Oman recently announced that expatriates can now purchase real estate assets outside the Integrated Tourism Complexes (ITCs) based on two categories. Investing in assets between RO250,000 and RO500,000 would entitle investors to a five-year extendable second-class residency, but this only applies to residential units. An investment of over RO500,000, however, entitles the investor to a ten-year extendable first-class residency, while also allowing the acquisition of commercial and industrial assets.

Anyone who wishes to make an investment of under RO250,000 can still do so, only in the ITC projects or usufruct schemes. Some governorates are still restricted as are other areas which are deemed to be of strategic importance.

The initial reaction to this policy change has been somewhat polarised. One viewpoint is that this will be extremely beneficial to Oman as it can trigger a flood of investment into a wide range of assets beyond the standard ITC residential unit, based on the belief that there is significant pent-up demand for such assets.

The opposing view is that this decree will have little impact on the market, arguing that the level of investment required to make a dent is much higher when compared to other regional or global markets. For example, within the GCC in Bahrain, Qatar and the UAE, investments in properties valued in the range of RO50,000 and RO100,000 can help obtain residency. For non-ITC assets, an investment of RO250,000 is still significant and can potentially price out certain categories of buyers. When it comes to attaining residency, expatriates can already gain those rights through purchasing an ITC residential unit.

In our view, the impact will be defined somewhere in between these two viewpoints.

The number of expatriates in Oman has been dropping on a yearly basis since 2016 following Omanisation efforts, and we are unlikely to see a change in government policy to reverse this trend. While it is possible that some expatriates will seek residency through the minimum RO250,000 acquisition, such purchasers already have plenty of economical options of apartments to choose from within ITC projects.

However, buyers might consider purchasing a residential villa outside of ITC projects given the numerous value-for-money options available – in adjacent non-ITC locations, it is possible to purchase villas for 50-60 per cent of the cost of an ITC villa. On balance, the benefits of purchasing real estate assets valued at less than RO500,000 appear few and small, and therefore might not attract the desired level of interest.

The real beneficiary of the new law in our view will likely be the RO500,000-plus option which allows the acquisition of industrial or commercial assets, in addition to residential assets. This option is also attractive because it does not compete with residential assets that expatriates can already acquire within ITC projects at better price points, and opens up new investment avenues.

It is likely that we will see interest from expatriate businessmen in Oman in owning factories, logistics warehouses, retail units or offices. Businesses will be able to benefit from the greater security afforded by ownership and can potentially insulate themselves from future increases in rental rates. Owners would also have more control over their assets and would be encouraged to make capital investments in the property, which would not have been viable in a leasehold arrangement.

Ultimately, we consider that this is a positive move as it adds flexibility to the market, specifically to expatriate business owners with commercial or industrial occupational requirements in the country, and signals the further opening up of the sultanate to foreign investors.

Ihsan Kharouf is the head of Oman office at Savills Middle East

The views and opinions expressed in this column are solely those of the author and do not necessarily represent those of Muscat Daily or Apex Press & Publishing.