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Oman has put in place the most transparent and unambiguous laws on property ownership by non-nationals
Mayank Singh

Slow but sure wins the race, goes the adage. Oman seems set to prove the point to the world. While it is not the first country in the GCC region to come up with a law allowing property rights to non-nationals, analysts and legal experts have gone on record saying that it has the best deal on offer for the prospective expatriate property owners. Whether it is inheritance rights, right to freehold or residency rights, it is Oman, with its Royal Decree 12/2006 promulgated in march 2006, that has put in place unambiguous rules and clauses that should boost the confidence of any prospective buyer.

Says Abdul-Haq Mohammed, Trowers & Hamlins, Bahrain, “While UAE, Bahrain and Oman have property ownership laws, the one in Oman is the most radical. Oman has looked at what other countries are doing and has improved upon them.” Analysts attribute this comprehensive package to attention to details. Says Keith Scott, general manager, Alliance Housing Bank, “This is quite typical of Oman; while it takes its time, it puts together high quality legislation.” As per the decree, non-Omanis, both individuals and companies, can purchase property in tourism designated areas in Oman either for accommodation or investment.

Leasehold vs freehold
While Oman lags behind other countries in terms of investment and projects in the cons-truction sector, the new property law, with its freehold clause, has the potential to leapfrog Oman into the big league. Christopher Steel, general manager, Hamptons, says, “The law in Oman is infinitely superior. Compared to a 99 year leasehold, a freehold property without a specified tenure makes a huge difference to a potential investor.”

Oman has chosen to follow a clear and documented policy of land ownership, while most other countries in the region offer at best a hybrid system of leases and sponsorships, erroneously called freehold. In Oman, freehold will mean the right to own property in one’s own name and sell it when one wants to.

Dubai’s Law No 7, 2006, allows non-nationals to own property in designated ‘investment areas’ on a 99 year lease. Abu Dhabi’s Law No 19, 2005, gives GCC nationals the right to own land in ‘investment areas’ while foreigners can own buildings on a 50 year renewable lease. Oman, on the other hand, allows non-Omanis to own land and apartments in tourism-designated areas without cap on the tenure of ownership. This gives investors confidence in terms of ownership of the property.

Inheritance rights
The law in Oman also takes into account ano-ther huge concern of investors – inheritance rights. The law states that property owned in tourism-designated areas by non-Muslims will be subject to the inheritance laws of the owner’s parent country. Bahrain allows non-Muslims similar rights in terms of inheritance. But the inheritance rules of property owners in the UAE are still unclear. “It is only once we have some court cases in Dubai that the rules pertaining to inheritance will be clarified,” says Mohammed. The law in Oman allows inheritance rights and also gives a 15 year period of grace for claiming inheritance, after which the property, if unclaimed, reverts to government ownership.

Residency rights
The law is also expected to give expatriate owners a residence permit for themselves and their immediate family members. However, the exact terms and conditions of such a residency permit are still being awaited. “The exact length of the residency visa is still awaited though it is speculated that it will be a two-year renewable visa,” says Steel. “Despite claims, there is no automatic residency both in Bahrain and Dubai,” says Mohammed.

Even in countries like the UK or France, owning property does not entitle the owner to automatic residency rights. “Attaching residency to property ownership is not a worldwide trend but it has become a norm in the region and it is assuring for investors,” says Wael Lawati, deputy CEO, The Wave.

GCC perspective
The importance of the real estate market in GCC can hardly be overstated. According to a study by Abu Dhabi National Exhibitions Company (ADNEC), the construction sector’s contribution to GCC economies has increased by 35 per cent since 2002. The UAE dominates GCC’s construction sector with projects worth RO13.06bn under construction in 2005, accounting for 63.7 per cent of the total value of ongoing projects in the region. Saudi Arabia occupies the second slot with RO2.89bn worth projects, Qatar (RO1.68bn) in the third place followed by Kuwait (RO1.26bn), Bahrain (RO0.73bn) and Oman (RO0.51bn).

The ADNEC study said as of June 2005, there were 1,825 construction projects underway in GCC. The UAE led the market with 820 projects followed by Bahrain with 214 projects. There were 209 projects underway in Qatar, 208 in Saudi Arabia, 207 in Kuwait and 167 in Oman.

Novel models
With so many countries in the GCC trying to attract real estate investment by non-nationals, competition is hotting up. This has prompted certain countries and emirates to devise novel ways to allow expatriate ownership.

For example, an emirate like Ras al Khaimah allows expatriates to set up a company in the principality and own property in the company’s name. Bahrain has opened up some of its best available areas like Seef, Jujhair, Diplomatic areas and Riffa views for expatriate ownership. In addition, 100 per cent foreign owned companies in certain sectors have been allowed the right to own property in designated areas.

Abu Dhabi has declared Al Reem Islands and Al Raha Beachfront as designated investment areas, allowing expatriate ownership. Dubai offers the Nakheel area properties to expatriates. In the sultanate, The Wave, Muscat Golf and Country Club, The Blue City and the YItti Project have been identified as integrated tourism
designated areas.

The demand for these properties can be gauged from the fact that that Aldar Properties in Abu Dhabi saw its 1,400 villas on the Al Raha Beach being oversubscribed 21 times within 45 minutes of the project’s announcement as 21,000 applicants queued up. Says Mounir Haidar, CEO of Sorouh Real Estate, one of the biggest developers in the UAE, “We are on the threshold of a transformation of the real estate market.”

Sensing an opportunity, investors are inves-ting across countries. For example, Bonyan International Investment Group has projects lined up in Dubai, Sharjah, Abu Dhabi, Amman, Riyadh and Beirut (it has an office in Muscat too). Says Abraham Turaani, vice president, sales, Tameer Real Estate in Dubai, “Money is flowing across GCC countries as these economies are healthy and the culture of ent-erprise is flourishing.”

But will similar developments in the region result in cannibalisation? Mohammed al Qadi, managing director and CEO of RAK Properties in Ras al Khaimah disagrees. “We believe that such developments in various countries complement each other. People have the money and confidence to invest in other countries.”

As countries in the GCC put together laws to attract expatriate investment, Oman has positioned itself as the clear leader by providing the most advanced legal structure for foreign ownership. The challenge from here on is to make the most of this advantage.