"Al Mazaya Holding Co (K.S.C) a leading property firm in the region, signed a contribution contract with "Oman Construction" to share in a real estate investment portfolio in Oman with a capital of OMR 3.1 million. Al Mazaya's share is 40% while 12% is for Oman Construction and 12% for "Mina" real estate company. The remainder of the percentage is submitted for IPO from a chosen group of investors and real estate companies."

Weekly Real Estate Report

   

Al Mazaya Holding's Weekly Real Estate Report

Al Mazaya Report: Attraction of real estate investment in the Sultanate of Oman is increasing

Indicators show investment opportunities in low-cost real estate dedicated to young adults and first-time buyers

Economic conditions and the prevailing investment climate both have considerable impact on determining the type and number of investment opportunities available, in any given market. The ability to develop the structure and tools to keep abreast of local, regional and global developments gains substantial importance when we talk about attracting foreign investment towards major economic sectors. Given the recent levels of financial and economic uncertainty, investment opportunities require large-scale efforts in due diligence and focus.

In the long run, regional markets with evolved financial and legislative structures will ensure the continuation of activity across all major economic sectors, including real estate. This is because – regionally – the real estate industry remains one of the most important for both the public and private sectors and offers opportunities to offset the negative consequences of oil price declines.

Sultanate of Oman – Real Estate Overview

In this context, Al Mazaya Holding's Weekly Real Estate Report points out that the real estate sector, in the Sultanate of Oman, has moved from a phase of development and reclamation of lands, by way of sale and purchase by domestic and GCC investors, to a phase of diversifying its real estate products, in terms of its residential and commercial offerings.

The Sultanate's real estate market currently provides a large number of investment opportunities, although this currently rests on a package of incentives that help ensure the continuation of momentum from local investors. This is particularly relevant to developing areas like tourism, where the Sultanate is positioned to occupy an increasingly more prominent standing on the global tourism map. Moreover, investors can rely on the Sultanate’s commitment to capitalising on sound, yet flexible, economic policies that are able to respond to fluctuations in both neighbouring and global markets.

Assuming that Oman keeps pace with enacting global standards on economic policy, the current development and expansion taking place in the Sultanate’s economic infrastructure will further contribute to attracting both domestic and foreign investors. This is evident when you take into consideration the benefits of its investment climate across multiple industry sectors, the stability of the country’s economic and political system, an investment-friendly legal framework, and a flexible tax system.

Favourable Legislation

Al Mazaya’s Report further points out that the Sultanate's real estate sector has earned a good share of the government’s attention, with a view to introducing more amendments that are necessary to ensure the market's ability to compete at the regional level. Most recently, several amendments made to the Foreign Investment Law have provided increased openness and incentives, in relation to tax and customs. These recent inclusions are in addition to existing legislation that allows for licensed freehold purchases of all-inclusive tourism compounds and the purchase of reclaimed lands throughout all the Governorates (regions) of the Sultanate. It is worth noting that flexible conditions for land ownership by individuals and companies is largely in accordance with usufruct (long-term leasing) laws and contracts, with an additional stipulation that lands purchased for tourism projects must be reclaimed within four years from the registration date. The owner does, however, withhold the right to resell the constructed buildings at any time and, in addition, the title deeds for the property can also be passed onto the owner's heirs. These types of investments enjoy a tax exemption period of five years.

Infrastructure Development

Al Mazaya’s Report also adds that the real estate market in the Sultanate of Oman is one of the fastest developing markets in the region – in large part due to corrective actions being taken to provide an attractive economic environment for boosting activity and investment. This is particularly evident when looking at the real estate sector’s ability to take advantage of continued government spending on infrastructure projects.

Al Mazaya’s Report notes that investment opportunities in the Omani real estate market are present in many of the Sultanate’s cities and regions; therefore, investment opportunities are diverse and compatible with the aims and aspirations of a large number of investors. For example, the Muscat Governorate and all other major cities, including Salalah, Duqm, Al Buraimi and Barka, are currently attractive and experiencing high demand from domestic and foreign investors. Market indicators also reveal potential for further increases in demand, in harmony with their positive economic development and the vast areas of lands available.

On an administrative level, Al Mazaya’s Report suggests that the Omani real estate market would benefit from a more comprehensive database that provides detailed assessment of the quality and reliability of projects; thereby ensuring peace of mind to investors. This, in turn, will contribute to more positive and widespread support from the real estate sector, increase the rates of local, regional and global investment, and provide a solid foundation from which different types of investment decisions can be made.

Al Mazaya’s Report points out that such a database should including details related to the key areas for development and population-related needs, so as to identify the target categories for market analysis. Armed with such information, the planning of real estate investments can be brought into line with more internationally recognised norms for forming medium and long-term development strategies.

GCC Investment in Oman

When it comes to foreign investment, it is a well-known fact that GCC nationals account for the largest ratio of real estate ventures, into the Sultanate. This has typically included investments directed at undeveloped land and tourism projects. Al Mazaya’s Report points out that demand from GCC investors has seen a marked increase, in these areas, over the past few years – a direct result of the Sultanate's economic and political stability, continued government spending, and uninterrupted urban growth in major cities. Competitive land prices and market liquidity are also key factors in motivating GCC investors to look towards Oman.

Residential Real Estate Sector – Oman

In terms of the residential sector, Al Mazaya’s Report notes a decrease in the demand for houses, a drop in domestic purchasing power and a decline in the number of title deeds granted to GCC investors over the past year.

It is worth mentioning that while Oman is not a significant oil producer, compared to most of its GCC neighbours, the Omani real estate market is not immune to the effects of declining energy prices and revenues. There is also a tendency in the Omani government towards rationalising continued spending on development projects; however, a deficit in the government budget, for the current year, was recently announced, with 84 per cent of total revenues from oil accounting for spending on development and service projects. That said, Al Mazaya Report is confident that the Omani real estate market remains among the best investment opportunities in respect of real estate units for middle-income nationals. A rise in the demand for such properties, due to an increase in the Sultanate’s population, is largely being driven by the young adult and first-time buyers’ category.

Young Adults and Affordable Housing – Oman

Al Mazaya’s Report notes that there is a significantly young demographic of buyers in Oman, all of whom are looking to own affordable housing units and take their first steps onto the property ladder. It is worth mentioning that the construction of relevant real estate units is currently lacking; however, demand is high, so these locations should not be affected by market fluctuations, in the medium term.

Affordable or low-cost real estate units, aimed specifically at young adults and first-time buyers is expected to drive construction of such projects, based on the premise that demand for all-inclusive housing communities at affordable prices will increase over the next few years. On the other hand, oil price declines and its associated negative impact could affect the ability of young adults to own property, which may increase the likelihood of an upsurge in the pricing of housing units. The knock on effect may then have a negative impact on the pace of real estate investment into the Sultanate.

Conclusion

Al Mazaya Report forecasts that non-oil sectors are going to attain further growth in terms of productivity and contribute to the ongoing diversification of Oman’s income sources. The share of non-oil activity, in Oman, increased by 4.7 per cent, by the end of 2015, sparking confidence that the private sector will play an increasingly important role in advancing and activating investment activities, in the country. Of course, this will largely depend on the Sultanate's continued commitment to enacting comprehensive infrastructural development, including the ports, airports, roads, and communication networks.

Taking into consideration that the Omani government is focused on energising both domestic and foreign investments across a large number of industry sectors, key opportunities – and high returns – exist for investors in areas such as: public services, healthcare, logistics, manufacturing, tourism, and mining.

In short, the real estate sector is a key priority for the Omani government and this presents huge opportunities for real estate developers and investors, in the medium to long-term.

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