UAE Construction projects to exceed $30bn in 2013

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KFH Research expects construction projects worth USD 30 billion in the UAE, with 5 percent growth for 2013.

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UAE Construction projects value to exceed $30bn in 2013

Infrastructure is a key growth pillar for the UAE, where huge investments are planned, as the UAE positions itself to accommodate future population increases and maintain their excellent foreign direct investment history.

The KFH Research latest report revealed that contracts to build roads, airports, seaports and other infrastructure in UAE may exceed USD 30 billion for 2013. The UAE is also on track to witness a huge residential project, replacing 12,500 houses that were built before the year 1990, at a cost of USD 2.7 billion. Expectations say that the construction sector may grow in Dubai to 4.8 percent in 2013.

Deloitte’s GCC Construction Sector report said that in terms of contract awards, the UAE replaced the Kingdom of Saudi Arabia as the GCC’s largest construction market in 2012 with USD 16.2 billion, 4 percent more than the USD 15.6 billion of contracts awarded in KSA.

Meanwhile, the value of construction and infrastructure contract awards in the Gulf Cooperation Council (GCC) fell by almost 18 percent in 2012, with USD 51.9 billion of contracts awarded during the calendar year compared with USD 63.4 billion in 2011, reports Middle East Economic Digest (MEED).

The UAE was one of only three countries within the region to successfully raise its position on the World Bank Ease of Doing Business Report 2013.

A sentiment that was reinforced by new data says the UAE was one of the biggest recipients of foreign direct investments during 2011, lending credence to the more positive attitude (since the Dubai property crash in 2009) towards investment in the UAE. Though the lion’s share of FDI projects, in terms of value, went to Saudi Arabia, the UAE won the most number of projects by volume (368). Hence, it appears that on the back of a stable political environment (especially in the context of the Arab Spring), as well as better transport and logistics infrastructure, the UAE has managed to occupy a positive space in the minds of investors.

Meanwhile, the UAE projects market has continued to remain a strong throughout the year, posting a 26.8 percent y-o-y growth. There is a total of USD 179 billion-worth of planned and un-awarded major projects in the UAE, which is more than any other GCC state — except Saudi Arabia. It is expected that contract awards in the UAE could exceed USD 30 billion this year and possibly go as high as USD 35 billion should full confidence return to the market.

In ensuing years, spending is expected to remain in the USD 25 billion to 35 billion range. Infrastructure will be key to growth in the UAE projects market, with substantial investment planned in airports, roads, ports and rail as the Emirates look to increase capacity to cope with rising population trends and maintain foreign direct investment.

Furthermore, new numbers from property consultants Jones Lang LaSalle suggest that Dubai has seen a steady recovery in the property market throughout 2012, with villa prices rising by over 20 percent. Adding to that, the UAE is set to start a massive housing project, replacing 12,500 houses build before 1990, at a cost of USD 2.7 billion.

As such, we expect UAE’s real construction industry to grow by 4.8 percent in 2013 (with an average annual growth of 5.1 percent between 2013 and 2016). After a stream of government supported development programmes we now see long-stalled projects such as the Louvre museum (an offshoot of the celebrated Paris institution) back on track.

Large parts of the USD 653 million contract for the flagship project were awarded to UAE’s leading construction firm Arabtec. Further, the EPC tender for the stalled Zayed National Museum is also underway. Dubai also looks set to break its own record for the world’s biggest shopping mall with plans for a new mega-development complex; complete with a shopping centre that could welcome 80 million people a year, 100 hotels, and five theme parks. The new Mohammed bin Rashid City will carry a price tag of GBP 1.7 billion.

Photo: Joi/Flickr

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