Sudhakar Reddy, CEO of Al Habib & Co expects borrowing costs to rise and credit to become tight, which will enhance the competitiveness of the companies that have excellent credit record
The year 2016 is predicted to be a tougher year with the continued decline in oil prices. What is your outlook for 2016?
We are gearing ourselves up for a few challenging years owing to low oil prices. At the same time, we see opportunities in the difficult times ahead especially in real estate services where good professional companies will be needed to weather the tough times. We expect borrowing costs to rise and credit to become tight. This will enhance the competitiveness of companies like ours which have an excellent credit record. We are working on newer but tried technologies from other markets to drive down costs of housing and keep ourselves competitive in property development.
According to you, how is Oman’s real estate sector going to shape up in 2016?
There will be challenges with supply outstripping demand and rents, occupancy and capital values coming under pressure. However, companies that work on their competitiveness will be able to prosper.
On the macroeconomic front, we believe that the Sultanate has enough financial reserves to bring down expenditure gradually and therefore, the private sector will get time to adjust and work on competitiveness.
Owing to the strength of the Omani Rial and drop in commodity prices, we see construction costs declining and this can stimulate demand even while the economy shrinks.
How was Al Habib & Company’s performance in the year 2015?
We have had a good year.
Can you share a few highlights of the year for the company?
Our services business continued to do well. In property leasing and management, we have grown assets under management by over 15 per cent. Our volume in valuation has grown by about 5 per cent from a very high base. The traded value of real estate properties in Oman in 2015 has been the highest ever and this has helped our brokerage business grow substantially.
Leasing has been strong and we have been able to get properties to change hands with relative ease. We have completed major projects in property development including a RO20mn commercial/residential complex in Azaibah.
What were the main challenges? And what were the factors that helped the company do well?
The main challenge has been in contracting where variations and delays in being paid have stressed our cash flows and crimped growth. While we have achieved a very high level of Omanisation in services, Omanisation in construction has been a challenge.
Non-Oil GDP has grown by about 3.7 per cent. Employment levels have been quite high with the result that occupancy, rents and capital values of properties have been stable. This has helped us do well.