Real estate boom pushes up rents

The residential lease market has seen a 12-15 per cent rise in prices in the last one-year in and around Muscat fuelled by corporates’ demand for quality and affordable housing.

Many real estate companies, mainly in the capital area, have attributed to the rise in rental prices due to a number of factors, including the growing cost of construction, land value and general trends in the region.

Market watchers say that while lease prices in areas like Ruwi, MBD, CBD, Hamriya, Darsait, Muttrah, Wadi Kabir have gone up when compared to 2004; the rent have seen major movement in Madinat Al Sultan Qaboos, Qurum, Al Khuwair, Al Ghubra, Azaiba, etc. (See table. Source: Hamptons International).

First Choice, one of the leading names in the leasing business in Muscat, says that some of the factors which have led to rental hikes include the rise in cost of construction materials, transportation, and hike in land values. While admitting that there has been a rise in rents in the last one year, sources at First Choice said that the cost of the rent is not uniform in all buildings and areas. The rent prices vary, depending upon factors like the type of building (old or new); the quality of accommodation (tiles, marbles or ceramic); kitchen facilities offered; in-built cupboards, almirahs, etc.

It was thought that since most rented accommodations are occupied by expatriates, there would be a loss of customers after the Omanisation process began in the middle of last year.

But the Omanisation of foodstuffs and certain driving categories, does not seem to have had any effect, with most of the real estate dealers claiming ‘houseful’ in most of their properties.

This is also corroborated by the population figures by the Ministry of Manpower, which says, the total number of expatriate workers holding valid labour cards has in fact gone up by 1.9 per cent from 424,788 in December 2005 to 432,909 at the end of February 2006. Sources in Al Habib, a name synonymous with accommodation in Muscat, say that they are unable to cope up with the demand for rented houses and flats.

K. Rithesh Shetty, marketing executive of Al Habib, disclosed that they have witnessed a big expatriate exodus from Dubai. “We have seen lots of families coming from Dubai and now we do not have a single bedroom to offer to customers, especially in areas like Al Khuwair,” explains Shetty.

The prices of flats leased by Al Habib have also gone up between the range of 10 and 15 per cent, Shetty said.

Christopher Steel, head of Arabia Operations, Hamptons International, stated in a report that making up for lost time, the year 2005 and the first two months of 2006 have seen property values correct themselves but they still remain, in general, lower than the regional norm which is witnessing high levels of activity.

Azaiba and Ghubrah are now firmly established as “prime” rental areas, with rentals often competing with their southern neighbours.

Another interesting development as far as the real estate is concerned is that apart from the capital area, even other towns like Sohar are witnessing a spurt in real estate prices. With many new industries being set up in Batinah region and Sohar industrial area in particular and total investments in the region hovering between $10-15 billion, real estate has become dear in Sohar.

Times of Oman has found out that in some areas of Sohar, the real estate prices, especially rental rates, are in fact higher than that of Muscat. People, who have shifted from Muscat to Sohar because of their jobs, have affirmed this scenario.

An interesting factor, noted by Hamptons, is the setting of rigid rental budgets for employees of newly establishing corporates. This has, at times, led to acute shortage of properties within the relevant price bands. As a result, mostly it is the employees who feel the pinch, as they have to pay the difference from their pockets.