes (ITCs) and property-ownership-linked residential visa are driving demand for housing units. Demand for hotels and retail outlets are also aiding the overall development of the sector.
The growth drivers in Oman’s real estate market also include the upsurge in business activities, rapid urbanisation, momentous rise in consumerism and financing options at affordable interest rates, growing number of small and medium enterprises (SMEs) and port and free zone projects. The overall upward trend is reflected in a recent surge in transactions. For instance, real estate transactions in Oman in the first four months ending April 2015 surged ahead by 68 per cent to RO1,638.9 million, over the same period last year. The fees collected for these transactions soared to RO16.1 million, a growth of 12.6 per cent in comparison with last year. However, the value of sales fell by 0.9 per cent to reach RO391.7 million. Also, the number of sale transactions witnessed a decline of 5.2 per cent to 28,543 contracts compared to 30,093 contracts during the same period last year, according to the National Centre for Statistics and Information.
The value of mortgage contracts also increased by 115 per cent to reach RO1,241.1 million, compared to RO577.3 million for the same period of 2014. The number of those transactions rose by 7.6 per cent to reach 7,452 transactions, compared to 6,928 contracts in the same period of 2014. Likewise, real estate transactions in 2014 shot up by 27 per cent to over RO2.9 billion, from RO2.3 billion witnessed in 2013. In fact, the real estate sector accounted for 10 per cent of the country’s gross domestic product (GDP) last year, contributing RO1.3 billion, against merely RO0.9 billion in 2009.
The country’s residential development can be broadly divided into two categories – affordable houses for middle income group and premium houses for the high-net worth category. As the demand for premium housing units has shown a growth in recent years, several real estate developers, including Saraya Bander Jissah, The Wave, Muriya and Alargan have massive development plans, mainly in the capital area.
The integrated tourism complex Saraya Bandar Jissah, which already started work, offers exclusive homes and two five-star beachfront hotels, as well as recreational and community facilities, on a beach surrounded by the Hajjar Mountains, just east of Muscat. With villas, apartments and hotels, the development is positioned sympathetically amongst 2.2 million square metres of undulating hillsides. The project is being developed by Oman’s tourism development and investment arm, Oman Tourism Development Company (Omran), in partnership with Saraya Oman, a subsidiary of Saraya Holdings, the leading international development company.
Another major proposed development is the $2.5 billion Omagine Project, which will transform a wide swath of the waterfront adjoining the airport into one of Muscat’s principal leisure and entertainment hubs. Covering an area of around one million square metres overlooking the Sea of Oman, the Omagine Project is proposed to be an integration of cultural, heritage, educational, entertainment and residential components. The main attraction is a theme park featuring seven pearl-shaped buildings, each approximately 60 feet in diameter, associated exhibition buildings, a boardwalk, an open air amphitheatre and stage, open space green areas, a canal and an enclosed harbour and marina area. Around 2,000 residential units will also be developed for sale as part of the development.
Also, after completing the first phase of Tilal complex, which mainly comprises the Muscat Grand Mall, residential apartments and office space, Al Madina Real Estate has started work on the second phase. The project is the largest mixed use development in Oman, combining a central place to live, a large shopping mall offering a host of regional and international brands, professional office space with the latest facilities, hotel apartments and underground parking – all spanning 250,000 square meters. The second phase will include a five-star business hotel with 300 rooms and forty luxury apartments, while in the third phase, plans are afoot to expand the Muscat Grand Mall.
Real Estate Index
As real estate market is developing over the years, Oman government started taking several important measures to bring in effective regulation, which will help promote stability in the market and avoid speculation. An important measure in this direction was the introduction of a comprehensive index called the Muscat Real Estate Index, a major initiative which will help give a clear indication on price movement. A unique initiative, the Muscat Real Estate Index was jointly developed by the Ministry of Housing, National Centre for Statistics and Information (NCSI) and the Oman Real Estate Association (ORA). KPMG calculates the index on the basis of information provided by real estate agencies in Muscat. The information provided was based on area and the type of properties (vacant land and constructed properties). The residential properties were sub-categorised into one-bedroom, two-bedroom, three bedroom and villas, while the commercial properties were sub-categorised under commercial villas, shops and offices.
Real estate transactions in Oman in the first four months ending April 2015 surged ahead by 68 per cent to RO1,638.9 million, over the same period last year, according to newspaper reports that quoted the bulletin released by the National Centre for Statistics and Information (NCSI). The fees collected for these transactions during the period stood at RO16.1 million, a growth of 12.6 per cent in comparison with last year. The value of sale contracts fell by 0.9 per cent to reach OR 391.7 million. While the number of sale transactions witnessed a decline of 5.2 per cent to 28,543 contracts compared to 30,093 contracts during the same period last year, the value of mortgage contracts increased by 115 per cent to reach RO1,241.1 million, compared to RO577.3 million during the same period of 2014. The number of those transactions rose by 7.6 per cent to reach 7,452 transactions, compared to 6,928 contracts in the same period of 2014, said reports.
The value of swap contracts till the end of April 2015 was RO6.1 million with a growth of 190.5 per cent in comparison with RO2.1 million in the same period of 2014, added reports. Mainstream media quoting Ministry of Housing says that investments continue to happen in the real estate sector and prices are expected to be stable across the segments this year. Newspaper reports that quote Oman Real Estate Association said fall in oil price has not impacted the sector. The government is extending efforts to prevent any negative impact on it by international economic fluctuations. The Ministry of Housing is implementing different plans and programmes in the housing sector to meet the needs in various governorates and regions and continue to give land, housing aid and affordable loans to citizens of low-income and social security families. Housing projects occupy an important position in the five-year development plans of the Sultanate. The real estate business including renting, buying or selling of villas, private or commercial buildings, as well as investment in land, is one of the important activities in the Omani economy.
According to Government data published in newspapers investment in the Sultanate’s real estate market has doubled since 2007 in tandem with the expansion in Oman’s economy. The major growth of the housing sector started in 2011 with the government distributing more residential plots to citizen. Prices across different real estate segments at the end of 2014 were not significantly different from what it was in 2013 and before. These are expected to remain so without any major change during 2015. In some areas in Oman like Ruwi, there is stagnancy in residential rent rates even in the case of relatively new buildings. In the case of old buildings, rents have actually come down in many places in Ruwi and surrounding areas. Big private sector groups in Oman, which employ huge expatriate workforce, have constructed residential buildings, especially for the expatriate workforce. After the rise in prices, businessmen found that owning their own residential buildings is better than renting the same for their expatriate workers.
Investments continue in the real estate sector. Since 2010 until the end of 2014, licenses were given for the construction of hundreds of residential buildings, some of which are still being built, making the supply of residential real estate much greater than the demand. Quite a high number of residential units planned for investment are still to be built.