Housing needs in Oman are projected to grow in leaps and bounds in the coming years.
Oman’s housing sector is still in a nascent stage when compared to its GCC peers, despite government taking a series of initiatives to build affordable houses for its citizens. The housing sector needs not only more involvement from large developers, but also availability of ample mortgage finance from lending institutions.
With more than half of Oman’s 2.7 million people under the age of 20, housing needs in Oman are projected to grow in leaps and bounds in the coming years. The Ministry of Housing had completed 2,000 low-cost housing units worth RO40 million last year, while another 2,000 low-cost houses will be delivered in 2012, making it possible for those at the bottom of the pyramid to own a house. However, this is not enough for meeting the housing needs of the entire population, which include middle income people.
Apart from lack of finance for affordable housing projects, slower approval processes create a challenge for the entire residential market in Oman. Further, limited supply of land for developers who build low cost houses poses another challenge.
Government spending
In an effort to boost the affordable housing segment, the government allocates RO80 million every year through different housing assistance programmes. During the fifteen month period (2011 and March 2012), 3,174 housing units with a total cost of RO60 million were offered through the Housing Assistance Programmes, besides providing interest-free affordable housing loans to 400 families with a total cost of RO7 million.
The ministry of housing has been supporting and financing affordable programmes for low-income and social security families through social housing programmes.
The Ministry of Housing provides adequate housing for families through the Housing Assistance Programme, the Housing Loan Programme and the Housing Units Project. The Housing Assistance Programme aims at building and restoring houses for families of social security and low-income, while the Housing Loan Programme provides soft, free interest loans not exceeding RO20,000 for Omani families.
The number of families benefited from the Social Housing Programmes since its inception and until the end of March 2012, reached 29,600 families, with a total cost exceeding RO475 million. As much as RO360 million has been allocated for the Housing Assistance Programmes during the current five-year plan. The ministry aims at helping more than 18,000 families during the current five-year plan period, while soft loans will be offered to more than 2,500 families in the next three to five years.
Shortfall of housing units
Despite all these initiatives, there is still a shortage for affordable houses in Oman, as majority of projects developed by private real estate firms are integrated tourism complexes or luxury apartments aimed at upper middle class customers. A study in 2011 showed that Oman has an estimated shortfall of about 15,000 housing units.
However, the extent of housing shortfall in Oman is the lowest among seven countries in the Middle East and North Africa (Mena) region. These countries have a combined shortfall of more than 3.5 million affordable dwellings, as the real estate industry has failed to provide sufficient housing units to meet the required demand, said Jones Lang LaSalle in a study report.
Focusing on seven major markets, the report said that while governments across the region are increasing their attention on the supply of new homes, demand is far out-stripping supply as the region experiences population growth around twice the global average. With a young and fast growing population, the report estimates that there remains a combined shortage of more than 3.5 million affordable dwellings across the major markets within Mena region and that demand will continue to outstrip supply for at least the next five years.
The extent of this shortfall varies from more than 1.5 million units in Mena’s most populous Egypt, to just 15,000 units in the Sultanate. The major factors that hinder the supply of affordable housing include high land values which have reduced access to affordable land and high capital costs for associated infrastructure development such as electricity and sewerage.
High-end leisure
Several property developers, including major layers like Muriya, Muscat Hills, Alargan and the Wave, have massive development plans at different stages of completion in various locations spread across the country.
Muriya, a joint venture between Egypt’s Orascom Development Holding and Oman government’s tourism investment arm Omran, is now developing two major integrated tourism complexes – Jebel Sifah and Salalah Beach. Muriya’s Jebel Sifah and Salalah Beach projects are part of integrated tourism complexes, which allow 100 per cent foreign ownership.
Spread over an area of 6.2 million square metres, Jebel Sifah is home to luxurious freehold apartments and villas of diverse architecture and style, four five-star hotels and two marina boutique hotels, up to 200 berth inland marina and marina town, retail venues and restaurants cafes.
Likewise, Salalah Beach is spread over an area of 15.6 million square metres with 8.2-km beach front. This integrated tourism complex will comprise of high-end luxury freehold apartments and villas, its own shopping and retail outlets, five five-star hotels and two marina boutique hotels, an 36-hole PGA Golf Course, a 200-berth inland marina and a marina town, restaurants and cafes.
Muriya recently opened a 100-berth marina at its upscale Jebel Sifah town, which overlooks the turquoise expanse of the Gulf of Oman. The inland facility was unveiled at a special soft-opening gala that also showcased Muriya’s ambitions to position Jebel Sifah as a much sought after lifestyle destination and leisure hotspot on Muscat’s shores. The new marina will serve as a vibrant hub for yachters, recreational boaters and others with a penchant for nautical adventure.
Similarly, Alargan International Real Estate Company, the Kuwait-based Real Estate developer, has launched Qurm Hills project. The development, comprises of 109 plots, including road networks, service facilities and landscaped park spaces including a variety of residential units in addition to retail, commercial and office space. The total size of the Qurm Hills project spans 164,900 sq metres with a built up area is 119,000 sq metres, consisting of 109 plus plots. The average size of the plot would be 1000sq metres.
In yet another development, Al Khonji Real Estate & Development, which is popularly known as AQAR, is building their newest real estate project Rimal. Once completed, Rimal will be one of the largest of its kind in Muscat covering 50,000 sqm comprising 254 apartments, high-end leisure facilities such as two private gyms, a choice of two swimming pools for children and adults, a shopping mall, climate controlled corridors and three levels of underground parking – making Rimal one of the most convenient places to live in Muscat. The Wave Muscat and Muscat Hills, have announced massive expansion programmes, which are expected to enhance availability of luxury homes.
The first phase of Tilal complex, which mainly include the Muscat Grand Mall, residential apartments and office space, has already opened for occupation. Developed by Al Madina Real Estate, the project is the largest mixed use development in Oman, combining a central place to live, a large shopping mall offering a host of regional and international brands, professional office space with the latest facilities, a health club, hotel apartments and underground parking – all spanning 250,000 square metres. The second phase will include a five-star business hotel with 300 rooms and forty luxury apartments, while in the third phase, plans are afoot to expand the Muscat Grand Mall.
Increasing over supply
Meanwhile, the average rental values of residential accommodation have fallen and a further reduction is foreseen in the coming months in view of increasing over supply. The residential leasing market in the Sultanate has seen a decline in activity over a year. In fact, rising rental values and a shortage of residential properties up until mid-2008 led to significant development activity, which is now resulting in an over-supply of residential rental property, according to a survey conducted by Cluttons.
There is a significant supply of office space that will become available within the capital area soon, which is likely to result in further reductions in rental values. In early 2008, there was limited office availability across the market, which resulted in demand out-stripping supply. There is still considerable demand for office space in Muscat, particularly from smaller (100 to 300 square metres) space occupiers. The Cluttons survey found that Muscat currently has approximately 300,000 square metres of retail space in purpose-built retail centres.
