Own or Rent in Oman
Real Estate & Construction and Hotels & Leisure
The government of Oman has continued to liberalise laws relating to the acquisition of leasehold, usufruct and freehold interests.
Law Update: Issue 359 - Real Estate & Construction and Hotels & Leisure
Ahmed Al BarwaniPartner, Head of Office - Oman
Mazoon Al HadhramiAssociate,Dispute Resolution
When investing into any business sector in Oman, the investor will invariably be associated in one way or another with acquiring real estate interests, whether in the form of a freehold or leasehold interest. The reason being that investment is coupled with carrying out the commercial activities in compliance with the requirements of Royal Decree number 3 of 1974 issuing the Commercial Register Law (“Commercial Register Law”) and its regulations.
The government of Oman has continued to liberalise laws relating to the acquisition of leasehold, usufruct and freehold interests to reflect the demands of the market. Various discussions have taken place in the context of permitting foreign investors to acquire real estate ownership rights outside of freezones (namely, on the mainland), although such discussions have not yet materialised into a codified law. It is currently the case that foreign nationals can acquire the freehold interest only to properties that are located within freezones (known as “integrated tourism complexes”). GCC nationals are permitted to acquire real estate interests in any part of Oman (within or outside integrated tourism complexes) subject to limited exception.
This article clarifies the regulations relating to the ownership of property interests in Oman and other real estate interests for any interested party to be aware of when deciding whether to invest or reside in Oman.
The general position is that Omani nationals may freely own property in Oman without restriction subject to limited exceptions as stipulated in the law in comparison to foreign nationals who could not acquire freehold interests due to a general prohibition under the law.
There has been some development in Oman laws which resulted in permission being granted to foreign nationals to acquire freehold interests to properties in integrated tourism complexes for residential and investment purposes; those rules applied to both natural persons or companies entities owned by foreigners. This rule had been and continues to be applied in high quality integrated tourism complexes such as The Wave and Muscat Bay (formerly known as Bar Al Jissah).
Ownership for investment purposes and for the purpose of being used as accommodation for the laborers or workers is also permitted for commercial companies outside integrated tourism complexes.
Foreign ownership of land and real estate property is not permitted in certain designated areas in Oman in accordance with Ministerial Decision no. 292/2020 Issuing the executive regulations of Royal Decree number 29 of 2018 Concerning Prohibition of the Ownership of Land and Real Estate by Non—Omanis in Certain Places (“Ministerial Decision”). The Ministerial Decision stipulates that land and property in certain areas in Oman cannot be owned by foreign investors regardless of its use. These areas include the following:
Dhofar region, except for Salalah;
Musandum, Buraimi, Ad Dhahirah and Al Wusta, Liwa, Masirah and Shinas;
Jebel Shams, Jebel Al Akhdar and any other mountain with strategic importance as determined by the competent authority.
All islands in Oman;
All land within 1000 metres from the royal palaces.
All land within 500 metres from any security or military sites and any other sites deemed by the competent authority; and
Sites of archaeological and historical importance and any other sites determined by the competent authority.
Foreign ownership of land for agricultural use is prohibited in all governates of the Sultanate of Oman on the basis that such land is essential for the protection of the environment, natural resources and landscape of Oman.
The restriction of ownership of agricultural land is also in place to support citizens and the competent authorities in their land projects.
Albeit the fact that usufruct and leasehold interests serve the same purpose of leasing land or property, the identity of the regulator and the terms of the same may differ. Usufruct agreements are regulated by and registered with the Ministry of Housing, whereas leases are regulated by and registered with the local municipality where the land or the property is located. Further, the registration fee differs for each one of them.
Commonly, land and property are allocated by the government, represented by Ministry of Housing in Oman, although long term lease or usufruct contracts for strategic investments and projects that are important for the development of Oman economy without being subject to the provisions and restrictions set out in the Land Usufruct Law as amended from time to time.
The government of Oman has allocated a number of areas and free zones where the usufruct right over land is granted using standard form contracts. Usufruct rights can be mortgaged in favour of banks and enforced against if the party which mortgaged the right defaults on its financial obligations. It is common for these rights to be mortgaged and registered with the Ministry of Housing.
Leases that are entered into by landlord and tenants whether for residential, commercial, industrial or any other purposes are registered with the local municipality. Non-registration of the lease may have the disadvantage of the court not accepting to look at the case whenever it is filed with it in relation to any disputes arising out or in connection with the terms of lease. Although there is no restriction of having or registering leases with a term of more than one year, it is common to have a one-year term which gives the parties more freedom to renew or not by the end of the term.
The laws relating to freehold, usufruct and leasehold interests as well as the practice that has been developed by the administrative and judicial bodies in Oman have created a flexible regulatory framework that serves the interest of investors and residents alike. As it is the case with any jurisdiction such laws and regulations need to be reviewed periodically in order to strike the right balance between the interests of the developers, landlords on one hand and buyers or tenants on the other hand, which to a large extent has taken place.
Foreign ownership of properties in Oman for residential and investment purposes has witnessed a sharp increase due to an increase of investment in some sectors such as the hotel industry and hospitality. Due to the shortage and demand in the Oman market this is expected to increase especially with the current level of oil prices and the plan of the government to partner with regional and international groups to develop integrated tourism complexes, free zone and economic areas.
The room for improvement which has been raised by the officials from Oman government is ownership of real estate properties outside the integrated tourism complexes which means that non-Omani citizens will be treated like Omani citizens. This will ensure that the prices of properties and dealings in real estate sector will be always high without a sudden drop due to financial recession or any other downturn.
Given the recent issuance of key laws in Oman such as the foreign investment law, commercial companies law, PPP law and amendments to others laws it may be worth considering and reviewing the compatibility of the real estate laws in Oman with other laws and ensure that they work in a coherent and consistent manner. Further the ability of conducting online transactions without the presence of the parties or the necessity of representation before the administrative bodies should be further advanced.
For further information,please contact Ahmed Al Barwani or Mazoon Al Hadhrami.
Published in June 2023
