Oman widens its real estate market to foreign investors

Oman is further opening up its real estate market to foreign investors by giving them access to a wider range of residential properties as part of reform initiatives aimed at improving the country’s fiscal position.

The move is outlined in the Medium-Term Fiscal Plan of the Sultanate, which also stated that it is looking at introducing a personal income tax on higher earners.

According to the plan, “The Ministry of Housing and Urban Planning is adopting a package of measures that will work to revive the real estate market in the Sultanate”.

This includes “opening the door to non-Omanis to own real estate residential units in multi-story commercial residential units in certain areas”.

As per the tourism ministry’s website, the property can currently be purchased in Oman by non-GCC nationals, but only inside integrated tourism complexes (ITCs) such as the capital’s Al Mouj and Muscat Hills resorts and the Salalah Beach Resort. There are 13 ITCs in the Sultanate.

Aditi Gouri, Head of strategic advisory and research at Cavendish Maxwell states that the new regulations grant rights “to own limited lands and properties within multi-story buildings”.

“There are still certain restrictions, whereby the percentage of the sale to expats should not exceed 40 percent of the units in a commercial and residential building or 20 percent of a single nationality,” she added.

Other measures aimed at improving the property market include licensing rent-to-own schemes and allowing payments by installments.

According to Matthew Wright, head of consultancy at Savills Oman, Oman’s real estate market has been “under pressure since 2015” as a result of lower oil prices and has been affected further by the COVID-19 pandemic.

“Residential rental values in Muscat dropped by an average of 30-40 percent from 2014 to 2019 and have seen further reductions of 10-20 percent over the course of 2020,” he stated.

Mr. Wright added that one major difference with the new rules is the residential properties have residency rights within ITCs, but buying outside could limit their appeal.

“We understand that the Ministry of Housing & Urban Planning may re-assess whether purchasing a property outside an ITC project should include residency rights for non-GCC nationals in the future,” he further stated.

The Medium-Term Fiscal Plan of Oman sets out a series of measures aimed at reducing the budget deficit of the Sultanate by spending cuts and revenue diversification. In addition to the plans for income tax on higher earners, as of April next year, Oman will implement VAT at a rate of 5 percent, improve tax administration and collection, and look to improve the returns of state-owned firms.

Labour market changes are being suggested to make it more competitive and the Sultanate is preparing to allow visa-free entry for more than 100 nationalities to improve tourism.

According to the latest predictions from the International Monetary Fund, Oman’s economy is expected to contract 10 percent this year and 0.5 percent in 2021. The fund forecasts that this year the Sultanate will run a fiscal deficit of 18.3 percent and that by the end of the year its debt-to-GDP ratio will grow to 81.3 percent.

Efforts already undertaken to cut government spending by 10 percent this year would help reduce the deficit by $2.26 billion (870 million Omani rials), according to the government’s Medium-Term Fiscal Plan. In line with the fiscal strategy, cutting water and electricity subsidies to zero by 2024 would help the Sultanate reduce expenses by 2.07 billion rials and raise revenue by 1.39 billion rials.

The sultanate hopes to be able to hold debt-to-GDP at around 80 percent by 2024, by adopting measures in the plan. Without the measures, it forecasts an increase in the ratio to 128 percent.