Before looking in more detail at the ITC's that comprise Oman's residential tourism market, it is important to explore in more detail the reasons why residential tourism is an attractive aspect for any economy. In looking at this topic, lessons can be drawn from the well-established Residential Tourism market of Spain and in particular the Costa del Sol.
The term 'Residential Tourism' is commonly used referring to a specific type of tourist; someone who chooses non hotel accommodation for their stays (Sesena 2004). These accommodations normally involve an owned, rented or timeshare property. The most significant differences of residential tourism in comparison with vacation tourism are; longer stays, the use of an owned or rented residence for accommodation and the fact that the reason for the trip is leisure connected to a certain quality of life.
It is only recently that research has been carried out in this area. It arose from the Single European Act that entered into force on 1st January 1993 which created the framework for the single European market, allowing (in the case of Spain) nationals of other EU states to reside either temporarily, partially or definitively in Spain or indeed any other part of the EU.
Consequently tourists began to acquire local real estate that were originally constructed for locals and these houses rapidly (in the case of Spain's Costa del Sol) became the ´star product´ of the tourism industry.
The benefits of such Tourism are evident (Sesena 2004);
It assists in avoiding the extremes of seasonal mass tourism
It generates a higher socio -economic profile of tourism
It creates a complementary tourism consisting often of families and friends who own the residence
It diversifies expenditure beyond hotels into a wider variety of facilities and services than package holidays tend to achieve
It generates tourism in the off season
It often generates additional types of tourism such as ecological and sports Tourism
It generates a greater range and type of facilities to accompany (and market!) the residential developments.
In terms of indicators from 2003 (quoted in Sesena 2004) the following data drawn from the Costa del Sol reveals some measure of the economic impact of tourism in that region;
750,000 family units have invested in residential property in the Costa Del Sol, generating 3m tourism visits and opened and maintained 850,000 bank accounts to handle maintenance costs, electricity, telephone, food expenditure and the payment of local taxes
These tourists keep €5.409 billion in circulation in addition to generating €6billion spending capacity.
Residential Tourism in Oman
Although there was initial hostility amongst some Omani groups and prominent individuals to the prospect of 'selling off the family silver' to expatriates most realized that whilst you could buy property in Oman you couldn't take it anywhere else so the issue was more about investment in the country rather than taking or removing assets from the people of the Sultanate (Unpublished Policy Paper from Omani Centre for Investment Export and Development (OCIPED)). Given the size of the country (the same size as England and Wales with a population of 5% of England and Wales) there is no shortage of land but there are pressures in coastal areas particularly in the capital area.
In addition as we have seen, the country's varied geography and range of climatic conditions gives Oman an enormous potential in the tourism industry, a sector which is still undeveloped in comparison to that of its neighbour Dubai and other Arab countries such as Egypt. Given Oman's current unemployment problem, combined with the thousands of young Omanis entering the workforce every year, the expansion of the tourism sector could create much-needed jobs.
In 1990 the GOSO instituted a 15 year tourism development plan, easing visa restrictions in order to open up the country to more tourists, and very quickly the number of visitors rose from 290,000 in 1994 to 503,000 in 1999.
This was reinforced in the early years of this century as Oman's diversification plan generated rapid growth in its non-oil sectors, especially tourism, manufacturing and construction. Tourism registered 9% growth in 2006, and 19% growth in 2007 and a healthy 7% growth in tourism revenues in 2008. This growth is expected to result in the trade and tourism sector to reach about 18% by 2020.
Real Estate Law in Oman
Real estate in Oman is regulated by the Land Law (Royal Decree 5/80), 1980 which states that all land in the country is the property of the state, unless specified otherwise. The Law permits Omani nationals to enjoy the benefits of owning land on freehold and leasehold bases. Expatriates on the other hand only had one choice and that was to rent villas or apartments however in December 2002, Gulf Cooperation Council (GCC) (made up 6 Arab states) nationals were given the right to own real estate in Oman for the purpose of residency or investment.
With Dubai's real estate sector booming in the early years of this century the GOSO saw the potential of real estate development from the huge effect it was having on country's neighbour. As a result legislation was introduced in 2004 in relation to foreign freehold ownership of property in Oman. On 22nd February 2006 this was ratified under the Law on Foreign Ownership of Land in the Integrated Tourist Complexes (Royal Decree 12/06), 2006. This gave all other nationalities the right to own real estate but only in certain zones called Integrated Tourism Complexes (ITC´s). Along with ownership the law permits full rights of inheritance and residency status rights for themselves and their immediate families, by virtue of the property acquisition.
As we shall see, the majority of ITC projects have well defined tourism, commercial and housing components. Upon achieving the stipulated minimum build obligations, a developer is authorized to sell of the constructed residential units to third party purchasers. In the event of a failure by the developer to either develop the land according to a development agreement or achieve the minimum build obligations within the stipulated time, the government has the authorization to take over the land and the ITC project.
Integrated Tourist Complexes in the Sultanate
The promulgation of Royal Decree 12/06 has opened up an entirely new property market sector within the Sultanate. For the first time expatriate purchasers were permitted to purchase land and property in the Sultanate albeit in designated areas. Significantly the property development market has responded to this opportunity by introducing a raft of new developments designed to cater to this emerging market. These include;
The Wave
The Wave, built along a strip of a beach in Muscat adjacent to Seeb international airport saw construction commence in 2006. This large scale project is worth OMR805 million (US$2 billion). It covers an area of 2.5 million sq. m. which includes more than 4,000 residential units, Greg Norman signature golf course, four premier hotels and new retail, leisure and dining opportunities all situated at a seafront address.
Blue City
'The Blue City' is located at Al Sawadi, some 100 kilometres northwest of capital Muscat and is approximately 30 minutes from the international airport. The multi billion rial project (with estimated costs OMR7.7 (US$20) billion) has an area of 34 sq. km., is projected to house a total of 250,000 residents. It is the biggest tourism related project undertaken in the country's history and is expected to bring in more than two million tourists annually. The development will be completed in several phases over a 15-year period. When completed, the development will accommodate 250,000 people, creating a new community, meeting all the needs of its residents that will include education, health, communications, shopping and entertainment facilities. Phase I of the Blue City will cover 5.5 sq.km, is worth an estimated OMR0.85 (US$2.2) billion, will include 200 villas, 5,000 apartments three 5 star hotels, golf resort and tourist village with a contemporary Arabian Souq and a heritage museum. Construction of Phase 1 began in late 2006 and is due for completion in 2011.
Muscat Hills Golf and Country Club
Muscat Hills Golf and Country Club was the first integrated tourism complex to offer villas and apartments to foreigners. Another first for Muscat Hills is that it has the first green golf course in the whole of Oman. When completed, the RO300mn Muscat Hills will basically comprise an 18-hole par 72, championship green golf; an exclusive gated residential development of villas and apartments; a boutique resort hotel and a premiere Country Club in addition to commercial real estate for office space, retail and entertainment
Along with the aforementioned developments the following are other developments in and around Muscat, Oman.
Salam Yiti is a 4.19 sq. km. proposed luxury residential resort located in between the Al Hajar Ash Sharqi Mountains and the Gulf of Oman, south of Muscat. This OMR0.65 (US$1.7) billion project includes a residential area with 720 townhouses, more than 400 villas and 1,000 apartments.
The Muriya Tourism Development, which costs OMR231 (US$600) million involves the development of beachside communities at Salalah, Jebel Sifah, Wadi Al Qurum, and Al Soda Island. The first phase of Salalah beach and Jebel Sifah has been sold out in its launching in November 2007.
The Jebel Sifah project, which is 45km from Muscat, is set on a 6.2 million sq. m. site with 5km of beachfront. It will offer more than 1,000 residential units and 2,000 hotel rooms.
Salalah Beach, located southeast of Muscat on the coast of Arabian Sea, has an area of 15.6 million sq. m. The development will offer 1,200 residential units and 1,200 hotel rooms when finished.
As we can see, the market has responded quickly to the emerging opportunity provided by market liberalization. But in order to better understand the impact on the property market in general, it is important to better understand the role that GOSO has played in progressing these developments and in particular the policy tools that have been deployed by GOSO in order to open up the market.
Before doing so it is important to better understand and review the literature on the role of the state in stimulating/ providing housing in order to provide a theoretical framework for the investigation and analysis of the policy tools used in the Sultanate of Oman. This will be done in the next chapter.
