‘Building costs in Gulf up by 50 percent this year’


Dubai : Lack of skilled labour and soaring prices of building materials have pushed building costs in the Gulf by 50 percent in the first half of 2008, according to a leading real estate firm of the region.

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Al Mazaya Holding, which is listed on both the Kuwait and Dubai stock exchanges, said in a statement Tuesday that inflationary pressures in the Gulf Cooperation Council (GCC) countries have increased the cost of building materials, leading skilled and unskilled labourers to leave the country. This has resulted in a labour shortage that has fuelled soaring building costs in the region.

The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

The costs of building in the Gulf region increased at an estimated rate of at 30 percent in 2007 alone, and a further 50 percent in the first half of 2008, according to the company.

“Building material prices have increased by 50 percent on average, and even more in the case of certain materials,” Salwa Malhas, Al Mazaya’s vice executive president, said in the statement. She added that her company was working out timetables to avoid delays in the delivery of its projects across the region.

“Delays in project delivery is not caused by a lack of reliable contractors, but by the inability of those contractors to find skilled labourers and by the rising cost of building materials,” she said.

“Changes in steel and cement prices mean that these delays in project delivery are inevitable.”

According to Al Mazaya, the region’s construction industry was badly hit by the deportation of hundreds of thousands of illegal Asian workers, including Indians, in a bid to solve the demographic imbalance and to put an end to continuous strikes by labourers who are unable to cope with the rising cost of living.

The UAE expelled over 300,000 illegal workers last year, while Bahrain began barring Indian workers from entering its borders, the statement said.

There are currently approximately 13 million expatriates in the GCC, accounting for 37 percent of the total population estimated at 35 million. Indians number around 5.5 million.

As of now, Indian workers comprise 42.5 percent of the total labour force in the UAE and 65 percent of them are in the blue-collar category.

Malhas said that several contractors were seeking alliances with real estate developers in an attempt to work together to control construction costs.

“These partnerships are becoming more common place year on year, in parallel with the growth of the industry. This method may alleviate the pressure placed on contractors somewhat, as they are apparently unable to bear the burden of rising costs alone,” she said.

She, however, cautioned that the problem could not be solved solely by the forging of alliances between developers and contractors, and called for support from both the private and public sectors in order to create a balance between supply and demand in the long term.

The Al Mazaya official also praised the decision of the UAE government earlier this year to exempt cement and steel from customs duties across the UAE in a bid to maintain the stability of the real estate market and the construction boom.

According to figures released last month by MEED, a leading business intelligence service of the region, the construction industry in the GCC is now worth $1.9 trillion.

Saudi Arabia leads the region, accounting for 25 percent of all construction projects.