The removal of fuel subsidies and the Government’s austerity measures to tighten spending could provide a welcome boost for public private partnerships in Oman’s real estate market, says Cluttons.
According to the international real estate consultancy, measures set in place by Oman’s government, such as plans to remove fuel and utility subsidies, could also lead to a rise in the number of private public partnerships (PPP) by enticing additional foreign investment into the Sultanate.
Faisal Durrani, head of research at Cluttons said: “For a country as reliant on hydrocarbon income as Oman, the continuing slide in crude prices is driving the need for additional income streams.”
Cluttons believes this move could be beneficial to international investors that want to engage in projects such as the ambitious Port Sultan Qaboos Waterfront.
Durrani continues: “We have already seen the successful implementation of fuel subsidies in the UAE, where energy subsidies formed a sizeable proportion of GDP. Bahrain has also announced similar plans and so it was only a matter of time before other Gulf States including Oman followed suit by dropping fuel and energy subsidies as they try to rebalance their economies in this era of cheap oil. Over the past six months, the price of diesel in the UAE has fallen by 30% to 40%, which has a clear upside for the industrial sector, with lower manufacturing and transport costs likely to be passed on to consumers gradually.”
Philip Paul, head of Cluttons Oman, said: “The redevelopment of Port Sultan Qaboos is an ideal example of a project that would benefit from international best practices and ‘place-making’ expertise to create a thriving waterfront destination in heart of Muscat that will attract both visitors and residents. Urban regeneration is something that is only just starting to appear in cities across the Gulf and will provide tremendous opportunities to create more value from established and desirable parts of central business districts, which often benefit from well-established communities, transport infrastructure and pedestrian footfall; something that developers and investors will find hugely attractive, particularly in the case of PSQ”.
Paul adds: “There have been limited PPPs in the Sultanate’s real estate sector as the size of the market is still fairly small compared to some neighbouring countries. International interest in Oman’s real estate development has mainly come from a handful of Gulf developers, however, large scale projects such as Port Sultan Qaboos Waterfront could open the market for foreign investors to gain a foothold in a highly attractive market that has a good track record.”
In Oman, the property market as a whole has been supported by the relative stability in job creation levels in the Sultanate, as it continues to boost oil production to inject confidence into the economy. Continued infrastructure spending has also boosted business confidence and has contributed to stability in the country’s residential and commercial markets.
Paul concluded: “private-public partnerships offer a good alternative solution to the government to continue driving major infrastructure projects and boost job opportunities that will support economic growth, particularly when credit availability is low.”