Oman faces property crash as foreign workers leave
At least 670 commercial property owners are facing potential bankruptcy, says source
Oman's property sector is feeling the squeeze as thousands of expatriates leave the country following a renewed government drive to replace them with Omanis.
Ahmed Al Hamadani is one of the many landlords who are losing income. Only a third of the 30 flats in his commercial building are now occupied by tenants. In the past 12 months he has lost about 96,000 rials (Dh916,000) in rents, he said.
"I know we need to find jobs for Omanis but we have to find ways to keep the expatriates in the country for the sake of the private sector economy," the Muscat-based landlord told The National. “I started letting this property in 2011 and all the flats were occupied until March 2017. Then they started forcing the private sector to replace foreign workers with the Omani workforce."
Politicians began an "Omanisation campaign" at the end of 2016, aiming to reduce the number of expatriates in the country to create jobs for Omanis. The government told the private sector it would withdraw incentives such as free commercial land, free training and subsidised business loans if companies did not nationalise a certain percentage of their staff.
The country is experiencing its worst job crisis in 40 years, according to the Ministry of Manpower, with unemployment at about 17 per cent.
The ministry renewed the nationalisation push last year, asking private companies to create 25,000 jobs for its nationals between by the middle of 2018.
Landlords say the cost of this job creation could be their bankruptcy as they struggle to make repayments on loans they used to build property.
“I am in arrears for over 125,000 rials in the last 12 months because I cannot meet the repayments from the bank loan I used to construct my block of flats in 2016," said Khamis Al Fahadi, 42, who owns a 35-apartment property in Muscat. "The interest is piling up and the bank is threatening to repossess the building because occupancy of the property is less than 20 per cent.”
At least 670 owners of commercial buildings in different areas of Oman are currently in financial trouble as they struggle to meet repayment obligations, an official at the Central Bank of Oman told The National.
“These commercial buildings are in imminent danger of repossession and regrettably, banks have the legal power to sell them off in auctions to recover their money," said the official, who asked to remain anonymous as he was not authorised to disclose statistics. "But the question is that will the banks recover all their money? There may not be many investors willing to buy commercial properties when expatriates are vacating them.”
According to the Ministry of Manpower, up to 60,000 Omanis, mostly graduates, are looking for work. The aim has been to create 40,000 to 50,000 jobs each year for the next five years, half of them in the private sector.
A ministry adviser said last month the Omanisation drive would continue and companies that did not to comply would be punished.
“If any company is found to be in non-compliance with the law, the ministry will not provide them any service, including issuance of new work permits and renewal of work cards,” said Mohammed Ghalib Al Hinai, adviser of Human Resource Planning.
He said the ministry had taken action in April against 199 private sector companies – which employed 16,544 expatriates – for not hiring Omani citizens. The ministry planned to stop issuing new work permits for expatriates in those companies and work permits for current expatriates would not be renewed after their contracts expired.
More than 115,000 foreign workers left Oman between March 2016 and March 2018 as a result of the Omanisation drive.
Property experts now fear a property crash is imminent.
“The problem is that too many landlords heavily depend on expatriates," Abdulhakeem Al Farsi, a retired investment banker, told The National. "It is bad time for landlords, especially for those who have used money from the banks to build their properties. They had it so good for many years but now the end is near.”
Updated: May 13, 2018 10:28 AM