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Promising times

Changes to the laws of Oman have established a sound legal framework for foreign involvement in tourism projects
Charles Schofield

One of the most active business sectors in Oman at the moment is the tourism sector. The key initiatives driving growth in that sector are the major property developments that are now well underway within the sultanate.

Many of those developments are initiated and funded by foreigners. For Oman, the benefits of foreign involvement are many. These projects will bring massive amounts of employment and investment into the country’s economy. The involvement of the foreign developers brings experience and expertise to these projects, which improves their chance of success and increases a project's credibility with both project financiers and buyers of the properties being built.

Legal framework
There have been significant changes to the laws of Oman over the past three years which have established a sound legal framework within which foreign involvement and investment can take place in tourism projects. The primary law dealing with land ownership in Oman is Royal Decree 5/80. This law stipulates that all land in Oman is the property of the State, unless specified otherwise. That land law allows Omani nationals to enjoy the benefits of land on both a freehold (ownership) and leasehold (contractual) basis.

The rights of non-Omani individuals and corporate entities to own land in Oman are restricted to varying degrees.

GCC land ownership
A law change in 2004 (by Royal Decree 21 of 2004), allowed GCC nationals to own land in Oman. Prior to the 2004 law, GCC nationals had only limited rights to own land here: they could not own more than 3,000 square metres of property. This restriction hindered any large scale land ownership by GCC nationals of the type required for tourism projects.

Under the 2004 law, GCC nationals can own either constructed property or land which can be held for residential or investment purposes. Ownership is open to both GCC individuals and GCC entities that are wholly owned by GCC nationals. The aim of the law is to give GCC nationals similar land ownership rights as Omani nationals. One restriction under that law that differentiates the rights of a GCC national from those of an Omani national is that if the purchased property is a plot, then the land must be developed within four years from registering it in the name of the GCC national. If the land is not developed within that time, the government has the right to dispose of the property, provided that it compensates the owner in respect of the land.

Foreign land ownership
The increasing drive to allow foreign developments within Oman has in more recent times seen a new legal framework enacted. This allows foreign ownership of land for the purpose of specific tourist developments.

In 2006, the Foreign Ownership of Land Law (FOLL) was passed (Royal Decree 12/2006). This law allows any foreigner to own land in tourism developments that are designated as Integrated Tourist Complexes (ITCs) by the Omani Government. To date, ITC status has been granted to a number of significant property developments including The Wave, Blue City, and the Yitti development project.

Under FOLL, foreign nationals can own land in ITCs for the purpose of residence or investment. Similar provisos apply to the ownership of land as under the GCC ownership laws. The land must be developed within a period of four years. Otherwise the government is entitled, amongst other things, to sell the land.

This law has opened the door for foreign developers looking to build tourism development projects in Oman. It allows a foreign development company to hold title to the land in its own name while it develops the land and sells the villas and apartments constructed in the new development.

Checks and balances
In practice, the rights granted to property developers under FOLL are heavily controlled by the government through the ITC designation process. As a part of achieving the ITC status, a developer has to satisfy the government that its project is beneficial to the sultanate and will deliver a good quality and successful tourism project.

The specific rights that are granted to a development company over the area of project land are recorded in a Development Agreement. The Development Agreement sets out what rights the developer has in the land and what obligations the government has in relation to supporting the project.

Government support typically includes providing infrastructure such as roads and access to power and water. In return for the concessions granted by the government, the developer will undertake to develop the land in accordance with agreed restrictions. These will, for example, include the government approving a master plan for the development and having some rights of oversight in the project implementation.
The Omani government has also, on occasion, taken a shareholding interest in the development company so that it becomes a direct owner in the tourism project. In this way, the government can engage in the management of a tourist development and ensure that its vision for the development of the country is implemented within each project. From the foreign developer's perspective, this can be beneficial, as it ensures that the government will be involved in ensuring the project is a success.

Future outlook
The increase of foreign ownership in tourism projects in the sultanate has been a significant feature of the development of the industry over the past five years. In recent times, changes in law have paved the way for direct foreign ownership of land by not only the developers but also the buyers of developed properties in such tourism projects.

The benefits for Oman are clear. Such changes have led to an increase in foreign investors which will, in turn, lead to more jobs created through the construction of the projects and, over time, in supporting the new tourism developments, once operational. It is inevitable that there will continue to be some fine tuning of the current laws and perhaps increased liberalisation of the land ownership laws in Oman, as the Oman economy continues to embrace the international business community.