Arab Today, arab today gulf construction industry stable at 18tr despite challenges
Last Updated : GMT 12:48:35
Arab Today, arab today
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Gulf construction industry stable at $1.8tr despite challenges

Arab Today, arab today

Arab Today, arab today Gulf construction industry stable at $1.8tr despite challenges

Dubai - Arabstoday

The Gulf\'s construction pipeline remained stable at $1.8 trillion (Dh6.6 trillion) in 2011, despite economic challenges that have affected the real estate and construction sectors in recent past. On a year-on-year basis, GCC projects planned and under way are down just over 16 per cent, according to the latest construction project tracker by Citi Group. However, when Iraq and Iran are included, the combined value of the construction projects ongoing and announced reaches $2.5 trillion. Last November, over $91 billion of new projects were announced across the main Mena markets. This includes a $68 billion low-cost residential project in Saudi Arabia. Excluding this the total amounts to just over $23 billion. Saudi Arabia remains Mena\'s largest construction market at almost $660 billion. Key positives include a 27 per cent increase in its projects pipeline to $265 billion; a $25 billion jump in its preliminary stage projects to $273 billion and a 6 per cent decline in delayed projects to $343 billion. \"The UAE remains Mena\'s second largest market at $592 billion. However this is down 27 per cent year-on-year. The UAE accounts for 56 per cent of cancelled and delayed projects for the main Mena markets [$1.7 trillion],\" Heidy Rahman, Citi research analyst, said. Early stage \"Its project pipeline is flat at $160 billion. Its early stage projects are also flat at $126 billion.\" Iran is the region\'s fourth largest market. It has dipped in recent months to $308 billion. As previously highlighted, UN sanctions remain the country\'s key challenge. Fitch Ratings expects that the construction sector in Mena will continue to be supported by government spending in Saudi Arabia, Qatar and Abu Dhabi in 2012 as these markets have undertaken massive infrastructure spending plans backed by government and government-related entities. The Dubai construction market will remain fragile in the medium term. The key factors in assessing the construction outlook at the country level are government fiscal flexibility and the extent of historical infrastructure spending. \"In Saudi Arabia and Qatar, infrastructure spending continues to be strong but with lower margins. During the construction boom, Mena region contractor margins have remained higher than international peers,\" says Bashar Al Natoor, Director of Fitch\'s Europe Middle East and Africa Corporates team in Dubai. \"However, with the recently increasing competition, contractors have started to go for lower margins and Fitch expects this to remain the case over the next few years,\" Al Natoor added. Qatar and the UAE have each announced over $3 billion in new projects. These relate predominantly to construction. However, Qatar does also appear to be targeting expansion of its Ras Laffan olefins complex. \"Again we believe the key challenge is likely to relate to gas availability,\" Rahman said. Cancelled and delayed projects for the key Mena markets stand at $1.72 trillion. The split of cancelled versus delayed projects is broadly steady at 36 per cent to 64 per cent. Decline Saudi Arabia has continued to show a decline. Delayed projects are down 6 per cent while cancelled are flat. This brings the total to $343 billion. In terms of key changes, Egypt stands out with a 125 per cent increase in delayed projects to close to $69 billion. \"This is not surprising, in our view, given a new governing body is yet to be elected and put in place,\" Heidy Rahman said. Other markets that show an increase are Kuwait up 5 per cent to $139 billion) and the UAE (up 1 per cent to $967 billion). We continue to believe there is increased risk of cancellations given the ongoing slowdown in this market. Iraq\'s delayed projects continue to account for 80 per cent of its total. Iraq shows cancelled projects at $30 billion and delayed projects at almost $12 billion. \"From a sector perspective construction projects continue to account for the lion\'s share of cancelled and delayed projects (over 70 per cent). This is also weighted to real estate and mixed use developments. The UAE continues to dominate here,\" Rahman says.

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