Industry Trend Analysis - Expat Law Positive For Commercial, Residential Building Growth - OCT 2017

BMI View: A new law allowing expatriates to own real estate will add upside to our residential building outlook in Oman and dovetails with the government ' s broader goal of stimulating economic diversification by promoting investment into tourism-related infrastructure.

A royal decree has allowed non-Omanis to buy land and units in integrated tourism complexes, according to the Ministry of Tourism, which we expect will add further impetus to the government's efforts to promote economic diversification and stimulate additional demand for residential and tourism-related infrastructure. The law marks the first time foreign nationals will be able to purchase property of any kind in Oman.

The government plans to build more than 5,000 homes for expatriates as part of five integrated tourism complex projects. The units will be built under an USD10.39bn programme. The Diyar Ras Al Hadd resort will include 700 residential properties, while the Omagine project in Seeb will have more than 2,000 homes. The Naseem A'Sabah scheme will involve building more than 1,200 residential units, five-star hotels, retail zones and yacht club. The Al Nakheel Project in Barka will include 1,436 residential apartments, and hotels and hotel apartments, villas and houses. We note that roughly 2mn expatriates (approximately 45% of the country's population) currently call Oman home, although these are primarily comprised of guest workers unlikely to be able to afford the high-end units the government plans to deliver. Instead, the newly available units in tourism complexes will target the type of affluent, international buyers who have fuelled Oman's emergence as a viable tourism destination over the last several years.

Tourist Arrivals & International Tourism Receipts
Tourist Arrivals (2014-2021)
e/f = BMI estimate/forecast. Source: National Sources, BMI

The law will capitalise on the growing international demand for vacation and tourism facilities in Oman. We note that total tourism arrivals have registered a consistent increase since 2014, with BMI projecting total arrivals to reach USD5.4mn by 2021, roughly double the 2014 figure. This is in line with the Omani government's ambition to promote economic diversification by attracting growing numbers of tourists as a means of lessening the country's dependence on oil - the government aims to increase the share of GDP generated by tourism to 5% by 2020 under the auspices of its Vision Oman 2020 plan.

Accordingly, we have noticed an uptick in tourism-related infrastructure projects, the most notable of which announced over the course of 2017 has been the USD1bn Mina Sultan Qaboos waterfront (see, ' Tourism Emphasis To Energise Construction Sector, ' June 26, 2017). The new law allowing foreigners to own land and property will likely add further momentum to this trend in the country's residential segment and incentivise the construction of similar higher-value residential projects that will cater to wealthy expatriates.