Challenges to Tackle by the UAE Construction Sector

28 Sep 2021   |  UAE

As one of the fastest regions that had established the COVID-19 vaccination, the United Arab Emirates (UAE)'s sectors are picking up where they left off.

Albeit the pre-COVID 19 performance would not immediately return, the UAE federal authorities plan to establish fiscal disciplines to suit the pace of vaccination of other countries as a cushion to several vulnerable sectors such as tourism and hospitalities.

The fiscal discipline will be in the form of cutting 5.3 percent of expenditure this year, eventually posing a construction challenge in the UAE, especially in the real estate and construction sectors. In the first quarter of 2021, the real estate and construction sectors were still lagging by 5 percent relative to the pre-pandemic level.

However, the government's recent initiatives of foreign ownership for businesses and other regulations encouraging traffic in the business ecosystem have helped the sectors to move in a positive direction.

Specifically, the construction sector expects to grow by 3 to 4 percent by the end of 2021. The growth would owe to the UAE's government infrastructure plans such as the Energy Strategy 2050 and the Sheikh Zayed Housing Program.

Nevertheless, there are still several significant challenges that need to be resolved to retain construction market opportunities in UAE.

Skilled workers shortages

Workers

With expatriates taking the majority of the population, the COVID-19 pandemic caused a significant workforce to flee the country. The absence of expatriates in the region resulted in a lack of skilled laborers to continue the postponed major projects, eventually slowing the pace of the UAE's construction sector's recovery.

As countries worldwide inoculate their citizens and open their borders, the UAE encourages foreign people to settle in the region and help continue construction projects.

Raw materials shortages

Due to the hardship experienced throughout the construction during the COVID-19 in the UAE, raw materials prices have significantly increased by 25 to 30 percent. 2021 has seen the gradual stabilization of raw materials supply, but the prices have yet to reach the pre-pandemic level.

The rise of raw materials prices has damaged small construction players in the UAE, forcing them to reduce their profit margins if they opt to continue their projects on time.

Demand for the sustainable construction sector

With countries globally trying to cut carbon emissions and reach a carbon-neutral ecosystem in 2050, the UAE is rapidly demanding that each sector complies with several environmental standards.

The region's construction players are now encouraged to register for the LEED (Leadership in Energy and Environmental Design) certification to provide a resource-efficient product.

However, a green building requires over 5 percent more cost and 3 to 4 years more development per project, resulting in hesitation from the UAE's construction players trying to recover from the damages done by the COVID-19 pandemic.

Projects delay

2020 was a year of transformation for the UAE's construction sector: the COVID-19 pandemic had disrupted the global supply chain at the same time as the sector's attempt to become sustainable in its operations.

The post-pandemic era still faces a residue of issues from the global crisis, affecting project costs and schedules.

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