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NBO’s home loan products for expatriates take off from the law allowing property ownership rights to non-nationals
BusinessToday reports

With the promulgation of Royal Decree 12/2006 in March this year, clear laws allowing property rights to non-nationals were put in place. Through its provisions, the law has led to the creation of a new category in the home loan segment �housing loans for expatriates. It is early days yet for the category, with just two banks offering specific products at the time of going to press. But as more tourism-designated areas develop, offering expatriates further opportunities to own property in the sultanate, there is bound to be growth in this particular segment.

Point of origin
The housing loan schemes �BankMuscat’s Baituna Home Loans and NBO’s Al Manzel housing loan scheme �were launched in April 2006 and June 2006 respectively. Within the purview of the schemes are home loans for Omanis as well as expatriates. BankMuscat representatives were not available for comment on the story.
Says Adil al Saleh, head, mortgage banking, NBO, “We have three categories when it comes to providing housing loans for expatriates. The first category is salaried expatriates who are working and living in Oman. The second category is self-employed expatriates. The third category is GCC residents and other foreigners, who are not residents in Oman, but are buying a property in the specific tourist-designated areas where it is allowed.�To avail of a loan under the Al Manzel scheme, the minimum salary requirement for expatriates (including GCC citizens) is RO1,000. For self-employed expatriates, the minimum monthly income requirement is RO2000.

NBO offers a loan of up to 80 per cent of the value of the property. The rates of interest range between seven-eight per cent. NBO offers a variable rate of interest and a fixed rate of interest. The variable rate (between 7-7.5 per cent) is reviewed twice a year. The fixed rate (currently eight per cent) is reviewed every three years. The customer can choose and shift between the options. The tenure of repayment is 25 years.

The Al Manzel scheme also has a re-draw feature. Informs Saleh, “This is a great benefit for those people who can, from time to time, generate some additional income or savings. Usually, people get nominal returns on such savings, which they generate over the years. Here, we give our customers the opportunity to keep on adding their savings to the loan. By doing this, they are saving on interest. In addition, if, in the future, they need funds for any reason �education, car maintenance �they can redraw back whatever excess money they have paid into the account without any charges.�

The other feature NBO has is that whoever applies for the Al Manzel loan is eligible for a free credit card. The bank also offers its customers the option not to pay the principal, but just the interest, for a maximum of five years in the initial start period. If a customer takes a housing loan, as per NBO’s policy, the debt burden ratio (DBR) shouldn’t be higher than 50 per cent. This means that the monthly installment for the housing loan cannot exceed 50 per cent of the customer’s income. If, for the customer, there’s still a gap, the bank can even offer him a personal loan, which can help him to buy other things that he might need.

Property palette
As of now, while there is a demand from expatriates to buy properties in Oman, the wait is also on for developers to release more properties and start marketing them. Several tourism-designa-ted projects haven’t started selling properties yet, making the situation one where it will take additional supply to change the market.

Banks are also tying up with developers to get additional benefits for their customers. Says Saleh, “Let’s say X project is coming up. If you approach the developers directly, you would pay Y amount of money. But if you approach them through NBO as a customer, then we would negotiate with the developers to get you a discount on the Y amount. Or we might be able to get our customers free household items.�

With property values in the sultanate appreciating, real estate will continue to develop as an investment avenue. Currently, there’s not much competition in providing housing loans for expatriates in Oman.

But as Saleh points out, “The real estate market (for expatriates) in the UAE was in a similar situation about five years ago. Today, not just the banks but also several finance companies are offering housing loans for expatriates. We’ve got a good response from the UK market for this product. We know that there will be a boom here in the future so we are preparing ourselves with a lot of features in our housing loans.�