Construction Week

Beating the heat of in ation


In mid-2021, when the world was getting accustomed to the ‘new normal’ in a post-pandemic era, there was a momentary optimism that supply chain hurdles and spiking in ation were transient. Now, in the second half of 2022, in ation has become a top-of-mind issue for operators and consumers across industries.

For constructi­on companies globally, the striking effect of in ation has only triggered further worries as prices have escalated two-fold for everything from materials to logistics and labour. While the Middle East is no exception, contractor­s are now adjusting their nancial, contractua­l, and delivery mechanisms to mitigate the impact of in ation on constructi­on projects.

Because large price increases have a considerab­le impact on contractor­s and developers, they sometimes have no choice but to incur the additional costs, cutting into already thin margins and impacting liquidity. Currently, however, a lack of transparen­cy regarding future costs, as well as the uncertaint­y around their volatility, is complicati­ng the bidding process and affecting every member of the project delivery chain.

According to a recent report by JLL, the Middle East continues to see greater rates of urbanisati­on resulting in unpreceden­ted levels of demand for affordable housing, social, transporta­tion, and utility infrastruc­ture, which in turn has stimulated constructi­on activity across a range of sectors.

From increased commodity prices since 2020 to reduced expatriate labour force availabili­ty and dependence on imported building materials, particular­ly from China and Europe, these factors have further fanned the re surroundin­g the liquidity crisis caused by in ation.

Localisati­on of the supply chain has resulted in risk mitigation due to in ation, but let’s all agree that it is a time-consuming process. As a result, the constructi­on industry will likely continue to rely on imported materials, at least in the short term.

However, for time being, constructi­on stakeholde­rs – developers, contractor­s, and suppliers alike – must brace themselves to beat the heat of in ation. Signing off!

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 ?? Ranju Warrier Editor in Chief ??
Ranju Warrier Editor in Chief

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