As materials and construction costs soar, developers are now re-examining the viability of projects on their drawing board.
The breakneck pace of growth in the Middle East showed its first signs of faltering this month with a handful of property developers ditching projects on the back of spiralling labour and raw materials costs.
While protests by disgruntled investors may have succeeded in winning a reprieve for a couple of scrapped developments, suggestions are that this could just be the start of a wider trend and plenty more projects may soon be judged economically unfeasible.
With steel prices multiplying four-fold since 2005 and cement prices soaring by 30% last year alone, it is easy to see why the figures no longer add up and that property sold off-plan two or three years ago is no longer going to turn a decent profit.
But one man’s loss is another man’s gain and any deceleration in the number of developments reaching completion will bring some respite for the region’s utility providers, which are struggling to keep in step with the rise in electricity and water demand.
The current speed of development has taken many utilities by surprise, leaving them unable to bring power and water plants online fast enough to meet new requirements.
The UAE’s Federal Electricity and Water Authority recently admitted that its investment plans were based on 7% annual growth, but the actual rate is closer to 19%. And similar increases are being seen throughout the region.
Industry experts predict the Middle East is set to face a 35% shortfall in electricity and water availability by 2010-2013.
With independent power and water projects taking up to four years from notice to proceed to completion, compared to mega building projects being finished in as little as two years, it is no surprise that supply and demand have fallen out of synchronisation.
Of course, private companies are able to move in and plug the gap with decentralised water and wastewater plants, but these are officially deemed temporary solutions until the main systems catch up.
So, while project delays and cancellations may leave investors and developers wringing their hands, utility firms will secretly be breathing a sigh of relief.
Elizabeth Bains is the editor of Utilities Middle East.
Staff Writer
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Tide may be set to turn
As materials and construction costs soar, developers are now re-examining the viability of projects on their drawing board.
As materials and construction costs soar, developers are now re-examining the viability of projects on their drawing board.
The breakneck pace of growth in the Middle East showed its first signs of faltering this month with a handful of property developers ditching projects on the back of spiralling labour and raw materials costs.
While protests by disgruntled investors may have succeeded in winning a reprieve for a couple of scrapped developments, suggestions are that this could just be the start of a wider trend and plenty more projects may soon be judged economically unfeasible.
With steel prices multiplying four-fold since 2005 and cement prices soaring by 30% last year alone, it is easy to see why the figures no longer add up and that property sold off-plan two or three years ago is no longer going to turn a decent profit.
But one man’s loss is another man’s gain and any deceleration in the number of developments reaching completion will bring some respite for the region’s utility providers, which are struggling to keep in step with the rise in electricity and water demand.
The current speed of development has taken many utilities by surprise, leaving them unable to bring power and water plants online fast enough to meet new requirements.
The UAE’s Federal Electricity and Water Authority recently admitted that its investment plans were based on 7% annual growth, but the actual rate is closer to 19%. And similar increases are being seen throughout the region.
Industry experts predict the Middle East is set to face a 35% shortfall in electricity and water availability by 2010-2013.
With independent power and water projects taking up to four years from notice to proceed to completion, compared to mega building projects being finished in as little as two years, it is no surprise that supply and demand have fallen out of synchronisation.
Of course, private companies are able to move in and plug the gap with decentralised water and wastewater plants, but these are officially deemed temporary solutions until the main systems catch up.
So, while project delays and cancellations may leave investors and developers wringing their hands, utility firms will secretly be breathing a sigh of relief.
Elizabeth Bains is the editor of Utilities Middle East.
Staff Writer
Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and... More by Staff Writer
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