Breaking Oman’s Real Estate Pressure on Expats

Oman recently announced that expats can now purchase property outside of Integrated Resorts (ITCs) in two categories. Investing in assets between RO250,000 and RO500,000 would entitle investors to five-year extendable second-class residence, but this only applies to residential units. An investment of more than RO500,000, however, entitles the investor to a ten-year extendable first-class residence, while also allowing the acquisition of commercial and industrial assets.

Anyone who wants to make an investment below RO250,000 can still do so, only in ITC projects or usufruct schemes. Some governorates are still restricted, as are other areas deemed to be of strategic importance.

The initial reaction to this change in policy was somewhat polarized. One view is that this will be extremely beneficial for Oman as it can trigger a flood of investment in a wide range of assets beyond the standard ITC residential unit, based on the belief that there is a significant pent-up demand for these assets.

The opposing view is that this decree will have little impact on the market, arguing that the level of investment required to make a dent is much higher compared to other regional or global markets. For example, within the GCC in Bahrain, Qatar and the United Arab Emirates, investments in properties valued between RO50,000 and RO100,000 can help obtain residency. For non-ITC assets, an investment of RO250,000 is still significant and can potentially overvalue certain categories of buyers. When it comes to obtaining residency, expatriates can already obtain these rights by purchasing an ITC residential unit.

In our view, impact will be defined somewhere between these two points of view.

The number of expats in Oman has been declining every year since 2016 as a result of Omanization efforts, and we are unlikely to see a change in government policy to reverse this trend. Although it is possible that some expatriates will seek to reside via the minimum acquisition of 250,000 RO, these buyers already have many economical options of apartments to choose from in the ITC projects.

However, buyers might consider buying a residential villa outside of ITC projects given the many value for money options available – in adjacent non-ITC locations it is possible to buy villas for 50-60% of the cost of an ITC villa. . Overall, the benefits of buying real estate assets valued at less than RO500,000 seem rare and small, and therefore may not generate the desired level of interest.

The real beneficiary of the new law, in our view, will likely be the RO500,000-plus option which allows for the acquisition of industrial or commercial assets, in addition to residential assets. This option is also attractive because it does not compete with residential assets that expatriates can already acquire through ITC projects at better prices, and opens up new investment avenues.

It is likely that we will see interest from expatriate businessmen in Oman to own factories, logistics warehouses, retail units or offices. Businesses will be able to benefit from the greater security offered by ownership and can potentially insulate themselves from future increases in rental rates. Landlords would also have more control over their assets and be encouraged to make capital investments in the property, which would not have been viable in a lease agreement.

Ultimately, we see this as a positive move as it adds flexibility to the market, especially for expatriate business owners with in-country commercial or industrial work requirements, and signals the continuation of the opening of the sultanate to foreign investors.

Ihsan Kharouf is the head of the Oman office at Savills Middle East

The views and opinions expressed in this column are solely those of the author and do not necessarily represent those of Muscat Daily or Apex Press & Publishing.

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