Removal of subsidies to boost Oman real estate PPPby Paromita Dey on Jan 19, 2016
The removal of fuel subsidies and the government’s austerity measures to tighten spending could provide a boost for public private partnerships in Oman’s real estate market.
According to the real estate consultancy Cluttons, 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."
He 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.”