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Friday, April 2, 2010

Visa rules attract property investors in Oman

Bradley Hope

Last Updated: April 01. 2010 10:57PM UAE / April 1. 2010 6:57PM GMT
MUSCAT // Oman’s property market is showing new vitality, thanks in part to the government’s easing of its visa policy.

Like other Gulf markets, sales of new homes in Oman slowed to a crawl after the global financial crisis. Prices in Muscat dropped by an average of between 30 and 40 per cent, with high-end villas falling even further, according to the property consultancy Cluttons.

Now, with the new visa policy in place for several months, sales have picked up and prices have stabilised in three of the country’s largest developments: Muscat Hills, The Wave and Shangri-La Barr al Jissah. Expatriate homeowners in special zones can now obtain two-year visas that are renewable.

“There has been a pickup” since last month, said Francis Selvaraj, the head of professional services at Cluttons. “There is more certainty and confidence. A lot of funds are also coming back into the market.”

Oman’s success in sparking a small rebound in sales could be a model for Dubai as it struggles with a sluggish market and a confusing visa process.

Nicholas Maclean, the head of the regional office of CB Richard Ellis, a property consultancy, says a lack of clarity about the UAE’s residency visas was a “barrier to entry” in Dubai and was inhibiting buyers who were intent on taking advantage of the market’s significantly lower prices. Oman’s policy could be partly replicated in the Emirates, he said.

“It would not by itself turn around the market,” Mr Maclean said. “It’s one of those inhibitors that if taken away would lead to a higher level of sales interest.”

West of downtown Muscat, the Wave, a dense collection of white villas along the coast, launched last month its first sales drive since August 2008 and has sold 140 of 168 apartments.

Over the past 18 months, the developer, which is a joint venture between Majid al Futtaim and the Omani government, has changed plans for the project to include apartments that are more affordable than the luxury villas it had featured.

In the recent sales push, apartment prices ranged from 69,000 rials (Dh659,000) to 110,000 rials, while town houses were priced at about 110,000 rials to 160,000 rials.

“We went into the market with great trepidation, but it has been a success,” said Michael Lenarduzzi, the chief executive of The Wave. “The visa has been important for this … It’s a true, two-year visa that is renewable.”

About half of the buyers in the recent sales push were expatriates, many of whom had lived in the country for decades and needed a residence visa to be able to retire in the country.

The other half, Omani buyers, saw the project as a “long-term investment”, Mr Lenarduzzi said. The visas were making Oman a more attractive location for expatriates from Europe eager to live in a tax-free environment, he said.

The residency visas are granted to buyers in integrated tourism complexes, which are developments that include the tourism components that are important for the country’s economic diversification.

Muscat Hills, a collection of luxury homes and apartments around a golf course near the airport, has seen an increase in secondary market sales so far this year.

The project was near liquidation two years ago, but has been restructured and will begin delivering homes to buyers next week.

Chandra Lahiri, the group managing director of the project, said the Oman government was considering widening its visa policy even further to allow people on two-year residency visas to also work.

The government is being very, very supportive of these projects,” Mr Lahiri said. Still, Oman is dealing with the impacts of the dramatic slowdown that began in late 2008.

Many projects have been scrapped or put on hold indefinitely, while developers struggle with a lack of finance and an unwillingness of buyers to commit to purchasing homes that have yet to be built.

This has put a damper on the country’s plans to diversify the economy towards tourism.

Salam Yiti, a huge resort project by Sama Dubai and Omran, the Oman government-owned tourism developer, has stalled completely. Wael Lawati, the chief executive of Omran, said the two sides were in discussions about how to move the project forward. If those talks fail, Omran may have to find a new partner to finish the project, he said. Sama Dubai has been merged with other property developers at Dubai Holding, which is owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, under Dubai Properties Group.

Oman’s largest tourism and property project, Blue City, has fallen apart because of a lack of sales. Located 45 minutes to the west of Muscat, the project was originally announced as a 20-year venture encompassing 32 square km with hotels, schools, apartment buildings, villas and recreation areas. The board of Al Sawadi Investment and Tourism Company, the parent company of the project, sent out a notice in February calling for investors to vote on the “dissolution of the company and filing subsidiaries”. The meeting was postponed to March 15, but the company has not disclosed any decision about the fate of the project.

Property insiders in Oman believe the project will be liquidated and bought up by another developer to be finished on a much smaller scale. Moody’s Investors Service, which rates the bonds issued by Blue City to fund construction, said that as of November last year, Blue City had sales of US$74.6 million (Dh273.9m), compared with a target of $860m.

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