In common with its fellow Gulf states, Oman is preparing for a future without oil. It is this drive to diversify the economy away from a reliance on hydrocarbons that is behind the sultanate’s real estate push.
But Oman’s real estate industry has grown at a much slower pace than that over the border in the UAE.
Oman’s main focus is on building a modern tourism sector and the associated infrastructure. The residential property boom it is experiencing is almost a side-effect of this policy.
In a bid to attract foreign investment into the tourism sector, in 2006 Muscat relaxed strict property laws that previously prevented foreigners from owning a home in Oman and limited GCC nationals to a maximum of three plots.
It made the move to boost the number of hotels operating in the state, but real estate developers are now taking advantage of the more relaxed property laws.
The government’s bid to boost tourism is working. In 2006, the number of tourists visiting Oman hit 1.16 million, including 538,606 from outside the GCC. In 2003, the Oman tourism ministry recorded just 783,226 visitors to the country.
Since tourism projects are more profitable for developers when the schemes include residential sales, the government has encouraged the construction of integrated tourism complexes. Plots at these complexes must measure in excess of 200,000 sq m, but developers are permitted to build villas and apartments on the same site as the tourism resorts.
The move to allow these properties to be sold freehold to non-GCC nationals has breathed new life into the Omani real estate sector and inspired developers to design some landmark projects.
As the first integrated development to be launched, The Wave in Muscat is the most eagerly anticipated real estate project in Oman. Fears over the market appetite for resort homes were dispelled when the competition for the first release of 4,000 dwellings planned for the waterfront development was nearly 20 times oversubscribed. Some 24 nationalities were recorded among the eventual buyers.
The $1.1bn Wave project is being jointly developed by the government through Oman’s Waterfront Investments, the UAE’s Majid al-Futtaim Investments and the National Investment Funds Company, which represents the Omani Pension Funds and State General Reserve Funds.
The Wave will occupy a built-up area of 2.5 sq km along 6km of natural beach and will include an 18-hole golf course, marina, four luxury hotels and retail outlets.
The most expensive Omani project is Blue City (Al-Madina al-Zarqa), with a total investment cost of $20bn. Developer Al-Sawadi Investment & Tourism has brought in the award-winning London-based architect Foster & Partners to design the 32-sq km waterside city that will be home to 250,000 residents
Other major Omani projects include the $1.7bn Salam Yiti development, the Ras
al-Hadd eco-tourism scheme and the $1.6bn Omagine project to build a theme park, hotels and 3,900 residential units.
The enthusiasm that has met the early sales highlights the immense demand for residential properties in Oman, both from locals and foreigners, and as the market is still very much in its infancy, there is vast potential for growth.
“We see Oman where Dubai was about five years ago and we feel there is a lot of scope for development,” says Abid Junaid, executive director of Dubai-based ETA Star Properties, which in September formed a joint venture with the local OHI Group to build a OR400m mixed-use development on a 130,000 sq m site in the centre of Muscat.
This project will supply housing for GCC nationals only, but ETA is also looking at opportunities to develop an integrated resort project.
“For the integrated projects, we know that what is coming to the market is a relatively small number in terms of what the potential is,” says Junaid.
He estimates that the prices of properties launched a year ago have appreciated by 50 per cent on the back of this limited availability.
The Omani government has been cautious in opening up its property sector, insisting that development should not come at the expense of its culture and customs, or the environment.
It is also keen to avoid the pitfalls encountered by other Gulf states, where rampant construction has overtaken investment in infrastructure and developers are sometimes left waiting for power and water connections.
In Oman, efforts are made to ensure transport, communications and public utilities keep pace with real estate projects. OHI and ETA, for example, had to wait for a dual carriageway to be completed before their project could go ahead.