Omani officials are considering a new law that will address potential problems in the real estate industry arising as a result of the global financial crisis, according to the recent GCC real estate report by Global Investment House.

“Proposed laws will include provisions requiring the establishment of escrow accounts for the sale of property by developers who may use the money in the escrow account only for developing the project and would also include other provisions that restrict developers from advertising or marketing the sale of units before obtaining written approval from government authorities,” the report said.

Flattened demand

Elaborating further on the real estate market of Oman, Global said that slower economic growth is expected to lead to a flattening demand for office space in the Sultanate in 2010. However, residential demand in Oman has been to a great extent endogenous. The population in Oman is growing and around 43 per cent of Omanis are under the age of 14. Industry sources estimates that 20,000 to 25,000 units are needed over the next few years to keep up with increasing demand.

“But, due to the financial crisis and the lack of financing we expect lower demand in the short term,” said the Kuwaiti investment company.

Projecting the impact of the global crisis on the hospitality sector the report said, “In the medium term through 2011, a major decline could be seen in the influx of tourists, as 44.4 per cent of Oman’s tourist count is from United States, UK and other major developed economies.”

The major projects in Muscat are expected to add about 5,500 rooms to the already existing 4 and 5-star rooms through 2012 leading to an oversupply said the report. The investment company has a conservative medium term outlook for the hospitality sector.

On the projects front, the GCC region as a whole witnessed a year-on-year decline of 13.5 per cent in total value of ongoing and announced projects by the end of November 2009 as per MEED projects data.

The largest hit was seen in UAE reporting 25.4 per cent of decline. Kuwaiti market followed with 9.1 per cent of decline while Qatar retreated by 5.6 per cent. On the other hand, Saudi Arabia and Bahrain real estate sectors increased by 0.5 per cent and 18.3 per cent respectively. Finally, the total value of on hold projects stood at $472.1 billion. UAE accounted for the largest share of on hold projects 78 per cent followed by Kuwait and Saudi Arabia at 8.7 per cent and 8.3 per cent respectively, the report said.

Commenting on other GCC nations, the report highlighted that Kuwait residential real estate market is expected to pick up as it continues to witness a huge shortage in supply. Moreover, extended credit for the segment is expected to pick up in the medium term.

Qatar real estate market is expected to stabilise after a declining trend. Demand will continue to be based on fundamentals rather than speculations thus reflecting real prices and rentals.

However, UAE real estate market continued to slide during the third quarter of 2009, with the steepest decline witnessed in Dubai. Based on the Dubai World’s debt restructuring announcement, “We expect further corrections in Dubai,” said Global Investment House.