Under-quoting hits construction sector
Sudden spike in material and shipment costs pose a challenge
TDue to the current macro-economic environment and the pandemic, clients/owners/ developers are launching limited active tenders and projects.”
Yu Tao | President and CEO at CSCEC
he sudden increase in material and shipment costs since end-2000 remain the biggest challenge for the UAE construction sector, according to the head of Middle East operations at China’s biggest contractor.
Construction material costs, depending on the category, have risen by 10-30 per cent in these four or five months, adding to the worries of contractors and developers alike.
According to Yu Tao, president and CEO at China State Construction Engineering Corp (CSCEC), Middle East, to secure a project, some contractors are tendering even with the price lower than their costs.
This need to secure work at any cost — even if means taking a loss if the project faces time and cost overruns — comes even as new construction work has dropped.
Signs of bounce back
“Due to the current macroeconomic environment and the pandemic, clients/owners/developers are launching limited active tenders and projects,” said Tao.
Government-created project activity has picked up since the second-half of last year, related to industrial, utilities, oil and gas, renewable energy and even manufacturing. Many of these would have been planned earlier but actually getting launched now.
Real estate development continues to lag in terms of new project awards. Tao hopes this situation gets rectified in the coming weeks.
“UAE real estate has shown strong signs of bouncing back from the pandemic impact,” he said. “Hopefully, in the near future, it will attract more local and foreign investment and demand, leading to the recovery for construction,” he said.