Overseas real estate talent takes on Omani bureaucracy

June 2, 2024, 5:19 AM

People at a real estate fair in Cannes, France view a model of a proposed development in Oman

Restrictions on international investors
Companies work around bureaucracy
Oman market seen as undervalued

Oman’s bid to develop its expanse of beaches, mountains and deserts means it needs to attract overseas real-estate expertise, but recent government restrictions are hindering its ambitions.

In May Club Med said it would build its first Middle Eastern resort in Musandam. Abu Dhabi developer Eagle Hills is nearing the opening of its Mandarin Oriental-flagged residences in Muscat. A Donald Trump-branded villa project in the country also continues to attract investor interest.

The slew of ongoing development has “significantly” upped demand for professionals in architecture and design, strategic consulting, quantity surveyors, contracting and real estate marketing agencies, Ihsan Kharouf, head of Oman for Savills, told AGBI.

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”On the other hand, several real estate activities have been added to the list of those restricted to international investors in August 2023,” Kharouf said.

“This makes it far harder for international firms to enter the market, and it runs contrary to the recent trend of opening up many sectors to allow 100 percent foreign ownership.”

Last summer, Omani authorities included brokerage, valuation, building and owners-association management and other real estate-related services to a list of businesses fenced off from foreign investment.

The shift has at least one international company, which spoke to AGBI on condition of anonymity given the sensitivity of the issue, now considering a restructuring of its ownership or other strategies to comply with the new rules.

Because of the increase in activity over the past year, however, none of the industry pros that spoke to AGBI are planning to leave. They are all looking to expand in Oman or are taking steps to set up shop in the country for the first time, no matter the red tape challenges.

Anastasiya Kouzan, head of sales for Oman at Dubai-based Metropolitan Premium Properties, said her company has just established a foothold in the Gulf nation and partnerships with six high-end developers.

It plans to open a permanent office there later this year, after realising that many clients were looking to Oman for vacation purposes as well as, increasingly, to relocate their businesses.

“Previously Oman was a real estate market more for GCC investors, but now the branded residences are bringing to Oman investors from all over the world,” Kouzan said. “So this is why we are there.”

Among the many other residential and hospitality projects in the pipeline are the Sustainable City Yiti, an urban regeneration project on the outskirts of Muscat named Sultan Haitham City, and the $1.3 billion Muscat downtown and waterfront revamp project Al Khuwair.

Tourists on a dhow cruise in Musandam, where Club Med will develop its first Middle East resort

According to Arsalan Shaikh, a senior legal consultant in the real estate group at Al Tamimi & Company who formally joined the law firm’s Muscat office last year, Oman is trying to replicate the path that other GCC countries have taken.

It is tightening its grip on areas of real estate ripe with abuse and aims to depart from a regional legacy that in other places has led to highly speculative markets.

“Initially at least, you have to control those things that are easier to control: just allowing foreign entities to enter the market, they are always going to be more difficult to regulate than those entities which are based in Oman,” Shaikh said.

“But, as is the case in other GCC jurisdictions, I do see as the market matures that this kind of regulation will change and become more flexible later on.”

While foreign investors hustle for their slice of the Omani real estate pie despite increasing bureaucratic hurdles, data from the National Centre for Statistics and Information (NCSI) suggests that property transactions have actually been sliding in the first few months of this year relative to the same period in 2023.

Nevertheless, many industry pros remain bullish that this is just a blip.

“Other markets have become so expensive and may soon overheat,” Shaikh said.

“I think there is a sense among investors, and we’ve had inquiries from Eastern Europe, the far east, China, who are looking for value, and they see the Oman market as undervalued in many ways compared to Dubai and Abu Dhabi and other regions.”

While some new rules on real estate make life harder for foreign entrants, other recent or expected government actions – in the anti-money laundering, association management and valuation domains – are paradoxically triggering even more demand for veteran professionals from around the world, according to Kharouf.

Since 2021, the Ministry of Housing and Urban Planning has required developers and real estate companies to comply with requirements against illicit finance.

The central bank separately took steps in 2023 to expand lending to real estate projects, while authorities are currently laying the groundwork for a new real estate law that would streamline the existing regime for development, brokering, valuations and other realms.