São Paulo – After the 2008 financial crisis, when building industry activity plummeted in Dubai, grandiose projects started being announced again, this time in the wake of the Expo 2020, the universal exposition the city is slated to host five years from now.
One of these projects is the Expo 2020 park, planned to sprawl over 1,082 acres in the Jebel Ali area, and the surrounding infrastructure of road works, railway extension to the site, water and power supply systems and sanitation networks.
Investment in the park alone is expected to fall in the US$ 2-4 billion range. The master plan should be presented late this year, with construction expected to begin in 2016. Infrastructure is expected to see at least US$ 7 billion.
Two projects are underway to meet the expected tourism industry growth. In Dubai, the new Al Maktoum International Airport, in Jebel Ali, is already operating, although capacity falls far short of what’s expected upon completion: 160 million passengers and 12 million tons of cargo a year.
In Abu Dhabi, the country’s capital, a new terminal is being built to handle 30 million passengers a year, driving total capacity at the international airport to 45 million travellers annually.
In Dubai, the Road and Transportation Agency (RTA) is in charge of the ongoing Dubai Water Canal project, worth 2 billion UAE dirhams (US$ 544 million), an extension of the Dubai Creek, a strip of sea that runs through the city’s downtown, and will be lengthened all the way to the area known as Business Bay, home to Burj Khalifa, the world’s tallest building, and from there back to the Gulf in Jumeirah, the beach that’s the site of the famed sail-shaped hotel Burj Al Arab.
As for bold new developments, look no further than Dubai’s crown prince Future Museum plan. Featuring cutting-edge architecture, the project will be set near the Emirates Towers, one of the local postcard views. It will be a technology- and innovation-oriented venue where visitors can engage in futuristic experiences through simulations and interactive demonstrations.
Back on Dubai Creek, another flamboyant project being gestated is Aladdin City. Inspired by stories from the One Thousand and One Nights, the project consists of three commercial towers incrusted in the ocean inlet, connected among themselves and to the continent by bridges.
Large developments in the pipeline include the luxury residential project Mohammed Bin Rashid Al Maktoum City (MBR) – District One, whose name is a tribute to Dubai’s emir and UAE prime minister. The area will boast capacity for 78,300 residents. The first villas are due for delivery in 2016.
Al Mamzar Beachfront is another planned mixed-use development. With an estimated budget of 10 billion dirhams (US$ 2.7 billion), the project should comprise 4,000 residences, 300 hotel rooms and 250,000 square meters of retail outlets, among other facilities.
Another project along similar lines, the Deira Islands are a set of four artificial islands that should add 40 kilometers to the coastline and feature mostly tourist attractions.
Bluewaters, by the developer Meraas, will also be erected on an artificial island and its flagship attraction will be the Dubai Eye, touted as the world’s largest Ferris wheel, styled after Britain’s London Eye.
Yet another project is the Dubai Creek Harbour, a mixed-use property near Dubai Creek and Ras Al Khor, a wildlife sanctuary. The incorporators, Emaar Properties and Dubai Holding, are hoping to build the world’s tallest twin towers there.
A different project altogether, the Dubai Opera will be a 2,000 seat theater designed to house various types of shows. In Abu Dhabi, the inauguration of the local branch of the Louvre Museum is scheduled for 2016.
Scenario
Besides these, there are a multitude of other projects in progress or already announced in the country. According to MEED, a company of marketing research and publisher of technical publications, there are in Dubai US$ 135 billion in planned but not yet contracted ventures. In Abu Dhabi, the number reaches US$ 42 billion. Last year, according to the same source, the value of projects effectively contracted stands around US$ 20 billion to US$ 25 billion in Dubai and a little more than US$ 10 billion in Abu Dhabi.
Edward James, MEED’s director of content and analysis, pointed out the differences between the two main markets of the UAE, Dubai and Abu Dhabi. According to him, there are less movement in Abu Dhabi because the emirate, the largest and richest of the country, depends a great deal on oil exports – the commodity answers to around 90% of local revenues – and the steep decline of international prices since the middle of last year resulted in a halt of the construction industry.
“There is indecision about what to do with the money, about what is the best use for the oil money, especially with the low prices”, James said to ANBA.
Dubai, according to him, is not so oil-dependent, since the local economy is more diversified. For the construction sector, the emirate depends more of foreign investments. The executive points out, however, that even with being more active that its neighbor, the market is not the same as before. “There isn’t the same demand as before [the 2008 financial crisis], the market is only half of what it was”, said James.
But considering the boom in the real estate market of Dubai in the last decade, half doesn’t mean small. The director of Big 5, the main construction fair in the Middle East, Andy White, says that the number of residential units scheduled to be completed next year reaches 28,000, way above the average of the last few years, and this supply took the prices down, making them more attractive.
“The prices are lower, dropped 11% in the second quarter of 2015 in comparison with [the same period of] 2014. That’s because there are more properties available in the market”, said White.
According to White, after the 2008 hit, the market changed and now the trend is sustainable growth. The local government, for instance, reduced the percentage of the value of properties still in the project stage that can be funded and, therefore, increased the amount that can be paid at sight and the tax rate for conveyance was increased from 2% to 4%.
“They changed it to curb speculation”, said White. He added that, for the same reason, some construction companies started to veto on their own the transfer of real estate before the construction is finished.
“Up to the [2008] crisis, people would buy off the plan a lot. [A project] get would announced and buyers would buy before construction, but now there are these limitations on the issuing of mortgages,” said James along the same lines.
Although the market is not the same as before, it’s been showing signs of recovery for some years already. According to White, the demand for the Big 5 is the highest in six years. “It started to improve as early as 2013,” he said. The fair will take place from November 23 to 26th in Dubai, and according to the executive it will have 10% more space than last year and feature 3,000 exhibitors, 75% of them foreigners.
James says, however, that the large number of projects announced doesn’t necessarily reflect the total amount of projects effectively in construction. “Making an announcement is easy, but it takes longer for the work to start,” he declared. “In 2014, there was optimism because of [choice of Dubai to host the Expo 2020] but now [the movement] is weak because the event is still far away,” he added.
Thus, he advises for exporters, building contractors and other businessmen from the sector to also look at neighboring markets such as Saudi Arabia, Qatar, Kuwait, Oman and even Iran. “Geopolitical issues make it complicated [for companies] from [Arab] Gulf countries to be active in Iran, for instance, but there are opportunities for countries such as Brazil,” James added. The advice on Iran is worth considering, since the economic sanctions imposed on the Persian country are expected to be lifted after the nuclear program agreement it signed with global powers.
*Translated by Gabriel Pomerancblum and Sérgio Kakitani
