Real Estate Projects worth $160b suspended

Forty per cent or Dh587.7 billion ($160 billion) of the current Dh1.5 trillion ($400 billion) worth of real-estate projects in Dubai have been "temporarily suspended" due to the default in payment for the increasing prices of core building materials.

This according to Rakaa Properties, the investment arm of Riyadh-based Rakaa Holding, which stressed that higher costs had caused a "severe crunch" on the construction industry and which could increase inflation, create an economic slowdown and, eventually, an investment collapse.

It said the current prices of cement in the UAE are from Dh290-300 per tonne, up from Dh260 and Dh275 several months ago.

The price of steel climbed 27 per cent to Dh3,050 per tonne from Dh2,400 per tonne within two months, creating a default in payment for purchases by a number of real estate projects.

There were also price increases on foodstuff in less than a year, with a 20 per cent rise on bread and rice, 10 per cent on dairy products, 17 per cent on juices and 42 per cent on fuel. Rakaa, which also has operations in the UAE, Sudan and the US, quoted "some developers" and published data saying that the value of land transactions in Dubai jumped 70 per cent last year, with sales and mortgages rising 142 per cent and 40 per cent respectively.

Dr Abdulrahman Al Tassan, CEO of Rakaa Property, said this was due to the "flurry of new multibillion mega projects" that jack up the cost of construction materials, with some developers having to book orders several months in advance.