Developers seek solutions to real estate challenges

Observer

21-05-2025

MUSCAT, MAY 21
The real estate market in the Sultanate of Oman has witnessed notable activity in recent years, particularly with the launch of Smart City projects such as Sultan Haitham City, and integrated residential neighbourhoods under the 'Sorouh' initiative, all of which aim to provide a comprehensive urban environment aligned with the goals of Oman Vision 2040.
However, this momentum faces several obstacles that threaten the pace of growth and investment in this vital sector chief among them being weak purchasing power among citizens, high construction costs, and land development challenges.
In this context, the Observer spoke with several prominent real estate developers during the 20th Oman Real Estate Conference and Design and Build Week, where they outlined the major issues confronting the sector and proposed realistic solutions to enhance market efficiency.
FINANCING: THE MAIN BOTTLENECK
Nasser Al Badi, General Manager of Al Badi Investment Group, emphasized that the concept of integrated residential neighborhoods, introduced by the Ministry of Housing and Urban Planning about four years ago, marked a qualitative leap in the housing sector, with the pilot project 'Hayy Al Naseem' initially showing strong sales. However, he noted that it soon faced marketing difficulties due to citizens' limited access to financing.
'It's unrealistic to expect citizens to purchase homes costing between RO 25,000 and 50,000 when their monthly income barely covers basic needs. Banks lend to those earning RO 325 a month, then deduct OMR 150 in repayments—how can someone live on the remaining amount?' Al Badi lamented.
He clarified that the problem isn't with the integrated neighborhood concept itself, but with the absence of financing mechanisms that align with citizens' incomes. He proposed long-term loans extending up to 50 years, with monthly deductions capped at 20–25% of income to ensure a dignified standard of living without overwhelming debt.
Qais al Bahri, CEO of Dream Villa, described housing finance as the 'fundamental dilemma,' stating that the challenge isn't legal but financial—where loan ceilings are not in line with citizen incomes or current property prices. He suggested that collaboration with banks, as seen in Saudi Arabia, could create holistic financing solutions.
RISING CONSTRUCTION COSTS
The rising prices of construction materials, along with permitting and approval fees, have created additional pressure on both developers and buyers.
Al Badi explained: 'To start a project, we have to pay thousands—RO 7,000 for mining approvals, RO 3,000 for environmental permits, and RO 18,000 for civil defense clearance. These fees ultimately inflate property prices.'
Al Bahri attributed the increase to global factors beyond local control, stressing that reducing construction quality to cut costs is not an acceptable solution.
MORE REGULATORY REFORMS NEEDED
Both developers acknowledged notable progress in real estate laws over recent years.
According to Al Bahri, the Ministry of Housing has become more flexible, offering easier eligibility for housing ownership. For instance, citizens can now purchase property even outside their native governorates, and support can reach up to RO 30,000 or even RO 50,000.
Al Badi praised the Ministry's escrow account system, which he described as an important regulatory measure that helps prevent real estate fraud.
ABUNDANT LAND BUT LIMITED INFRASTRUCTURE
Commenting on claims of land scarcity in some governorates, Al Badi denied there is a shortage of land, stating: 'We have thousands of unused plots, but the real issue lies in the lack of infrastructure—areas without water, sewage, or electricity.'
Al Bahri agreed, noting that 'owning land is not enough. The land must be livable with access to essential services, and this is what the Ministry has been focusing on recently.'
Al Badi proposed a different approach to stimulate the real estate market, one that goes beyond direct subsidies. He suggested allowing expatriates and their families to reside and own property.
'The demand for housing is low because the population isn't large enough to drive the market. If we allowed expatriate families to settle and rent homes, thousands of apartments would be occupied, and local markets would flourish, similar to what we've seen in Dubai and Riyadh,' he explained.
Oman's real estate sector currently struggles with a disconnect between strong government planning and the citizen's financial ability to keep up. While regulations have become more flexible, financial constraints remain the core issue—requiring joint intervention by the government and the banking sector to ensure the continuity of development projects and restore market balance between supply and demand.
In light of these challenges, proposed solutions such as expanding banking options, reducing government fees, and increasing population density through inclusive residency policies may offer new opportunities for this vital sector in shaping Oman's urban and economic future.