Read also: Keep calm and carry on . . . but save, save, save
Muscat: Expatriates say they are sending their families back home, or halting plans to bring them to Oman, to cut the living costs after the Sultanate released its austerity-driven budget for 2016.
Other families say they are moving to cheaper accommodation ahead of changes to the subsidy on the price of oil recently announced, which they fear will drive up the cost of living.
Indian expat, Ashraf Ahmed, who works at a cleaning service company at Wadi Al Kabir, told Times of Oman (TOO) that he can’t afford to keep his wife and three children in Oman anymore.
“I am sending them back to Kerala (south Indian state),” he said, adding, his salary of OMR620 isn’t enough to make things work in the ongoing conditions.
His colleague Chandra, who lives in Al Khuwair, has already dispatched his family to India.
“There were talks about upsetting economic condition here. That’s why I sent back my wife and two children. But I hope I will be able to bring them back again,” Chandra told TOO.
Syed Tawheed, an FMCG supervisor at Swiss Arabian perfumes, said, “My parents and siblings were supposed to visit me for at least four months. But I have asked them to hold on for some time.” Tawheed said he applied for their visit visa in December last year but after the austere budget, he isn’t sure if they can really live with them amid the difficult economic situation.
“I’m single and I know I won’t be affected much. But people with visiting families or a wife and school-going children will have to think twice before shelling out money...this may, however, see increase in remittances,” he noted.
One tactic being embraced by families trying to stay together is to move into cheaper accommodation.
S Banerjee, a private firm staffer, who pays around OMR380 at Rex Road in Ruwi neighbourhood, said, “I am planning to move to an older apartment. That should help me save at least OMR70,” he said, adding, “I can always switch to a new building if things become normal again.”
Pankaj R, who works in a publishing house, said he moved from his old apartment prior to budget announcements.
“Things are not fine as oil prices have continued to tumble. Before the budget came, I was sure I would have to cut costs too. That is why I just shifted to an older apartment near the Mwasalat bus stand from the CBD area,” he told TOO.
Pankaj will save OMR50 after his rent decreased from OMR300 to OMR250 for a 2BHK apartment.
He said many of his expat friends are also planning to send back their families for some months, cut down on frequent travel and partying, “until the restoration phase begins.”
“There are no other alternative for low-wage workers other than moving their families back to home. Since there will be no bonuses, salary hikes and all that for poorly-salaried expat workers, they would like to adopt such measures,” said a social worker based in Oman.
Also read: As Oman tightens its fiscal belt, people brace for challenging 2016
Pressure on real estate
The state budget also offered a slew of measures to shore up non-oil revenues in the Sultanate.
Among many other options, the government plans to amend the tariffs imposed for electricity and water for commercial, industrial and government usage and to amend the existing fees levied for real estate and by the municipality on rents.
Other measures to enhance non-oil income include an amendment in fees charged for the allocation of land (commercial, tourism, industrial and agricultural), unification of a service fee charged by the Muscat Municipality, the Dhofar Municipality and other regional municipalities.
Realtors believe the rental market in the Sultanate is at a very interesting stage and that any change in rents in the future would depend on expatriate demographics and the development of Oman’s economy. “In the public sector, the government has decided to reduce development expenditure. So there will be fewer contracts. Contracting will be under some pressure,” said Sudhakar Reddy, chief executive officer of noted real-estate company Al Habib & Co LLC.
On the private side, he said, a slight reduction in construction is expected.
“But let me tell you this is going to be tough for everyone, including the construction and real-estate industry,” he added.
Some realtors, such as Salman Jalil of Eqarat, believe that apartments will remain vacant for long particularly the high-end units “and that this might contribute to the lowering of rents.”
“Well, the budget has proposed austerity measures. It will have an overall effect as people will tend to cut expenses wherever it is possible for them to cut. Renting and rentals are already affected because of abundant supply and in the current scenario, it will only increase,” he told TOO.
The Eqarat official further stated, “If saving becomes a real challenge, the smaller and cheaper properties would see more demand.”
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Contracts on hold
Others are also expecting a depressed real-estate market in the country.
“We are witnessing a gloomy picture ahead. Many companies are insisting that we put on hold contract renewals for apartments, especially contracts for luxury apartments,” explained a top official from a real-estate group, who wished to remain anonymous.
“We feel that either they are expecting their employees to move out to smaller spaces or they’re downsizing staff. It looks like the usual business will be bad. Rents will come down,” he said, adding, “The workers are planning to send their families back home. Sending back their family to the home country is the only option to cut the expenses.”
The realtor said his company will not be taking up new buildings and apartment projects anytime soon. He said the occupancy rate of hotels and apartments, which was 95 per cent in 2015, is expected to go down “drastically.”
Sudhakar Reddy of Al Habib, however, argued that rents could remain unchanged.
“Not because of inflation, but because supply and demand are in balance. Rents will be stable overall,” he hoped.
“The only thing that has gone up are the transportation costs. That’s a small part of the total cost. Per head, it won’t be more than five riyals. Petrol prices may increase but I don’t think people can change apartments to save five riyals,” he noted.
Subsidy cuts could push up consumer prices in Oman and exert upward pressure on foreign workers’ wages, potentially hurting companies’ competitiveness, according to Philip Paul, country head, Cluttons Oman.
“It is our view that the real-estate sector will record declines as the low oil price era beds in and government spending levels retreat. This course assumes the absence of any major global economic or oil price shocks over our forecasting horizon,” he said.