The real estate market enjoyed healthy macroeconomic environment in 2005. The number of plots distributed increased from 11,925 plots in 2003 to 35,359 plots in 2004, with the residential sector registering 85.7 per cent. Again, most of the real estate activity was concentrated in the capital city Muscat, representing around 38 per cent of total plots distributed in 2004.

Recent studies show that at the Omani real estate sector is driving by a growing population, young demography, inflow of expatriates labour, low interest rates for Omanis and moderate for expatriates, financing options liberalised but often beyond the scope of most expatriates, and low construction costs. The foreign ownership law is expected to further raise the real estate demand. Currently, the stretch between Al Ghubra and Al Azaiba is fast developing into one of the most sought-after addresses in town.

Because this stretch of land has Sultan Qaboos Sports Complex, the Royal Hospital, five-star hotels like Majan International Hotel, The Chedi, Gulf International Hotel, shopping malls like Lulu Hypermarket, Safeer Hypermarket, schools like the Indian School Al Ghubra, Bangladesh School Muscat and many other private Omani schools, the area has gained upmarket profile. The prestigious monument in the centre, the Grand Mosque, has added extra allure to the area. 

Chairman of the W.J. Towell Group Hussain Jawad said, "Oman has now come on the tourist map of the world because of its political stability, stable oil prices, and the overall positive perception of the country. This has brought more and more people to the Sultanate and, hence, the need to provide them with housing has gone up."
He further stated that "the increasing demand for new houses stems from the fact that most oil companies have been doing very well and are now on the lookout for more premises for their staff, whether Omanis or expatriates. Also, the encouragement to young Omanis and the distribution of new plots to them to set up individual establishment has been instrumental in the boom in new constructions." As for the stretch between Azaiba and Ghubra, Jawad said that it has begun developing because other upmarket localities like Shatti Al Qurum have become saturated. The W.J. Towell Group has implemented several prestigious residential projects in different parts of the city,

Administration Manager of Unique Contracting Company Yogesh Parikh remarked, “There are many new constructions all over the city but most are happening in Ghubra and Azaiba area. This is probably because a lot of vacant plots are available there. Somehow, people prefer this area." Parikh further pointed out that his company is involved in 10-12 new projects all over the city between Al Wadi Al Kabir to Al Mawaleh, including Al Ghubra, Al Azaiba, Al Khuwair, Al Qurum, Madinat Al Sultan Qaboos.

The short supply of cement is currently a problem and construction companies have to wait long for their supplies. Commercial Manager of Arabian Construction Enterprises Sam Fernandes said, “The boom in the construction industry has suddenly begun and all construction companies are surprised. There is a preference for Azaiba and Ghubra because it is convenient, well connected to several civic utilities as well as the ministries area at Al Khuwair."

He added, “As soon as a building is built, it gets fully booked within a month, which is quite surprising. Also, I believe, it is easy to get bank loans for buying property in this area as compared to other areas in the city. Real estate prices are also cheaper in this area than other areas which have become saturated. The shortage of construction labour/carpenters and cement are major problems."
Some builders and owners of construction companies say the sudden acceleration in construction activity in this area would subside after all the vacant plots are given away. Like every new locality, new constructions reach a saturation point, and the Azaiba-Ghubra area will be out of demand after a few years.

Marketing Manager of Oman Cement, which is chiefly responsible for the supply of cement to numerous construction companies in Oman, Amitabh Saha, said that "there is no serious problem with regard to the availability of cement, and we are able to meet the current demand. In view of the high demand, we are also importing cement from India to prevent having waiting lists of customers."

He further pointed out that apart from Azaiba and Ghubra, there is a great demand for cement supplies all over Oman, especially in Sohar where new industrial projects are underway. Banks and housing finance institutions are more keen on providing housing loans to those seeking homes in new projects in the outskirts of the city, he said, adding that "the main cause for the construction boom is the massive cash liquidity in the Sultanate and this, in turn, provides people with the means to invest in property. This phenomenon will continue for at least 6-7 more years."

Saha also drew attention to the fact that "there has been an equal demand from residential as well as commercial projects. Most of the constructions which can be seen between Azaiba and Ghubra are old projects that are being completed on plots allotted earlier. As for now, the demand is rising at Al Mabela and Al Khoudh where several new plots are being acquired for new building projects."

He elaborated, “The construction boom in Oman is part of a chain effect currently being experienced all over the Gulf. In fact, construction is booming much greatly in Dubai. In Oman, however, many new projects get delayed or held up due to shortage of construction labour. Once this problem is solved, the pace of new constructions will gallop.”

Surveys and market studies carried out by esteemed firms, such as the Global Investment House (Kuwait), point out that the Oman's residential segment witnessed a major price appreciation in 2005. During last year, land prices, especially prices of lands adjacent to mega projects, have shot up. Speculative buying from GCC investors was cited as the reason for the appreciation in prices.

A recent Royal Decree expands foreign ownership rights, which were formerly restricted to GCC nationals, to include non-GCC nationals. The Ministry of Housing will shortly issue executive regulations of the new law. Large tourism-related projects like The Wave, The Muscat Golf Course, and Blue City are expected to benefit from the law.

Work on The Wave has driven up the prices of adjoining seaside plots in Azaiba, rising from RO100 per sq m to over RO 220 per sq m in less than a year. As more GCC investors purchase lands, the trend of escalating prices is likely to continue. More tourism-related projects are likely to come up because of government subsidy to developers of such projects.

The report states that areas adjacent to the government’s mega projects in tourist-designated zones, such as "Al Azaiba", which is close to "The Wave" project, and the Sohar industrial area are expected to witness highest escalation in prices.
Residential rents have climbed by 25 per cent year-on-year basis in 2005. The positive outlook of the economy, the influx of expatriates, the need for quality housing, and, above all, the recent announcement of foreign freehold ownership law will see increased activity in the residential segment. 

Also because of the upbeat state of the economy, the commercial property segment witnessed a major shift from a stagnant stage characterized by weak demand and lack of foreign investments to a shortage of supply situation because of increase in number of new companies setting up base. Demand for high-quality commercial space has started to pick up recently, creating a shortage of office space and inducing an increase in commercial rents.

With the demand for office space outstripping supply, monthly rentals have gone up from RO2.5 per sq m in 2004 to RO6-7 per sq m in 2005, and yields are currently ranging between 9-10 per cent, which is low compared to other GCC countries. Demand and returns on commercial space is also likely to pick up, but the retail segment may not witness fundamental changes in the short run.

The industrial segment too witnesses a huge transformation with the government encouraging the manufacturing sector under its diversification plan. The government has been trying to position Sohar Port as an industrial hub. Sohar itself is undergoing radical transformation with around US $12 billion worth of developments in the pipeline.

The government has also been very supportive to developers of new projects, giving out lands on long-term leases at very low annual rental rates of RO0.75 per sq m to big companies. Five major projects have been already announced, namely Sohar Refinery Project, Sohar Methanol Project, Oman-India Fertilizer Project, Ferro-Chrome Project, and Sohar Fertilizer Project. Of these, work has already progressed on Sohar Refinery Project and the Oman-India Fertilizer Project.

The demand for industrial space will also pick up as the government continues to open up the sector for foreign investments. As more foreign investments pour in, it will, in turn, boost the residential sector as more expatriates will seek housing.
Since the tourism sector is one of the major targets of the government's diversification plan, the government has undertaken several measures to revive the sector, starting with the establishment of the Ministry of Tourism in 2004. One of these measures is the freehold ownership law allowing foreigners to own real estate in designated integrated tourism-related areas on a freehold basis.

After a long period of recession, the hotel business picked up last year. Hotel occupancy rates are close to 100 per cent and there is already a massive shortage of hotel rooms. As tourism picks up, more than 1000 hotel rooms will be needed at least in the next three years.
With more changes to come, the real estate market is expected to gain further momentum in the short to medium term. Real estate is set for a bright future.