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Having got a shot in their arms with the new property law integrated tourism complexes are working overtime
BusinessToday Reports

With Oman putting in place a model law for property ownership by non-nationals, all eyes are now trained on the sultanate’s ability to capitalise on the opportunity. At the core of this plan are the four projects which have been identified as integrated tourism complexes (ITCs) – The Wave, Muscat Golf Course Project (MGCP), Blue City in the Batinah region and the Yitti Project. These projects carry the burden of testing out the efficacy of the new law and are seen as a litmus test of Oman’s ability to attract foreign owners and to promote tourism.

Initial days
Out of the four projects, MGCP and The Wave are the first ones to get off the block. The MGCP hopes to have its first occupancies by the middle of 2007. The Wave is working towards handing over the possession of its first release (of apartments and villas) by the end of 2007. The initial response to these projects has been more than heartening. The Wave, which put up 221 properties on sale in its first release, was pleasantly surprised by the way the market reacted. “Our first campaign was oversubscribed by 20 times as we received over 4,400 applications,” says Wael Lawati, deputy CEO, The Wave. The MGCP has a similar experience to narrate. “If you combine the people who have bought property at the MGCP and the reservations made, these cover 80 per cent of the properties that are on sale,” says Mike Hywel-Davies, general manager, MGCP.
The property ownership law could not have come at a better time as it opens up new vistas for ITCs. “It opens up the market from 20mn investors to 2bn potential investors,” says Christopher Steel, general manager, Hamptons. International enquiries at ITCs have skyrocketed after the passage of the royal decree. Says Davies, “The law is brilliant, a lot of buyers who were not ready to make a final decision till the decree came through, have now gone ahead with their decision.”

ITCs have been getting queries from several European countries, South Africa, Australia, North America, the Far East, GCC nationals and expatriates living in Oman. In addition to its fabled hospitality and charm, the country has something for everyone. For GCC buyers, it offers stability and comfort. For non-GCC buyers it is an ideal holiday home. In Western Europe and Northern Europe it is a big draw amongst the semi-retired and destination seekers.

Golfing destinations
ITC properties have been positioned at premium prices, a notch above the prevailing market price in adjoining areas. Thus the price of an entry level apartment at The Wave starts at RO85,000, going up to RO340,000 for a beachside villa. Properties at the MGCP range from RO103,000 to RO350,000. Lawati justifies the pricing. “People have to appreciate that these are tourism projects with a residential commitment which enables us to recover the costs of the other tourism components like the golf course.”
Realising the need to give buyers something more than mere houses, ITCs have been working on creating a lifestyle experience for customers. The Wave has signed on legendary golfer Greg Norman to design its golf course. The MGCP is working on creating one of its kind golf course in the region with the help of UK-based Paul Thomas of Dave Thomas Limited. The Blue City has signed up king of pop Michael Jackson as its entertainment consultant.

The first phase of the Blue City (by 2010) will see a 36 hole PGA championship golf course, 600 luxury villas, three five star beach resort hotels, an Arabian style tourist village with souq, an aquarium and an amphitheatre. “Our target customer is not the usual investor but people who have the time and money,” says M K Satish, general manager, ASIT (The holding company for The Blue City).

With three to four golf courses in various stages of development, Oman is being positioned as a golfing destination. According to estimates, there are 61mn golfers in the world - 37mn in North America, 7mn in Europe and 13mn in the Far East. Davies says, “Out of these, we are targeting the latter 20mn. The aim is to attract a substantial number of these golfers to come and stay in Oman for at least 10 days a year.” And with attractions like pla-ying on variegated courses like the golf course on the beach at The Wave, a course with wadis, rocks and jebels at The MGCP or a green top grass course at The Blue City, this should be more than a mere pipe dream.

Promising returns
If lifestyle is one of the drivers at ITCs, the economics of investment is the other major pull. To start with, property prices in Oman are less than that in other countries. Says Keith Scott, general manager, Alliance Housing Bank, “Prices in Oman are a lot lower than in Europe or Dubai. This gives investors a comfort that these prope-rties can be sold at a profit in future.”

In addition, the market is bullish about the capital appreciation prospects of ITC prope-rties. To give an indicator – the prices at MGCP have appreciated by almost 40 per cent since the project was first announced two years ago. “The scarcity value of projects in tourism designated areas will ensure a good appreciation of these properties in the first few years,” says Scott. A number of international property evaluators also see good potential in Oman.

And if you are not in a hurry to book profits by sale, these properties hold the prospect of good rental returns. Analysts expect rental returns in ITCs to be in the range of eight to nine per cent. Said al Busaidi, general manager, Emaar Real Estate, puts things in perspective. “A good villa in Azaiba near the beach is leased out for a mon-thly rent of RO2,000. A similar villa at The Wave will fetch at least RO2,500 as the rents in ITCs are bound to be higher than other areas.”

Overall impact
From the time that ITCs were conceived, the real estate market has been anxious about their impact on the overall market. The property law has taken into account these anxieties.

Says Lawati, “By allowing expatriates the right to make purchases only in ITCs the law has taken care of emotive issues like sover-eignty or richer expatriates inflating prices in the local market.” Market watchers are quick to dispel fears of any direct fallout of these projects on the overall real estate market.

“There are 80,000 good quality villas in Oman. Tourism designated projects with 2,000 villas are unlikely to have a significant impact,” says Scott. The MGCP is building 72 villas and 142 apartments.

The project is working towards handing over possession by the middle of next year. The Wave, a five year project, will offer anywhere between 3,000-3,500 apartments and villas. It is looking at its first occupancies by the end of 2007. The Blue City plans to offer 5,500 properties in its first phase (till 2010) while the Yitti Project is expected to put up 1,600 villas and apartments.

Sudhakar Reddy, general manager, Al Habib, echoes the sentiments. “The foreign ownership law will help properties in these projects but their share of the overall market is still very small.” Having said that, real estate prices in the proximity of ITCs have escalated in anticipation of these projects. A 600sq mtr plot in Ma’abela North (near The Wave) which was earlier selling at RO19,000-RO 22,000 per sq mtr have shot up to RO27,000 per sq mtr in the last four months, coinciding with The Wave’s first release.

Learning experience
Being the first of their kind projects, ITCs have no precedent to use as benchmark. And it is proving to be a learning curve for most of them. Says Lawati, “Our first release was a rewarding exercise as it gave us real data as until now everything was speculation. We are incorporating the feedback in various areas like design improvements, adapting houses to local tastes, managing the draw of lots and so on.”

The Wave, which concentrated its marke-ting efforts to just Oman, ended up getting
primarily buyers from the local market. The project is now aiming to look beyond the local market in its subsequent releases. “We are looking at a combination of 20-25 per cent of local buyers and a 75-80 per cent expatriate ownership,” says Lawati.

The Wave is being watched closely by The Blue City for insights. “We are waiting to see the response to The Wave,” says Satish. Realising the enormity of the task, ITCs are leaving nothing to chance. The Blue City has signed on a host of renowned consultants like Hamptons International for marketing, HVS for hotels, PricewaterhouseCoopers for viabil-ity, KPMG for the finance model, and Willies as insurance advisers to name a few.

While ITCs are seen as crucial inputs to promote tourism in the sultanate, are just four projects on ground enough to jumpstart tourism in Oman? Opinions on the issue vary. “This is a start of a new experience and Oman has a reasonable number of tourism projects before it takes off on the world tourism map. It is still not such a large market which can absorb 100,000 or 200,000 units,” says Lawati. Others are a bit more circumspect. “Some developments which we thought would be tourism designated projects have not got the requisite clearance,” says Scott.

However, there is a general unanimity on the need for better infrastructure. Says Satish, “We need infrastructure like better airport facilities, roads, electricity and water and these are happening in parallel like the airport upgradation programme or the southern express highway, power projects and STP plants, so things are moving in the right direction.”

A radical property law, infrastructure upgradation and ITCs in Oman seem to have it all to give tourism and real estate a quantum jump. And as they would say in this part of the world – Inshallah.