Times of Oman
Nov 27, 2015 LAST UPDATED AT 08:23 PM GMT
Archaic’ land distribution policy a nightmare for youths
January 19, 2014 | 12:00 AM
Saleh Al Shaibany

Muscat: The disturbing relationship between salaries and rapidly rising house prices is now becoming a nightmare for young people who are looking to have a home of their own.  

In Muscat, where the majority of graduates find jobs, the cost of owning a property is rising much faster than the means of paying for it. According to statistics available with leading real estate companies and the figures from mortgage lenders, wages increased by only 32 per cent in the last 10 years, compared to 400 per cent for the cost of a house.

Waiting list

But the government still insists on putting on a waiting list the thousands of young people who are eligible to get a plot of land. According to the law, any Omani who reaches the age of 25 is entitled to get a piece of land to build his house. The Ministry of Housing has not released statistics on how many people are still waiting but the number is rising every year. A speedy and timely distribution of land will reduce property inflation, which is now heading to unsustainable level.

The government also needs to revise the areas where the lands are distributed to young people. If one works at Al Khuwair, it makes no sense to get a land in Amerat or Jifnain. They would not build there because it would take one-and-a-half hour to commute to work through heavy morning traffic. Records show that over half of the recipients of government lands sell them off because it is too far from their offices. The money they collect is not even enough to buy them a two-bedroom flat in the popular areas of the capital.

Banks say that a majority of the new mortgage borrowers are people who are approaching the age of 40 and who could not afford to buy or build a house before that. I bought a plot of land in 2005 at OMR15,000 in Al Hail North and I have the paperwork to prove it. Less than ten years later, it now costs OMR95,000. 

You would need at least OMR60,000 to build a decent villa on that land. It would take your total mortgage to OMR155,000. You would want to get paid not less than OMR3,500 a month for the bank to approve that kind of loan.

Land reserved
If this rate continues, only the rich would afford to own a home in the next 20 years since lands are not being distributed at the pace required and there is a shortage of houses in Muscat to meet the demand. If the government is keeping the land in prime areas reserved for future generations, then the situation is pushing the present generation towards undue hardship. It is not uncommon for working couples to have two bank loans to afford their homes.

The wife buys a land and the husband builds on it. Both have to keep working for the next 20 years to keep themselves afloat. You don't need to have a degree in economics to realise there is a big mismatch between property price rise and the slow growth in wages. But any government economist would blame the baby boom that started in the 1980s, and not land distribution. They may have a point but that is the exact point I am trying to make. A liberal land reform would mean a healthy cut in mortgage bills and greater affordability to young people in their late twenties to own their own homes as the population grows.   

Otherwise more couples would resort to living in squalid rented flats crammed with their children in two bedrooms so they can have enough money for other living expenses. Those who can scrape enough to own homes would struggle with huge mortgages and risk stomach ulcers while thinking about it. The third choice is for newlyweds to live with their parents until they hit their fortieth birthday to afford their own place. 

Again, I am not sure about statistics but it seems that more commercial lands are distributed in Muscat than residential. The government is unwittingly creating a rental market for young people to keep landlords happy instead of making it easier for them to own their homes.

Subscribe to our newsletter and be the first to know all the latest news