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Realty firms need to diversify to survive

By Alex Adams Aimed at property investors as well as young Omanis looking for their first move in real estate, Aqar's recently launched Rimal housing project sold 75 per cent of its properties in its first two weeks on the market.

Muscat Daily spoke to Aqar chief executive officer Mohamed al Khonji about Muscat's property market, land and building materials prices and what customers have learnt from the earlier property boom.

From your experience with the Rimal housing project, who are the main investors in the Omani market?

Our project is meant for Omanis and GCC residents alike. But most of our customers are Omanis. I think this is because of the timing. The Ministry of Housing statistics show that the global financial crisis has forced most GCC investors to stay away from the Oman market. Everybody is concentrating on their home markets rather than investing abroad at this time. We want Omanis to invest and put their money in the country because they know how safe it is here.

I, however, believe that we will see a change as the crisis subsides. There are Qataris coming here and investing in various areas. Jordan and Morocco are being talked of as joining GCC, so it would be good if they would invest in housing and projects here.

Rimal aside, have prices of real estate gone up in Oman this year?

Since October 2010 there was good demand for real estate. That demand continued until the recent unrests in Oman, when real estate activity almost ground to a standstill. But we have seen some improvement from May. We thought it was the right time to jump in because it looks like a new start.

Has there been a change in the price of building materials, and how does this affect projects?

Steel prices have halved from their recent peak. It had touched RO600 per tonne and is now around RO300 per tonne. A lot of projects suffered because of the price of land and raw materials. Today, prices have dropped, so now we can start afresh and that is why we think now is the time to jump in. Whoever missed the boat earlier must make sure they do not miss it again.

Do you think Muscat is about to experience a second property boom. What lessons do you think must be learnt from the first boom?

I think this is the time to get into the real-estate business. Even if you see some small fluctuations in prices, we think the market has bottomed out. We believe now is the right time to start again and get into the business.

As far as lessons are concerned, you have to learn from your past. Earlier, people were buying up property without knowing what they were buying into, or even where. Today, buyers are more discerning. It is now an investor's and end user's market, and it is not a speculator's market any more. People used to get desperate to get whatever they could, but they are now more interested in picking up the right development and taking their time to make decisions.

What is the commercial and retail real estate outlook for Muscat?

I was surprised that even during the recent unrests in Oman, you could not find any nice retail space. You cannot find it even today. There have been inquiries, but there is no availability. I do think this has created a gap, and it could be a good space to move into.

However, commercial real estate has a different story to tell. There is plenty of real estate available and prices have gone down as a result. In some areas, prices have gone down from RO20 per sq m to RO8 per sq m because the sector is oversupplied.

Are there any upcoming projects for Aqar, and will the company be expanding its focus beyond Muscat and Oman?

I would say that in the short term we will be concentrating only in the Muscat area. But I would add that we plan to diversify, with lessons from the recent economic crisis. Those who concentrated in one area got hit badly, and those who had a diverse and mixed-use real estate portfolio survived as one division of a company can support the others.

We will also diversify and not stick to one area. We will also not be sticking to build-to-sell projects, as we have done with Rimal. We will be moving into rentals as well as other real estate-related businesses in order to maintain a fixed income. We believe this mix will help sustain the company.

© Muscat Daily 2011

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