Industry report · 2019-09-24 · Industry Market Research Report Construction and Contracting...

Industry report

Construction

and Contracting

Industry in

the UAE

Table of contents 1 Executive summary 4

1.1 Sector performance ........................................................................................ 4 1.2 Construction material market analysis .............................................................. 4 1.3 Characteristics of the sector ............................................................................ 4 1.4 Funding and investment.................................................................................. 4 1.5 Outlook ........................................................................................................ 5 1.6 Competitive landscape .................................................................................... 5

2 Sector overview 6

2.1 Snapshot ...................................................................................................... 6 2.2 Market size ................................................................................................... 6 2.3 Segment Distribution ...................................................................................... 7 2.4 Geographical distribution .............................................................................. 14

3 Construction material market analysis 16

3.1 Value chain analysis ..................................................................................... 16 3.2 Construction raw material market .................................................................. 17 3.3 Construction material price index ................................................................... 18 3.4 Distributors and logistics providers ................................................................. 21

4 Characteristics of sector 22

4.1 Opportunities .............................................................................................. 22 4.2 Threats ....................................................................................................... 24 4.3 Trends and drivers ....................................................................................... 27 4.4 Legal structure ............................................................................................ 31 4.5 Characteristics of entrepreneurs .................................................................... 33

5 Key insights – Funding and investment 37

5.1 Financial funding and investment ................................................................... 37

6 PEST analysis 45

6.1 Political factors ............................................................................................ 45 6.2 Economic factors .......................................................................................... 46 6.3 Social factors ............................................................................................... 47 6.4 Technological factors .................................................................................... 48

7 Outlook 50

8 Competitive landscape 52

8.1 Overview .................................................................................................... 52 8.2 Arabtec Construction LLC .............................................................................. 52 8.3 Al Naboodah Construction Group LLC .............................................................. 54 8.4 Dutco Construction LLC ................................................................................. 55 8.5 HLG Contracting LLC .................................................................................... 56

Industry Market Research Report Construction and Contracting sector in UAE of 60

1 Executive summary

The construction industry has rebounded from the 2009 financial crisis and the Dubai debt crisis,

driven by a relative increase in oil and gas prices, an expanding tourism sector and rising exports.

1.1 Sector performance

The construction sector in the UAE was valued at USD 44.5 bn in 2016 and contributed 10.9% of

the country’s GDP; the figure is expected to increase to 12.0% in 2017. The residential segment

generates the maximum revenue (~35%), followed by infrastructure (~20%) and office (~13%).

Further, most of the sector’s revenue is generated by two cities: Abu Dhabi (~50%) and Dubai

(~30%).

1.2 Construction material market analysis

The construction sector consists of three elements, which are essentially required for construction

activity: inputs (raw material and product manufacturing), construction process (design and

engineering, and construction) and outputs (operations and maintenance). The sector sources

almost 60% of its construction and raw materials locally, and the remaining 40% internationally.

1.3 Characteristics of the sector

Opportunities: A few factors that pose an opportunity for the country’s construction sector

include a positive outlook for the construction sector, a growing entertainment and tourism sector

and a growing focus on renewable energy.

Threats: A few factors that pose a threat for UAE’s construction sector include the effect of

changing climate conditions, growing competition, cash flow constraints, implication of VAT and

uncertainty over oil prices.

Trends and drivers: The key trends and drivers for the country’s construction sector include the

growing popularity of 3D printing, demand for green buildings and positive FDI flows.

1.4 Funding and investment

Construction and contracting projects in the UAE are funded through self-financed modes, bank

loans, non-banking financial institutions, private equity and venture capitals, and private

placements and bonds. Besides self-funded sources, as well as support from family member and

friends, bank loans are the most preferred way to fund construction projects.


1.5 Outlook

The outlook for the UAE construction sector appears to be positive; the sector is expected to

increase at a CAGR of 7.5% from USD 44.5 bn in 2016 to USD 63.8 bn in 2021. Its contribution

to the country’s GDP is also expected to increase from 10.9% in 2016 to 12.7% in 2021. The

sector is expected to benefit from new construction projects and further development of existing

projects, majorly due to international events such as Expo 2020 and government investment in

transportation, infrastructure and tourism.

1.6 Competitive landscape

The construction market, which comprises more than 6,000 companies, is fragmented and

constitutes many domestic and foreign players. Construction companies are primarily located in

Dubai and Abu Dhabi, as construction activity is mainly carried out in these emirates. Competition

in the market is strong as small companies as well as large players offer similar services.

Major companies in the country’s construction and contracting sector include Arabtec Construction

LLC, Al Naboodah Construction Group LLC, Dutco Construction LLC, HLG Contracting LLC and Al

Fara’a General Contracting Co LLC.


2 Sector overview

2.1 Snapshot

The UAE construction sector has rebounded from the 2009 financial crisis and the Dubai debt

crisis, driven by a relative increase in oil and gas prices, an expanding tourism sector and rising

exports. The sector outlook seems positive, considering further growth/development of the

tourism sector, international events such as Expo 2020 and major government investment in

transportation infrastructure.1

On the back of this growth, the UAE is expected to reclaim its crown from Saudi Arabia as the

largest construction market in the Middle East region by 2020.2

2.2 Market size3

In 2016, the market size of the construction sector in the UAE was USD 44.5 bn, and it is

expected to increase by 8.9% to reach USD 48.4 bn in 2017. Overall, the market is expected to

increase at a CAGR of 8.5%, from USD 36 bn in 2014 to USD 63.8 bn in 2021. BMI Research, a

Fitch Group Company, holds a positive outlook on the expansion of the UAE’s construction sector,

as it expects considerable investment inflows into Dubai’s and Abu Dhabi’s transport, energy and

tourism sectors.

The construction sector contributed 10.9% of the country’s GDP in 2016; the figure is expected to

increase to 12.0% in 2017. Overall, the sector’s contribution to the country’s GDP is expected to

increase from 8.7% in 2014 to 12.7% in 2021. Growth would be driven by continued investment

from private and government firms in the construction sector.

1 ‘UAE Construction Sector 2016’, Flanders Investment & Trade, December 2016 2 ‘UAE to reclaim crown from Saudi Arabia as biggest construction market in region’, thenational.ae, 21 Jan, 2017 3 ‘UAE - Q2 2017’, BMI Research, 2017 / Exchange rate (Average of 2016)1AED= USD0.272258 / LexisNexis, accessed on 25 May, 2017


2.3 Segment Distribution4

The major sub-sectors of the construction sector are infrastructure, residential, office, retail,

hospitality, healthcare and leisure.

According to industry experts, the residential segment generates the maximum revenue (~35%),

followed by infrastructure (~20%) and office (~13%).

The following sections provide details on the sub-sectors.

2.3.1 Residential

In the past (2013–14), residential projects accounted for the highest number of projects

completed. However, over the years, projects in the hospitality, education and healthcare sectors

have taken over, as large sums of money are invested in these sectors.

The UAE’s residential construction market is dominated by Dubai and Abu Dhabi, which account

for a large share of residential construction projects. The UAE government has undertaken

measures to bridge the gap between supply and demand for affordable housing for low-income

group. For instance, the government has allocated land in Al Quoz and Muhaisnah (Dubai) for

affordable housing units. The government is also expected to introduce a law that mandates

developers to allocate 15–20% of their projects to the affordable housing category.

4 ‘UAE Construction Sector 2016’, Flanders Investment & Trade, December 2016 / ‘JLL Real Estate Market Overview - UAE - 2016 Year In Review’ / Estimated figures are based on primary research and expert opinion

36.0

40.3

44.5

48.4

52.5

56.960.0

63.8

8.7%

10.6%10.9%

12.0%12.4%

12.7% 12.6% 12.7%

7%

9%

11%

13%

15%

10

20

30

40

50

60

70

FY14 FY15 FY16 FY17F FY18F FY19F FY20F FY21F

Market size % of GDP

Constr

uction industr

y v

alu

e, U

SD

bn

% o

f GD

P


Dubai residential market

The upper-mid and high-end residential market of Dubai is experiencing oversupply of units, with

a demand and supply gap of 13%. Additionally, about 51,000 units are expected to be delivered

by 2020. However, it is expected that the growing population and Expo 2020 will absorb the

oversupply.

*Future supply is the additional units delivered in that specific year.

Abu Dhabi residential market

Abu Dhabi, on the other hand, is experiencing over demand in the affordable housing space as

well as in the mid and higher end segments.

Some of the large residential projects that are under construction are as follows:

Project Project value (USD mn) Expected completion

Capital District- Abu Dhabi 40,000 2030

Mohammed Bin Rashid City 55,000 2023

Al Reem Island 37,000 2023

434449 456

471 471502

31

24

400

440

480

520

560

2013 2014 2015 2016 2017F 2018F

Dubai residential supply (2013–2018F)

Completed Future Supply*

Num

ber

of U

nits (

000’s

)

236244 245 248 248

253

5

7

220

240

260

280

2013 2014 2015 2016 2017F 2018F

Abu Dhabi residential supply (2013–2018F)

Completed Future Supply

Num

ber

ofU

nits

(000’s

)


2.3.2 Infrastructure

A significant number of infrastructure projects,

including road, airport and port projects, have

started in the recent past. These developments are

primarily due to the upcoming Expo 2020 event in

Dubai.

As per current statistics, the UAE ranks first in roads,

second in ports and third in airport infrastructure across the globe. Some of the large

infrastructure projects that are under construction have been listed below:

Project Project value

(USD mn) Expected completion

Dubai Metro Expansion 14,352 2030

Etihad Railway Network 11,000 2018

Dubai International Airport Expansion 7,800 2018

Abu Dhabi Metro 7,000 2020

Abu Dhabi Airport Expansion: Midfield Terminal 2,960 20195

2.3.3 Office

Dubai office market

In 2016, the Dubai office market space witnessed the delivery of 129,000 m2 of gross leasable

area (GLA), thereby taking the total Dubai office area to 8.6 million m2. The majority of these

completions were in Business Bay (56%) and TECOM A & B (32%). About 10,300 m2 of office

area was completed in Q4 2016, including The Edge in Dubai Internet City. In 2017, Dubai is

likely to witness the completion of about 300,000 m2 of office space, with supply primarily from

Business Bay (30%), Onyx Towers (22%) and Amesco Tower (20%).

5 ‘Abu Dhabi’s new airport terminal opening delayed to 2019’, arabianbusiness.com, 6 Mar, 2017

7,612 7,753

8,427 8,556 8,5568,858

302

84

7,000

8,000

9,000

10,000

2013 2014 2015 2016 2017F 2018F

Dubai office supply (2013–2018F)


GLA (

‘000)

m2

Across the globe, in terms of

infrastructure, the UAE ranks:

1st in roads

2nd in ports

3rd in airport


3,130 3,1733,319

3,533 3,533

3,744

211

144

3,000

3,500

4,000

2013 2014 2015 2016 2017F 2018F

Abu Dhabi office supply (2013–2018F)


GLA

(‘0

00)

m2

Abu Dhabi office market

The Abu Dhabi office market witnessed the completion of 214,000 m2 of GLA in 2016, taking the

total area to 3.5 million m2. In 2016, Abu Dhabi saw some popular project completions, including

Bloom Central, ADNOC HQ, Maryah Tower and the new FGB HQ. In 2017, Abu Dhabi is expected

to witness the completion of an additional 211,000 m2 of GLA, which will be dominated by the

delivery of ADIB on Airport Road, as well as Leaf and Omega towers.

Some of the large office projects that are under construction are as follows:


Masdar City (mixed use) – Abu Dhabi 22,000 2026

Renaissance City (mixed use) – Abu Dhabi 25,000 2020

2.3.4 Retail

Dubai retail space

In 2016, about 261,000 m2 of retail space was completed in Dubai, which is the highest volume

since 2010. The city witnessed the completion of some distinguished retail projects in 2016,

including Phase 2 of The Avenue in City Walk (130,000 m2) and the Ibn Battuta Mall Phase II

(17,000 m2). In 2017, the retail market in Dubai is expected to add another 350,000 m2 of retail

GLA.


Abu Dhabi retail space

In 2016, Abu Dhabi witnessed no major completions, with total retail space stable at about 2.6

million m2. In 2017, about 85,000 m2 of retail space is scheduled for completion, which is

primarily within residential communities or towers.

The retail space is expected to increase significantly over the short-to-medium term with the

delivery of Al Maryah Central Mall in 2018 and Reem Mall in the subsequent years in Abu Dhabi.

Some of the large retail projects that are under construction are as follows:


Yas Island Development 37,000 2025

Mall of the World 6,800 2022

Reem Mall 1,000 2018

Deira Islands Mall 355 2018

2,899 2,9553,180

3,441 3,4413,791

350

367

2,500

3,500

4,500

2013 2014 2015 2016 2017F 2018F

Dubai retail supply (2013–2018F)


GLA

(‘0

00)

m2

2,194

2,567 2,620 2,623 2,623 2,708

85 382

2,000

2,500

3,000

3,500

2013 2014 2015 2016 2017F 2018F

Abu Dhabi retail supply (2013–2018F)


GLA (

‘000)

m2


2.3.5 Hospitality

The UAE gains from its strategic geographical position – it serves as a transit point between East

and West. Due to this, it attracts a large number of visitors from all over the globe.

Dubai hotel market

In 2016, Dubai’s hotel market saw the completion of about 6,600 rooms, thereby taking the total

hotel stock to about 78,600 keys. In Q4 2016 alone, Dubai witnessed the delivery of Jumeirah al

Naseem (430 rooms), the Premier Inn Ibn Battuta (372 rooms) and Nikki Beach Resort (117

keys). It is expected that about 13,900 keys could be handed over in 2017. Further, the hotel

supply will continue to increase because of greater demand from visitors to Expo 2020.

Abu Dhabi hotel market

In 2016, Abu Dhabi witnessed the introduction of about 1,000 hotel keys, thereby taking the

hotel room supply to 21,400 keys. In Q4 2016, Abu Dhabi saw the completion of Millennium Bab

Al Qasr (422 rooms). Other completions in 2016 include the Four Seasons (190 rooms and 125

serviced apartments), the Marriott Downtown (315 rooms) and the Marriott Executive apartments

Downtown (64 units). In 2017, about 2,000 hotel keys are expected to be delivered.

60,800 64,40072,000

78,600 78,600

92,500

13,900

15,000

50,000

70,000

90,000

110,000

130,000

2013 2014 2015 2016 2017F 2018F

Dubai hotel supply (2013–2018F)


Num

ber

of ro

om

s (

Keys)

18,15019,700 20,400

21,400 21,40023,400

2,000

1,100

15,000

20,000

25,000

2013 2014 2015 2016 2017F 2018F

Abu Dhabi hotel supply (2013–2018F)


Num

ber

of ro

om

s (

keys)


Some of the large hotel projects that are under construction are as follows:


Paramount Hotel & Resorts 1,350 2018

Viceroy Dubai 1,000 2018

Al Habtoor City 3,000 2017

Jewel of the Creek 1,360 2017

2.3.6 Leisure

With an increasing number of tourists and a growing population, demand for the leisure market is

also increasing. The UAE has about 20 theme parks in the pipeline. The largest and most well-

known leisure construction project is DreamWorks Zone, which was completed during Q4 2016.

Some other announced projects such as a Holy Quran Park and Meydan One Ski (which includes

the world’s tallest observation deck, the world’s longest indoor ski slope and the largest dancing

fountain in the world) are expected to help Dubai reach its goal of 20 million tourists by 2020. In

Abu Dhabi also, a Warner Bros theme park, which will cost USD 1 bn, is expected to be

operational by 2018.

2.3.7 Healthcare

The construction sector has witnessed increasing investment in healthcare projects in the UAE. In

recent times, large healthcare project constructions have been noticed, including USD 1.2 bn Al

Ain Hospital in Al Ain, USD 136 mn medical mall in Khalifa City A in Abu Dhabi, and many more.

Some of the large healthcare projects that are under construction are as follows:


Mediclinic Parkview Hospitality 190.5 2018

Aster Hospital 17.7 2018

Saudi German Hospital Ajman 89.1 2017

Al Burjeel Hospital 1,500 2017


2.4 Geographical distribution

2.4.1 Construction and contracting companies in the UAE6

As of May 2017, companies in Dubai and Abu

Dhabi accounted for about 47.6% and 22.8%,

respectively, of the total construction and

contracting companies in the UAE. This may

be due to a high concentration of construction

activities and urbanisation in the two cities.

Construction and contracting companies in the

UAE were primarily into engineering and

construction, real estate development and

home building services.

Some of the major companies are Arabtec

Construction LLC, Al Naboodah Construction

Group LLC, Dutco Construction LLC, HLG

Contracting LLC, Al Fara’a General Contracting

Co LLC, Wade Adams Contracting LLC and Actco General Contracting Company LLC.

2.4.2 Breakdown of revenue generated by geography7

According to industry experts, most of the

construction sector’s revenue in the region in

recent times has been generated by two

cities: Abu Dhabi (~50%) and Dubai (~30%).

This is majorly because of the numerous

construction projects that are in development

or have been completed in the region.

Further, industry experts predict that this

would be an ideal revenue generating

structure for the coming few years as well.

Some of Abu Dhabi’s major construction

projects that are currently under development

are Capital District, Al Reem Island,

Renaissance City, Masdar City and Yas Island.

A few of Dubai’s major construction projects

under development are Dubai Metro,

Mohammed bin Rashid City and the Business Bay.

6 FactSet, accessed on 2 Jun 2017 / Includes FactSet industries - [1415] Homebuilding; [401525] Facilities and Construction Services; [302510] Home Builders and Manufactured Buildings; [236] Construction of Buildings; [15] Building Construction General Contractors And Operative Builders; [16] Heavy Construction Other Than Building Construction Contractors; [17] Construction Special Trade Contractors; [3115] Engineering & Construction; [238] Specialty Trade Contractors; [237] Heavy and Civil Engineering Construction; and [4885] Real Estate Development 7 Estimated figures are based on primary research and expert opinion

47.6%

22.8%

7.3%

22.3%

Geographical locations of

construction and contracting companies (2017)

Dubai Abu Dhabi Sharjah Others

50.0%

30.0%

8.0%

5.0%

5.0% 1.0% 1.0%

Revenue breakdown by geography

Abu Dhabi Dubai Sharjah

Ajman Ras Al Khaimah Umm Al Quwain

Fujairah


2.4.3 Geographical breakdown of SMEs and

large companies8

According to industry experts, a majority of small

medium enterprises (SMEs) and large construction

companies are based in Dubai and Abu Dhabi. While

Dubai hosts 35–45% of large construction companies and

50% of SMEs, Abu Dhabi hosts 20–25% of SMEs and

30% of the large construction companies.

Sharjah is the third most-prominent emirate in terms of hosting SMEs and large companies.

In addition, for Expo 2020 Dubai, more than 12,000 vendors have been registered on the Expo

supply portal and out of these 60% are SMEs. In 2017, about 47 construction contracts are

expected to be rolled out worth USD 3 bn (AED 11 bn) and another 98 non-construction contracts

totalling USD 98 mn (AED 360 mn).9

2.4.4 Construction product and machinery companies in the UAE10

As of May 2017, Dubai, Sharjah and Abu Dhabi, contributed 43.2%, 11.5% and 10.9%,

respectively, of the total construction products and machinery companies in the UAE.

The construction products and machinery companies were primarily dealing in construction

material and building products. Some of the major companies include Ras Al Khaimah Ceramics

PSC, Depa Ltd, Arkan Building Materials Company (Arkan) P J S C, Porcellan Co LLC, Gulf Cement

Company (PSC), Union Cement Company (PSC), Fujairah Cement Industries Company (PSC) and

Sharjah Cement and Industrial Development Company (PSC).

8 Estimated figures are based on primary research and expert opinion 9 ‘Behind the headlines – Dubai’s booming economy and what it means for your business’, vz.ae, 31 May 2017 10 FactSet, accessed on 2 Jun 2017 / Includes FactSet industries - [1230] Building Products; [20252010] Building Materials and Garden Supply Stores; [451535] Construction Materials; [4441] Building Material and Supplies Dealers; [32712] Clay Building Material and Refractories Manufacturing; [321992] Prefabricated Wood Building Manufacturing; [332311] Prefabricated Metal Building and Component Manufacturing; [52] Building Materials, Hardware, Garden Supply, And Mobile Home Dealers; [24] Lumber And Wood Products, Except Furniture; [3448] Prefabricated Metal Buildings and Components; and [1135] Construction Materials

43.2%

11.5%

10.9%

34.4%

Geographical locations of construction product and machinery

companies

Dubai Sharjah Abu Dhabi Others

Dubai hosts:

35–45% of large construction

companies

50% of SMEs


3 Construction material market analysis

3.1 Value chain analysis11

The construction sector consists of the following elements, which are essentially required for

construction activity:

Inputs (raw material and product manufacturing): The input elements include

construction raw material such as steel, cement, brick, labour and other construction material,

which are used to construct a building/structure. The parties involved include the

manufacturer of the raw material.

Construction process (design and engineering, and construction): This includes biding,

designing and construction of the building. The parties involved in this element include the

owner of the building, architect, engineer and contractor.

Outputs (operations and maintenance): Once the building is constructed, it is operated

and maintained by a maintenance company. The parties involved include owner of the

building, building occupants, maintenance companies and real estate companies that facilitate

the process of buying and selling of the property.

Note: Some companies may overlap in one or the other head, such as a company might be a construction material supplier as well as a constructing company. Example: Al Naboodah Construction Group LLC (ANCG) positions itself in the GCC construction industry as self-sufficient, supplying its own asphalt, concrete, and plant and machinery. 11 Construction industry report, fpts.com.vn / Building material suppliers in UAE, alluae.ae / Forbes Middle East Celebrates The Top 100 Real Estate Companies In The Arab World, forbesmiddleeast.com / General web search

Major logistics & transportation

service providers in the UAE

Major constructing companies

in the UAE

Major real estate companies

in the UAE

Major construction material

suppliers in the UAE

Inputs Constructors Outputs


60.0%

40.0%

Construction raw material

sourced

Locally Internationally

3.2 Construction raw material market 12

According to industry experts, the construction sector

in the UAE, sources almost 60% of its construction

and raw materials locally, and the remaining 40%

internationally. Considering the vast range of

construction projects, from multi-storied hotels and

residential villas to theme parks, the region imports

construction materials of all kinds from numerous

countries across the globe.

Also for the products domestically manufactured, most

of the raw material and construction components are

manufactured in the free zones located in the region,

mainly in Dubai. Apart from domestic manufacturers,

several international brands / companies are now

manufacturing building raw materials in these free zones, thereby helping customers procure

material locally. For example, several European brands are now manufacturing spare parts,

mechanical and electrical components, etc., in these free zones.

However, there are a few raw materials, such as timber,

marble and natural stones, and sand that are majorly

sourced internationally. According to a UN report, the

country imported USD 456 mn worth of sand, stone and

gravel in 2014. Despite the fact that the county has sand

in abundance, it is not suitable for construction projects as

it has a higher salt content and is too fine to be used in

construction.

A few of the major countries / geographical regions from where the country imports and exports

construction material are as follows:

Import: China, Europe, the US and India

Export: China, India, Japan, Iran, Korea and the US

(majorly focused on the Asian market)

The following are the primary construction material types and their sources:

12 “Strange but true: the UAE imports its sand”, edgardaily.com, 18 May, 2016 / Fpt Securities – Construction Industry Report, May, 2015 / Estimated figures are based on primary research and expert opinion

Key construction cost

components:

Raw material: 60–70%

Labour: 10–20%

Machinery: 10–20%

Total costs majorly include:

Steel: 25–30%

Concrete: 15–18%


3.3 Construction material price index13

The Dubai Chamber monitors the price movements of 251 construction materials used in

construction projects in Dubai and publishes their Construction Material Price Index (CMPI). The

index shows the construction material prices prevalent across the UAE. The Q1 2017 CMPI

indicates that the prices of false ceiling, cement and gypsum, pipes and fittings, steel, aluminium

sheet, and wires and cables increased significantly from Q1 2016 levels.

At the same time, prices of a few construction materials declined during the period. These

products include ready-mix concrete, timber, sanitary ware and waterproofing products.

Construction materials with relatively stable prices include bricks; aggregates, gravel and sand;

tiles and flooring materials; glass and mirrors; paints and varnish; and marble and natural

stones.

13 Dubai Chamber, accessed on 12 Jun 2017

6.1%

4.7%

3.0%

3.0%

2.3%

1.9%

2.2%

1.3%

7.9%

10.9%

4.5%

0.2%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

False Ceiling

Cement & Gypsum

Pipes & Fittings

Steel

Building Metal Products

Wires & Cables

Construction material, whose prices increased in Q1 2017

Y-o-Y (%) Q-o-Q (%)

Qatar

(~60%)

Turkey

Oman

China

UAE

UAE (Ras Al

Khaimah and Fujairah)

Saudi Arabia Bahrain

UAE (Dubai) China

China

UAE (Ras Al Khaimah)

Steel Cement &

gypsum Aggregates,

gravel & sand Aluminium

sheets Tiles & flooring

Korea

Japan

Turkey

Egypt UAE (Dubai)

UAE (Dubai)

Tunisia Egypt

Indonesia

Malaysia

New Zealand India

Syria

Jordan

Oman Egypt

Glass & mirrors Wires & cables Timber Marble & natural

stones


Details of the CMPI for various construction materials during Q1 2016–Q1 2017 are as follows:

Construction material

Index Percent change

Q1

2016

Q2

2016

Q3

2016

Q4

2016

(A)

Q1

2017

(B)

Q-o-Q

(A–B) Y-o-Y

Steel 72.0 79.4 75.1 77.6 79.9 3.0 10.9

Bricks 93.2 99.3 102.5 102.5 102.5 0.0 10.0

Cement & gypsum 95.5 95.5 94.6 92.4 96.8 4.7 1.3

Aggregates, gravel & sand 110.4 110.4 110.4 110.4 110.4 0.0 0.0

Aluminium sheets 91.2 93.1 91.2 93.1 95.3 2.3 4.5

Tiles & flooring 108.9 108.0 106.9 106.9 106.9 0.0 -1.8

Glass & mirrors 123.1 123.1 122.1 122.1 122.1 0.0 -0.8

Wires & cables 96.2 101.7 101.9 94.5 96.4 1.9 0.2

False ceiling 86.2 86.2 83.0 83.0 88.1 6.1 2.2

Sanitary ware 98.6 99.7 101.3 100.8 100.5 -0.3 1.9

-0.1%

-0.3%

-0.3%

-0.5%

3.1%

1.9%

2.0%

-2.2%

-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

Waterproofing product

Sanitary ware

Timber

Ready made concrete

Construction material, whose prices declined in Q1 2017

Y-o-Y (%) Q-o-Q (%)


Construction material

Index Percent change

Q1

2016

Q2

2016

Q3

2016

Q4

2016

(A)

Q1

2017

(B)

Q-o-Q

(A–B) Y-o-Y

Pipes & fittings 83.0 89.1 86.8 86.9 89.5 3.0 7.9

Ready-mix concrete 112.1 111.3 109.7 110.2 109.6 -0.5 -2.2

Timber 89.5 91.3 91.3 91.7 91.3 -0.3 2.0

Water proofing product 97.8 98.2 98.4 100.9 100.8 -0.1 3.1

Paints & varnish 106.0 106.0 106.0 106.0 106.0 0.0 0.0

Marble & natural stones 125.7 125.7 119.2 121.0 121.0 0.0 -3.7


3.4 Distributors and logistics providers14

Most of the construction projects in the region are required to abide by tight deadlines and quality

measures, making them highly dependent on construction product suppliers/traders/distributors

and external third-party logistics providers. Any delay in sourcing raw materials would result in

un-timely delays, missed deadlines and increased costs to get back on track.

Most construction material suppliers/traders/distributors and related logistics service providers

are based in Dubai, Abu Dhabi and Sharjah. This huge market is essential to support the growing

construction business in Dubai and Abu Dhabi. Further, the proximity of Sharjah to Dubai is a key

reason for the presence of a huge number of construction material providers and logistics service

providers in the region.

14 Estimated figures are based on primary research and expert opinion

30%

25%

20%

13%

7%

3%2%

Construction material suppliers/

traders/distributors by region

Dubai Abu Dhabi Sharjah

Ras Al Khaimah Ajman Fujairah

Umm Al Quwain

40%

30%

15%

7%5%

2%

1%

Construction material logistics

service providers by region

Dubai Abu Dhabi Sharjah

Ras Al Khaimah Ajman Fujairah

Umm Al Quwain


4 Characteristics of sector

4.1 Opportunities

4.1.1 Positive outlook for the UAE construction sector

The growing construction market in the UAE holds several opportunities for companies operating

in the construction sector in the UAE. The UAE construction sector is believed to be worth USD

48.4 bn in 2017. This positive growth is majorly attributed to increasing government expenditure

on infrastructure and industrial construction projects.

According to a Middle East market intelligence report, titled Outlook for GCC Construction

2017, the overall construction market in Gulf Cooperation Council (GCC) member states is

expected to improve in 2017. The report predicts that the GCC holds significant opportunities

for the construction sector despite the slowdown in awarding construction project due to lower

oil prices in 2016.15

According to industry experts, the UAE’s construction sector is expected to grow by 8.9% y-o-

y in 2017, majorly because of projects related to Expo 2020, Dubai Creek Harbour and Dubai

South.16

The commercial construction market, which includes retail, office and other commercial

spaces, is expected to be driven majorly by increasing government investment in office and

retail space in the region. Further, the industrial construction market and the residential

construction markets are also expected to grow.

4.1.2 UAE’s growing entertainment and tourism sector17

The entertainment and tourism sector in the UAE is one of the key factors driving the region’s

growth, apart from its oil-based economy. The sector is expected to grow rapidly, majorly backed

by exponential growth in the region’s tourism and hospitality infrastructure. For example, several

tourist attractions such as the Dubai Parks and Resorts and the Dubai Opera were completed in

2016. There are many more tourist attractions that were recently started, such as Louvre Abu

Dhabi and Dubai Safari followed by new projects such as

Six Flags Park, scheduled to be completed by H2 2019, and

the Sea World on Yas Island, Abu Dhabi, by 2022.

According to the World Economic Forum’s Travel and

Tourism (T&T) Competitiveness Report 2017, the UAE has

been named the most competitive economy for developing

its travel and tourism sector in the Middle East and North

Africa (MENA) region. According to the report, the UAE’s

15 “Positive outlook for the GCC construction sector in 2017”, thebig5hub.com, 30 Apr 2017 16 “UAE construction sector to witness 4% growth in 2017”, venturesonsite.com, 11 Oct 2016 17 “UAE tourism sector to hit Dh237b”, khaleejtimes.com, 27 Dec 2016 / “UAE named as MENA’s top economy for tourism growth”, arabianbusiness.com, 15 Apr 2017 / The UAE Real Estate Market – 2016: A Year in Review, report by JLL / Exchange rate (Average of 2016) 1AED = USD0.272258

World Economic Forum’s T&T

Competitiveness Report 2017

named the UAE as the most

competitive economy for

developing its travel and

tourism sector in the MENA

region.


performance has been continuously improving, with its score rising 1.4% since 2015.

Further, upcoming tourist attractions, large-scale international events such as Expo 2020, and the

growing meetings, incentives, conferences, and events (MICE) market are expected to accelerate

tourist arrivals especially to the UAE and the GCC in general. International tourist arrivals to the

GCC are expected to grow by 5.7% annually until 2020. Hence, the region’s entertainment and

tourism sector presents significant opportunities for the construction sector in the region and a

positive outlook.

4.1.3 UAE’s growing focus on renewable energy to aid the construction

sector18

The UAE plans to invest USD 163 bn in clean energy projects to ensure that half of the country’s

power needs are met by renewable sources by 2050.

In January 2017, Dubai launched an energy strategy called The Dubai Clean Energy Strategy

2050, which outlines plans to meet its target of producing 75% of its power from clean energy

sources by 2050. The strategy targets to generate 7% of its energy requirements from clean

energy by 2020, rising to 25% by 2030. Further, by 2050, it plans to generate 75% of the

emirate’s energy requirements from renewable/clean sources: renewables – 44%, clean fossil

fuels – 12%, nuclear – 6% and gas – 38%.

Similarly, the Abu Dhabi government has also set a target to source 7% of its energy

requirements from renewables by 2020.

To achieve these targets, the country has launched several large-scale infrastructure projects

including the Mohammed bin Rashid Al Maktoum Solar Park, the Hassyan Clean Coal Power Plant

and the Barakah Nuclear Power Plant. A few public buildings and commercial sites are also

starting to fit roof-top solar panels. Several other large-scale projects would need to be

constructed to meet the country’s renewable energy targets, thereby presenting opportunities for

the overall construction sector in the UAE.

18 ‘UAE economy: Renewable energy industry remains a priority in the UAE’, eiu.com, 23 Jan 2017 / ‘UAE invests £134bn in renewab les in push to reach 50% clean energy target’, independent.co.uk, 11 Jan 2017

“The UAE has rich cultural heritage, natural diversity and the developed infrastructure that make it a strong

competitor on the world tourism map.”

– Sultan bin Saeed Al Mansouri, Minister of Economy, the UAE

“Our aim is to balance our economic needs with our environmental goal. He who does not think of energy

is not thinking about the future. The UAE government has made an achievement in drawing up a unified

energy strategy for the country.”

– Sheikh Mohammed bin Rashid al-Maktoum, Prime Minister, the UAE


4.2 Threats

4.2.1 Effect from changing climate conditions19

Climatic conditions in the UAE are particularly harsh as compared with other countries. The

region’s climatic conditions include high temperatures, high humidity and occasional sand storms.

These conditions not only make it difficult to construct buildings and other construction projects,

but also put the lives of construction workers at risk.

According to The UAE Climate Change Risk and Resilience

Report, higher heat and humidity will endanger health and

decrease productivity in the construction sector during the

coming years. The report forecasts that the global impact of

heat on the workplace would lead to productivity loses of

nearly USD 2 tn by 2030.

Other environmental facts that are increasing threats to the construction industry, as highlighted

in the report, are as follows:

Sea level rise risk: Coastal urbanisation is fast-growing in

the UAE, making the region vulnerable to sea level rise

(SLR) risk. The coastal belt houses several prestigious

hotels and resorts and has several others in construction

presently. In Dubai, the urban area almost tripled during

1984–2003, with an artificial expansion of the city surface

due the projects such as the Palm Islands and the World archipelago. Similarly, in Abu Dhabi,

most of the city’s major developments are being built along the Emirate’s islands.

Greenhouse gas emissions: The region is also facing

challenges of increasing greenhouse gas (GHG) emissions.

Most of the designs of buildings in the modern urban

centres, such as Abu Dhabi, Dubai and Al Ain, are generally

19 ‘UAE climate change risks & resilience: an overview of climate change risks to 12 key sectors’, indiaenvironmentportal.org.in, 27 Mar 2017 / ‘Rising temperatures put outdoor workers’ lives at risk’, thenational.ae, 28 Mar 2017

93%

7%

75%

25%

2030 2050 2020 25%

75%

Non renewable energy Clean energy

The Dubai clean energy strategy 2050

By 2050, the UAE’s

temperature and humidity

would rise by 2º and 10%

respectively.

The UAE’s 85% of the

population located in low-

lying zones

In 2014, operating buildings

accounted for 28% of the

total energy consumption

and 59% of total water

consumption in Dubai


considered inefficient in terms of energy and water consumption. Most of these buildings are

believed to be unsuitable to the arid climate of the region. Their design and building material

focuses more on aesthetics and cost rather than environmental performance. The structures

generate a lot of demand for electricity and water, to cope up with overheating weather

conditions, thereby becoming significant sources of GHG emissions.

4.2.2 Growing competition20

The construction industry in the UAE is fragmented

and highly competitive in nature. Several small and

large companies operate in the sector, most of which

constantly face stiff competition not only from

regional companies, but also from several other

global companies and new entrants. A number of

international firms are targeting the high-growth,

low-risk emerging market; however, local players

continue to dominate in the region. Increasing

competition in the sector may lead to price erosion,

thereby inflating marketing costs.

A highly competitive market can adversely affect the company’s revenue, in case it fails to retain

and attract clients. Hence, companies in the sector are required to constantly come up with

innovative products and services for their customers

to create a competitive edge.

4.2.3 Cash flow constraints21

Contractors and sub-contractors in the UAE

constantly face the challenge of delays in receiving

payments. Cash is an essential component of the

sector, and any delays in payments not only affect

construction companies, but also the construction sector as a whole.

The Colliers Abu Dhabi and Dubai Construction Cost Benchmarking reports that delays in

payments ‘negatively impact the industry’s ability to deliver quality projects within budget and on

time’.

To ensure these delays do not affect ongoing projects, construction companies are depending on

debt financing to meet their requirements. In the current low-interest rate environment, this

looks like a short-term solution, but any mismatch in their fund flow would make them more

vulnerable.

Further, contractors are looking at various other funding mechanisms such as Joint ventures,

build-own-operate-transfer (BOOT) projects or public private partnerships (PPPs). According to

industry experts, it is also important for banks to identify innovative structures to support

contractors, in order to support cash flows and pay-outs.

20 Avention, accessed on 26 May 2017 / ‘UAE Construction Sector Fiercely Competitive’, bmiresearch.com, 15 Sep 2014 / Primary 21 ‘Delayed payments said to be key issue facing UAE contractors’, arabianbusiness.com, 4 Feb 2017 / ‘Contractors work out solutions for payment delays’, gulfnews.com, 21 Nov 2016

In 2016, 6-month cash flow delays in

the construction sector in Dubai

almost became a norm against the

usual

90–120 days turnout period.

Prominent construction companies in

the UAE:

Arabtec Construction LLC

Al Naboodah Construction Group

LLC

Dutco Construction LLC

HLG Contracting LLC

Al Fara’a General Contracting Co

LLC

Wade Adams Contracting LLC

Actco General Contracting


4.2.4 Proposed VAT to affect the construction sector22

The tax-free status of the GCC countries has been a major attracting factor for international

corporations and foreign individuals, both of which are of great economic importance to the

region. However, six GCC countries, which are the UAE, Saudi Arabia, Bahrain, Oman, Qatar and

Kuwait, announced that starting January 2018, they plan to introduce VAT on selected goods and

services. The tax will be applicable to all companies with revenues of more than USD 100,000.

The implementation, however, has taken place only in UAE and Saudi Arabia as per schedule and

implementation in other GCC countries has been delayed.

According to the managing director of the IMF, VAT in the GCC countries may raise revenues

equivalent to 2% of the region’s GDP. The government may further invest this VAT revenue in

infrastructure-related construction projects. While in the longer run, VAT might affect the

construction industry positively; in the shorter run it is definitely going to be a challenge.

According to industry experts, local construction companies are likely to feel the immediate

effects of VAT in the form of administration costs.

While, it is expected that government-funded construction projects would be exempted from the

tax, or at least receive rebates, private construction companies would have to comply with the

decision, which in turn is expected to raise overall construction costs.

22 ‘How will VAT affect the GCC construction sector?’, thebig5hub.com, 30 Nov 2016 / ‘How will VAT affect the GCC’s construction sector?’, constructionweekonline.com, 11 Mar 2017

“While six-month credit terms are not being embedded into contract arrangements, the practice of late

payments is becoming an epidemic in some parts of the sector, placing additional pressure on contractors.

Due to the nature and structure of the industry, contractors do tend to bear challenging contract

arrangements, often to the detriment of their business.

– Sachin Kerur, Head, Pinsent Masons M. E.

“Cash flow is thus the key — the contractor should not allow a project to get to a stage where they are

reliant on debt to finance it. This could be very high risk ... unless of course there is a separate agreement

with the client for a lump-sum deferred payment based on sales.”

– Niall Greene, Managing Director, Middle East, Linesight

“It is going to be extremely challenging. Businesses need to look at their arrangements. And the sooner,

the better, as the sector will face a scramble leading up to 2018, mainly due to the lack of domestic

legislation currently in place.”

– Jeremy Cape, Partner, Squire Patton Boggs

“Construction firms will certainly have a lot of complex issues to deal with, especially if there are certain

exemptions or rate reliefs on [particular] types of construction works… And in an economy that has been

tax-free for most of its history, businesses might find it difficult to get used to timely tax compliances.”

– Rakesh Pardasani, Partner, RSM UAE


4.2.5 Uncertainty over oil prices23

Government spending in the UAE and other GCC countries is majorly dependant on oil prices. The

region is increasingly facing threats from fluctuating oil prices, which results in reduced

government expenditure in times of a downward trend in price. The region’s overall economic

activities have been impacted, mostly due to falling commodity prices, particularly oil.

Any further drop in oil prices may force the UAE government to rethink its spending strategies.

Hence, uncertainty over oil prices is believed to be a constant challenge for the overall economic

condition of the country, thereby also affecting the country’s construction sector.

4.3 Trends and drivers

4.3.1 3D printing becoming popular in the UAE’s construction sector 24

In April 2016, His Highness Shaikh Mohammad Bin Rashid Al Maktoum, VP and Prime Minister of

the UAE and ruler of Dubai, launched the Dubai 3D Printing Strategy. The aim of the strategy is to

ensure that about 25% of buildings in Dubai are based on 3D printing technology by 2030. This is

a unique global initiative, which focuses on using the technology for the service of humanity, as

well as to promote the status of the UAE and Dubai as a leading centre of 3D printing technology

by 2030.

The strategy is focused on the use of 3D printing technology in three areas: construction, medical

products and consumer products. However, a majority of the focus is towards its use in the

construction sector, wherein the implementation phase includes launching the first pilot project

with Dubai Holding. In this phase, developers will be inspired to work on prototype projects, and

23 ‘Top 5 challenges for the GCC construction industry in 2016’, doka.com, 25 Jan 2016 / ‘GCC contract awards to drop by 15% in 2016’, thenational.ae. 17 Jan 2016 / ‘UAE and Dubai economic activity slows on back of low oil prices’, consultancy.uk, 2 Nov 2016 / opendataforafrica.org, as accessed on 7 Jun 2017 24 ‘UAE aims to be global hub for 3D printing’, gitex.com, Mar 2017 / ‘Dubai 3D Printing Strategy’, government.ae

20

40

60

80

100

120

May-1

2

Jul-

12

Sep-1

2

Nov-1

2

Jan-1

3

Mar-

13

May-1

3

Jul-

13

Sep-1

3

Nov-1

3

Jan-1

4

Mar-

14

May-1

4

Jul-

14

Sep-1

4

Nov-1

4

Jan-1

5

Mar-

15

May-1

5

Jul-

15

Sep-1

5

Nov-1

5

Jan-1

6

Mar-

16

May-1

6

Jul-

16

Sep-1

6

Nov-1

6

Jan-1

7

Mar-

17

May-1

7

Dubai crude oil prices: May 2012–May 2017 (USD / barrel)

USD

/ b

arr

el

Dubai crude oil prices have fluctuated

significantly in the last few years


the private sector and consultants will be encouraged to adopt 3D printing technology through a

combination of direct impact incentives.

Key initiatives

In May 2016, within a month of the launch of the Dubai 3D Printing Strategy, the world’s first

fully functional 3D printed building was inaugurated in Dubai by His Highness Shaikh

Mohammad. The one-storey prototype building, was 3D-printed using a 20-feet high, 120-feet

long and 40-feet wide 3D printer. The building with floor space of about 250-sq m was built in

17 days, at a cost of about USD 140,000, cutting both building and labour costs by 50%,

compared with conventional buildings of similar size.1

In March 2017, Cazza, a US-based 3D technology-focused construction company, announced

plans to build the world’s first 3D-printed skyscraper in the UAE. While the company has not

disclosed details about the project, such as its height, commencement or completion dates,

reports mention that the building would be nearly 40–50 stories. For the project, the company

plans to print concrete and steel materials using its cranes.1

Expected benefits of 3D printing

Reduce construction costs by:

50–70%

Reduce labour costs by:

50–80%

Reduce construction waste by:

60%

4.3.2 Growing demand for green buildings25

The UAE holds the largest share of green buildings in the MENA region, with nearly 65%. The UAE

government has implemented several policies and regulations to promote the adoption of green

buildings. One of these mandates require all government-owned buildings to be green. A 2013

global industry survey revealed that that more than half of the ongoing projects were green in the

UAE, indicating that construction firms in the country are early and strong adopters of green

building projects.

The climatic conditions of the UAE (hot desert climate and water scarcity issues) make it one of

the most challenging markets in the world to implement sustainable building solutions. Despite

these challenges, the UAE was named one of the top 10 markets for green building space by the

US Green Building Council (USGBC) in 2015.

25 ‘United Arab Emirates – Construction’, export.gov, 15 Aug 2016 / ‘UAE named one of top ten markets for green building space’, dmgeventsme.com, 28 Aug 2016

“The UAE is presenting to the world the first integrated and comprehensive strategy to exploit 3D

technology to serve humanity. We have also framed practical plans and precise goals to turn the strategy

into reality — the reality that will contribute to the progress and prosperity of the world and help preserve

our human heritage.”

– Shaikh Mohammad Bin Rashid Al Maktoum, VP and Prime Minister, UAE


Key initiatives

According to Green Technologies, a Dubai-based

Engineering Consultancy Company, the UAE accounts for

the highest number of USGBC LEED (US Green Building

Council Leadership in Energy and Environmental Design)-

certified buildings (221), followed by Saudi Arabia (124)

and Qatar (97), as on August 2016. Further, the number of projects under LEED certification

process, reveal the UAE’s growing commitment towards sustainability in construction.

The UAE was reported to have the eighth-largest stock of LEED-certified buildings outside the

US. Further, consultancy firm Solidiance ranked Dubai no. 8 in the list of the top 10 global

cities for green buildings.

609

99 8237 27 23

The UAE Saudi Arabia Qatar Lebanon Oman Jordan

Projects currently under LEED certification process (as on August 2016)

“The government plays a very important role in promoting and enforcing policies to reduce carbon footprint

in the UAE. Government entities such as DEWA, ADWEA, and SEWA are implementing new plans and

policies in this regard, and sustainability initiatives such as Abu Dhabi’s Estidama and Dubai’s Green

Building Code are really promising.”

– Dr. Alaa K Ashmawy, Professor and Dean, School of Engineering at American University in Dubai

The UAE has a significant lead over other GCC countries in the number of

LEED projects.

The UAE has almost 6 times more projects under LEED certification

process as compared with its nearest market, Saudi Arabia.

Dubai ranked no. 8 in the

list of the top 10 global

cities for green buildings.


4.3.3 Positive FDI in UAE construction sector26

During 2010–15, foreign direct investment (FDI) in the sector grew at a CAGR of 5.9%, from USD

3.3 bn to USD 4.4 bn. While it witnessed a decrease of 8.3% y-o-y in 2015, industry experts

predict that FDI in the sector would remain positive and grow in the next few years.

In 2015, FDI in the construction sector consisted of nearly 4.1% of the total FDI in the UAE.

The top 3 sectors for FDI were wholesale and retail trade (26.2%); real estate, renting and

business activities (25.8%); and financial intermediation (19.1%).

4.3.4 Increasing safety concerns for construction workers27

In July, 2016, the Ministry of Human Resources and Emiratisation announced that all construction

facilities with more than 500 workers would have to appoint at least one local occupational health

and safety officer from 2017.

According to the ministry, this move would help in emiratising the occupational health and safety

profession in the construction sector and major industrial enterprises. It was reported to target

nearly 400 facilities in the construction sector, which would also include close follow-ups in order

to evaluate compliance levels across the targeted facilities.

Key initiatives

A key initiative that strengthens the region’s growing focus on safety measure for construction

workers is an inspection campaign in Abu Dhabi. In April 2017, municipality inspectors started

inspecting construction sites in Abu Dhabi to ensure that worker safety rules are being

addressed. The campaign focused on encouraging safe and healthy working environments at

construction sites, thereby protecting the lives of not only the workers but also passers-by.1

26 old.fcsa.gov.ae, accessed on 15 Jun, 2017 / Exchange rate (Average of 2015) 1AED = USD0.272259

27 ‘Health and safety officers mandatory in construction companies’, gulfnews.com, 16 Jul 2016

3.33.1

3.53.9

4.84.4

2010 2011 2012 2013 2014 2015

FDI in construction (USD bn)

Despite the decrease, experts predict

that FDI in the sector would remain

positive and grow in the next few

years.


4.3.5 Increasing fire safety standards in the UAE28

The UAE has witnessed a few major fire accidents in the past at places including the 79-storey

residential Marina Torch Tower in February 2015, the Address Hotel Downtown Dubai on New

Year’s Eve in December 2015, the Sulafa Tower in Dubai Marina in July 2016, and the Oceana

Residence in Palm Jumeirah in December 2016. All of these incidents resulted in increased focus

on fire safety standards and led to the launch of an updated UAE Fire and Life Safety Code in

January 2017.

Key initiatives

The UAE had issued the first edition of its Fire and Life Safety Code in 2011 and made a few

amendments to it in 2012. The code made it mandatory for buildings taller than 15 metres to

use fire-rated facade cladding. It is estimated that nearly 70% of the buildings in Dubai that

were constructed prior to 2013, may be fitted with non-fire rated ACPs and hence, pose a

greater exposure to fire mishaps than buildings built since then.

The new code has undergone major changes to accommodate the evolving economic and

urban developments in the UAE. Apart from stricter regulations related to the use of fire-rated

facade cladding in buildings, the code now also covers requirements to store flammable

liquids, use of renewable energy, and material certification to make sure that building

materials with fire performance are made to the same specifications, despite the fact that they

are manufactured in Europe, the Middle East or China.

4.4 Legal structure29

The UAE’s construction-specific laws comprise federal and emirate laws and regulations. The main

federal law is the Civil Transactions Code Federal Law No. 1 of 1985, which contains general

contract principles, a section on Muqawala (a contract to make a thing or perform a task), which

relates specifically to construction-related matters. Apart from federal laws, emirates laws also

exists; Dubai has numerous regulations, codes of practice, standards, guidelines and circulars,

which are issued by Dubai Municipality and the free zones of Technology, Electronic Commerce

and Media (TECOM) and Jebel Ali Free Zone (JAFZA), that are in relation to building standards in

28 ‘The Burning Issue: Fire Safety in the UAE’, cbnme.com, 2 Feb 2017 / ‘Updated UAE fire code launched at Intersec 2017’, constructionweekonline.com, 22 Jan 2017 29 ‘United Arab Emirates’, dlapiperrealworld.com, accessed on 26 May, 2017

“We shall stop granting facilities employing 500 plus workers any further work permits if they don’t hire at

least one local occupational health and safety officer. The decision came following a strategic plan to

promote employment opportunities for locals in the private sector to implement the Emiratisation file which

has our wise leadership’s clear attention.”

– Saqr Ghobash, Minister for Human Resources and Emiratisation

“Due to increased construction and infrastructure activity in the UAE, we want to keep up to international

safety standards, and we constantly strive to evolve and be better than yesterday.”

– Lt. Col. Ali Al Mutawa, Assistant General Manager for Smart Services, DCD


their relevant jurisdictions. The legal structure includes building standards, health and safety,

environment guidelines and other technical conditions. The following is a brief on the regulatory

environment of the UAE construction sector:

Building regulation and standards: Administrative Resolution No. 125 of 2001 about the

adoption of Building Regulations and Standards provides a comprehensive discourse about

how to build in Dubai Municipality governed areas. Similar standards are used in JAFZA and

TECOM areas.

Licences and permits: All contractors should have a contractor classification licence that

allows them to work as a contractor. The permits required are dependent on which

municipality the site is located in: Dubai Municipality, JAFZA or TECOM. Certificates/Permits

relate to civil works, building permit (design drawing of proposed building), environmental

permit/licence, access road and internal road network, disposal of hazardous waste, no-

objection certificate from defence and airport authority, building completion certificate and

others.

Health and safety: The key health and safety provisions fall under Federal Law No. 8 of

1980 (as amended ‘the Labour Law’), as well as all employment-related matters in addition to

numerous regulations, codes of practice and specific technical guidelines. Health and safety

laws and requirements are administered by both the federal law of the UAE and the law of the

Emirate of Dubai. The law governing the health and safety of employees is the Labour Law. In

addition, the Ministry of Labour also makes important decisions. The Labour Law and

ministerial decisions set the main standards suitable for occupational health and safety and

impose obligations on both the employer and the employee. In addition to the federal law, the

Emirate of Dubai has additional codes of practice, circulars and technical decisions relating to

specific environmental and occupational health and safety issues.

Environment assessment and sustainability: The Ministry of Environment and Water

(MEW) governs the environmental protection in the country. The MEW is empowered to

delegate its powers to a ‘Competent Authority’ for each emirate. The major federal laws that

regulate environmental protection affecting the construction sector are the Federal Law (24)

of 1999 (protection and development of the Environment), the Federal Law (23) of 1999

(exploitation and protection and development of Living aquatic resources) and the Federal Law

(1) of 2002 (radiation).

Other obligatory requirements: Developers/Owners are required to obtain no-objection

certificates from utility suppliers such as Dubai Electricity and Water Authority, Roads and

Transport Authority, Dubai Municipality and Etisalat (the UAE-based telecommunication

company). The Civil Code also imposes certain conditions on Muqwala contracts, including a

provision that a contractor is liable for damage caused by its acts.


Regulatory developments

The following are key legal developments concerning the construction sector in the UAE.

Manage jointly-owned properties: In April 2017, the Real Estate Regulatory Authority set

specific guidelines and legislation concerning the management of jointly-owned property in

Dubai. The legislation requires the owners’ association (OA) or the OA manager to set aside

budgets and establish two separate funds for the property. The fund includes the general fund

and the reserve fund, both of which are contributed by the owners.

Emirati employment: In January 2017, the Ministry of Human Resource and Emiratisation

began monitoring private industrial and construction companies to ensure compliance with the

decree about Emirati (citizens of UAE) employment. As per the decree, companies with 500 or

more workers must employ at least one Emirati and companies with 1,000 or more must

employ at least two Emirati.30

Public private partnership (PPP) framework: In Q4 2016, the UAE was preparing a

framework to govern PPP. This draft was expected to encourage more private sector

participation in infrastructure projects. It also provides an opportunity to the private sector to

be comfortable while operating with the government.31

Property advertisement: The new regulation that came into force on October 09, 2016

states that ‘all real estate companies and institutions that wish to publish any real estate

announcements or advertise properties in print, online, radio and social media etc. will now

need to get a permit for each property to do so’.

4.5 Characteristics of entrepreneurs32

The global ranking of doing business in the UAE has improved in 2017. According to the Doing

Business ranking by the World Bank Group, the UAE ranked no. 26 in 2017, up 8 positions from

no. 34 in 2016.

According to the index, the ‘Protecting Minority Investors’ and ‘Starting a Business’ rankings

changed positively in 2017, whereas the ‘Dealing with Construction Permits’, ‘Getting electricity’,

‘Paying Taxes’ rankings remained unchanged.

30 ‘Private UAE companies to be monitored for compliance with Emiratisation decree’, thenational.ae, 1 Jan, 2017 31 ‘UAE to pass PPP law by year-end’, constructionweekonline.com, 9 Nov, 2016 32 doingbusiness.org, accessed on 7 Jun 2017 / Data based on primary research and expert opinion


Doing Business ranking by the World Bank

Area of business Doing Business

2017 rank

Doing Business

2016 rank

Change in

rank

Overall 26 34 8

Starting a Business 53 65 12

Dealing with Construction

Permits 4 4 -

Getting Electricity 4 4 -

Registering Property 11 10 1

Getting Credit 101 97 4

Protecting Minority Investors 9 48 39

Paying Taxes 1 1 -

Trading Across Borders 85 84 1

Enforcing Contracts 25 24 1

Resolving Insolvency 104 99 5

Global ranking of the UAE in different areas of doing business.

The Emirates NBD UAE Purchasing Managers’ Index (PMI), a composite indicator that

provides an overview of the country’s operating conditions in the non-oil private sector, registered

a positive trend since November 2016, before declining for the first time in seven months in April

2017. It registered a 19-month high of 56.2 in March 2017 and remained fairly stable at 56.1 in

April 2017. In May, it declined to 54.3 from the previous month’s figure of 56.1; however, the

average PMI reading year-to-May was 55.6 – well above the average of 53.4 recorded in the

same period last year.33 The chart below depicts the PMI trend over the last 12 months.

33 “UAE PMI signals strong growth in April”, emiratesnbdresearch.com, 3 May, 2017 / “UAE PMI eases in May” emiratesnbdresearch.com, 5 Jun, 2017

55.354.7

54.153.3

54.255.0 55.3

56.0 56.2 56.1

54.3

Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

NBD UAE Purchasing Managers’ Index (PMI)

Registered an increasing trend from Nov 2016 to Mar 2017

In Mar 2017, it registered a 19-month high figure


Basis the age group, the entrepreneurs are ranked as follows:

Age 30–40 years (maximum number of entrepreneurs): A majority of start-up owners

are in this age group, as they come with relevant experience in construction sector and have

the know-how and enthusiasm to start a company.

Age 20–30 years: People in this age group do not have much experience but are

enthusiastic, resilient and optimistic, with vision for a start-up. They have a greater appetite

for risk taking.

Percentage of

construction industry

entrepreneurs by

gender:

Male: 70–75%

Female: 25–30%

Maximum number of

entrepreneurs in the

region lie in the

following emirates

(in order of their

presence):

Dubai (maximum)

Abu Dhabi

Sharjah

Ajman

Ras Al Khaimah

Facts related to entrepreneurship / start-ups in the construction sector

The construction sector will be one of the key drivers of the UAE’s as well as

Dubai’s growth in 2017. A number of start-ups and entrepreneurship in this

field are coming up in all prominent regions. The following are the key

characteristics of start-ups:

Demographic

characteristics

Gender

characteristics

Location

characteristics

Location

characteristics

Entrepreneurs in the

region mostly are from

the following

nationalities:

India (~ 50%)

Philippines (~30%)

Pakistan

Jordan

Egypt

Palestine

Syria

Entrepreneurs in the

region mostly lie in the

following age groups:

Rank 1

(maximum): 30–

40 years

Rank 2:

20–30 years

Rank 3

(minimum):

40 – 50 years


Age 40–50 years (minimum number of entrepreneurs): People in this age group have

considerable experience and know-how about starting a company. They are more settled in

life and are less likely to take the risk of investing in a new venture.

Preference of entrepreneurs for free zones and mainland

Both free zones and the mainland region in the UAE offer their unique set of attractions / factors

for entrepreneurs to establish their projects in the region. A few common observations are as

follows:

Free zones: Industrial construction projects are popular in free zones; residential, retail,

hospitality and leisure-related construction projects are popular in the mainland region.

Main land: Securing a bank loan in the mainland region is easier than in free zones. This is

majorly because a start-up project needs to have a local partner (from the UAE) to establish

its business in the mainland region, thereby facilitating easier funding and loan access.

Compared with the mainland, free zones face more challenges in securing project funds and

bank loans.


5 Key insights – Funding and investment

5.1 Financial funding and investment

The following are the modes of funding in the UAE construction and contracting industry

5.1.1 Self-funded or family funded

Self-funding along with support from family member and friends is the most preferred way for

initial investment in projects in the UAE. Once they exhaust their own sources of funds, they

approach other funding channels.

– Dubai Walls Construction LLC launched four mid-income residential projects in Jumeirah

Village Circle, with an investment of USD 136.24 m, all of which is self-funded.34

5.1.2 Bank loans

Bank loans are the second most-preferred way of funding projects. On a broader perspective,

banks in the UAE are on their way to recovery, following recent years of dismal performance

because of low oil prices. As per a 2016 report by Alvarez & Marsal (a US-based financial advisory

company) on the UAE banking sector, banks in the UAE are in better shape than their global

peers.35

34 “Dubai Walls bags Myra’s residential project contract in Dubai,”, projects.zawya.com, Sep 14, 2016 35 “UAE banking sector on its way to recovery, report says,”, thenational.ae, Apr 17, 2017

Funding/Investment in construction

and contracting industry

Self-financed

modesBank loans

Non-banking

financial

institutions

Private-equity

and venture

capitals

M&A and

Private

placements

Bonds

“The good news is we are seeing signs of this downward cycle bottoming out. There is plenty of reason for

banks’ shareholders to feel optimistic. Returns are still considerably higher than in other parts of the world

and banks are being run very prudently. Capital adequacy ratios and coverage ratios, a sure sign of a

bank’s health, have also been increasing”

Saeeda Jaffar, Managing Director, Alvarez & Marsal


As per statistics from the Central Bank of UAE, in the last few months, there has primarily been

an increasing trend in credits taken and bank deposits.

The above chart shows that gross credit has increased from December 2016 (USD 428.8 bn) to

March 2017 (USD 434.9 bn); however, it decreased marginally to USD 434.5 bn in April 2017. On

the other hand, bank deposits have witnessed continuous growth in the last five months ending

April 2017.

As of March 2017, construction and real estate accounted for 18.1% of the overall bank credit to

UAE residents*. The chart below shows that a large share of bank credit is provided for personal

loans, followed by construction and real estate activities.36

*Residents include corporates, individuals, government, GREs (Government ownership of more than 50%) and NBFCs **Others includes manufacturing; transport, storage and communication; mining and quarrying; electricity,

gas and water; agriculture; and all others

36 Banking & Monetary Statistics, UAE banks, centralbank.ae, Apr 2017 / Exchange rate (As on Mar 31, 2017): AED 1=USD 0.2722

428.8429.5

431.7 434.9434.5

425.5 425.3

430.6

436.2437.0

420

430

440

Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

Valu

e (

US

D b

n)

UAE gross credit vs bank deposits

(Dec 16–Apr 17)

Gross credit Bank deposits

29.7%

18.1%

11.3%

10.3%10.3%

20.2%

Breakdown of bank credit to UAE residents* by economic activity,

Q1 2017 (ending Mar 2017)

Personal loans Construction and real estate

Government Trade

Financial institutions(excluding banks) Others**

Both gross credits and bank deposits

have shown upward trends in recent

times, indicating banking growth in the

UAE.


Over the last two years (March 2015 to March 2017), bank credit for construction and real estate

activity has been increasing every quarter, though the growth rate has been fluctuating.

*Residents include corporates, individuals, government, GREs (Government ownership of more than 50%)

and NBFCs

As per the financial stability report published by the Central Bank of the UAE, total real estate

market lending by banks in the UAE increased in both 2015 and 2016.

*The values depicted in the chart are approximates and does not match exactly, as the actual values were

not available in the source.

57,331 58,84060,876

63,97065,815 65,976

68,27572,068 72,685

-0.9%

2.6%

3.5%

5.1%

2.9%

0.2%

3.5%

5.6%

0.9%

-2%

1%

4%

7%

10%

0

25,000

50,000

75,000

Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Bank credit to UAE residents* for construction and real estate activity

(Mar 15–Mar 17)

Credit (USD m) Y-o-y growth

22.2

52.6

18.7

59.0

21.5

64.1

0.00

20.00

40.00

60.00

80.00

Under construction Completed

Valu

e (

US

D b

n)

Real estate-related lending by

category*

2014 2015 2016

24.9

49.9

24.9

52.8

26.5

59.1

0.0

20.0

40.0

60.0

80.0

Individuals Corporate

Valu

e (

US

D b

n)

Real estate-related lending by

borrower type*

2014 2015 2016


In 2016, lending to real estate properties under construction and completed real estate increased

approximately by 14.9% y-o-y and 8.7% y-o-y, respectively. Similarly, there has been growth in

lending by both individuals and corporates. Growth in real estate lending in 2016 indicates a

positive market sentiment.37

* The values depicted in the chart are approximates and does not match exactly, as the actual values were

not available in the source.

UAE banks’ lending to residential real estate properties increased by 10.3% y-o-y in 2016, owing

to an increase in both residential and commercial lending in the market. Financing of commercial

properties, which includes non-residential properties, services and developers, showed an

aggregate growth of about 10% y-o-y in 2016.

5.1.3 Private equity and venture capital firms

Private equity and venture capital (PE/VC) are not among the prominent sources of funding, and

traction here is low.

As pert FactSet, the number of funding deals in the construction and contracting business in the

UAE by private equity firms and venture capitalists for the past 10 years has been limited. Major

investments are in the construction sector. In 2017, Abu Dhabi witnessed the highest number of

private equity deals since 2007, followed by Dubai.38

37 Financial stability report 2016, centralbank.ae, accessed on Jun 5, 2017 / Exchange rate (Average of 2016): AED 1=USD 0.272258 38 Factset, accessed on Jun 5, 2017

32.5

20.9

8.0 9.0

4.4

33.2

23.4

8.29.9

2.7

36.7

27.0

8.7 9.9

3.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Residential Non-Residential Services Developer Other

Valu

e (

US

D b

n)

Real estate-related borrowing by type of property*

2014 2015 2016

Residential projects have clearly dominated

the borrowing space; however, over the

last three years (2014-16), borrowings in

non-residential projects have grown the

most (~30%).


*Includes engineering and design services

International PE firms realise the potential in the Middle East market. However, stringent local

laws and restrictions on foreign ownership create a competitive disadvantage compared with local

corporates, when it comes to bidding. To counter these challenges, some international PE firms

partner with local PE firms. A prime example of this is the Blackstone Gems Education deal with

Fajr Capital (a sovereign-backed private equity firm headquartered in Dubai) and Bahrain

Mumtalakat Holding Company (Mumtalakat), the investment arm of the Kingdom of Bahrain.39

5.1.4 M&A activities and private placement

The UAE’s construction and contracting sector

witnessed the announcement of 30 M&A during

January 2013–May 2017. Most of these deals

were announced in 2014 and 2015. In 2017

(until May), the sector witnessed the

announcement of five deals.40

Over the past 10 years, in the UAE, majority of

the M&A deals were in Dubai (57.1%), followed

by Abu Dhabi (42.9%).

A large number of the acquirer companies are headquartered in the UAE. A few of the deals

involved more than one acquirer and were carried out by companies from different countries. The

majority of the acquirers in the UAE are located in Dubai.

39 ‘Middle East Region’, bakermckenzie.com, accessed on 6 Jun 2017 / ‘Fajr Capital, Mumtalakat and Blackstone acquire significant minority stake in GEMS Education’, blackstone.com, accessed on 6 Jun 2017 40 FactSet, accessed on 2 Jun 2017 / Includes FactSet industries - [1230] Building Products; [20252010] Building Materials and Garden Supply Stores; [451535] Construction Materials; [4441] Building Material and Supplies Dealers; [32712] Clay Building Material and Refractories Manufacturing; [321992] Prefabricated Wood Building Manufacturing; [332311] Prefabricated Metal Building and Component Manufacturing; [52] Building Materials, Hardware, Garden Supply, And Mobile Home Dealers; [24] Lumber And Wood Products, Except Furniture; [3448] Prefabricated Metal Buildings and Components; and [1135] Construction Materials

46.2%

23.1%

23.1%

7.7%

Breakdown of private equity deals by sector (2007–17)

Construction

Professional, scientific,and technical services*

Real Estate and Rentaland Leasing

Construction materialmanufacturing

53.8%

30.8%

7.7%7.7%

Breakdown of private equity deals by state/province (2007–17)

Abu Dhabi

Dubai

Ash Shariqah

Al Fujayrah

5

7 76

5

2013 2014 2015 2016 May 2017

Total number of M&A deals announced

Total number of M&A deal announced


*Others includes: Saudi Arabia, Bahrain, Cayman Islands, France, Mauritius, and Sweden / **Information on

acquirer state for one of the M&A deal was not available.

A majority of the M&A deals occurred in the construction and contracting industry, with the target

companies located primarily in Dubai.

The following table provides information on some of the prominent M&A deals in the UAE from

2016 onwards:

Announced

date Target Acquirer Deal value Synopsis

3 Mar 2017 Balfour

Beatty Plc

/Middle East

Joint

Ventures 2/

Dutco Group

of

Companies

USD 13.72

mn

Dutco Group completed the acquisition of a

49% minority stake in Dutco Balfour Beatty LLC

and BK Gulf LLC joint venture companies from

Balfour Beatty Plc for USD 13.7 mn in cash.

Dutco Balfour Beatty and BK Gulf are 51:49

joint venture companies between Dutco Group

and Balfour Beatty.

51.7%

6.9%

10.3%

3.4%

3.4%

3.4%

20.7%

Number of deals by acquirer

country (2013–17)

The UAE India US Austria

Malaysia UK Others*

57.1%

42.9%

Number of deals by acquirer

state in UAE (2013–17)**

Dubai Abu Dhabi

65.4%

15.4%

11.5%

7.7%

Number of deals by target

company state (2013–17)

Dubai Abu Dhabi Ras al Khaimah Al Fujayrah

73.08%

26.92%

Number of deals by sector

(2013–17)

Construction and contracting

Building materials and products


Announced


16 Feb 2017 Al Jaber

LEGT

Engineering

& Contracting

LLC

Emirate of

Dubai

(UAE);

Investment

Corp of

Dubai

– Investment Corp of Dubai acquired Al Jaber

Legt Engineering & Contracting LLC, a building

and industrial site developer, for an undisclosed

amount. The acquisition would allow

Investment Corp of Dubai to expand its service

offerings.

13 Feb 2017 Wideurope

Engineering

Middle East

FZC

Mott

MacDonald

Group Ltd

– Mott MacDonald Group completed the

acquisition of Wideurope Engineering Middle

East FZC, an engineering and design consulting

services provider, for an undisclosed amount.

The acquisition enhances Mott MacDonald

Group’s offerings, services and capability in the

energy sector and provides access to new

markets.

4 Jan 2017 Sky Steel

Systems LLC

Palfinger AG – Palfinger AG acquired a 20% stake in Sky Steel

Systems LLC, a building and maintenance unit

manufacturer based in Dubai, for an

undisclosed amount. The acquisition would

expand the serving offering of Palfinger AG in

the field of building maintenance in the Gulf

region and Saudi Arabia.

31 May

2016

Novus

Community

Management

Three60

Communities

– Three60 Communities, a subsidiary of Eltizam

Asset Management Group, completed the

acquisition of Novus Community Management,

a real estate service provider and a subsidiary

of PRD Nationwide Middle East Real Estate LLC,

for an undisclosed amount. The acquisition

allows Three60 Communities to enhance its

existing portfolio of real estate services and

expand its geographical presence and client

base.

31 May

2016

Premium

Community

Management

Three60

Communities

– Three60 Communities completed the

acquisition of Premium Community

Management, a Dubai-based real estate

services provider, for an undisclosed amount.

The acquisition allows Three60 Communities to

enhance its existing portfolio of real estate

services and expand its geographical presence

and client base.

17 May

2016

Leaders Fort

Contracting

LLC

Emaar

Industries &

Investments

PJSC

– Emaar Industries & Investments PJSC

completed the acquisition of a minority stake in

Leaders Fort Contracting LLC for an undisclosed

amount.

12 Apr 2016 ERE Homes Gulf

Sotheby’s

International

Realty; High

End Real

Estate LLC

– Gulf Sotheby’s International Realty, a

subsidiary of High End Real Estate LLC,

completed the acquisition of ERE Homes, a

Dubai-based real estate services provider, for

an undisclosed amount. The acquisition would

strengthen and increase Gulf Sotheby’s’


Announced


property management services and existing

business offerings.

11 Jan 2016 Tarmac

Trading Ltd.

/Tarmac

Middle East

Business/

Colas SA;

Colas Moyen

Orient SAS

– Colas Moyen Orient SAS, a subsidiary of Colas

SA, completed the acquisition of a minority

stake in Tarmac’s Middle East business, Tarmac

Trading Ltd, a subsidiary of Anglo American Plc,

for an undisclosed amount. The transaction

includes a stake in six operating joint venture

entities. The entities produce and supply

building materials and construction products.

The acquisition enables Colas Moyen Orient

SAS to expand its business in the Middle East.

Private placement: Private placement is another source of funding in the UAE construction and

contracting sector. For example, in 2014, Lamprell Plc, located in Dubai, UAE, generated funds

through private placement by offering subscription rights and shares as securities.41

5.1.5 Bonds

The UAE bond market is still at a nascent stage as the market is governed by the Federal Debt

Management Law. However, a new debt law is expected to be introduced in the UAE that will

allow the federal government to sell sovereign bonds in the future. The law will also encourage

the government to issue bonds in the local currency.

In April 2016, Abu Dhabi raised USD 5 bn from the international market, its first bond sale since

2009. In 2014, Dubai had issued a bond sale and raised a USD 750 mn sukuk and is expected to

raise more in the coming years.42

In February 2017, the International Monetary Fund (IMF) called on the UAE to tap bond markets

and the assets of its sovereign wealth funds instead of using its local bank deposits to balance its

budget. This is expected to increase the bond market locally, which will ultimately lead to rising

investment in the construction and contracting industry in the UAE.43

41 FactSet, accessed on Jun 5, 2017 42 ‘UAE debt law to awaken sleeping giant bond market’, globalconnections.hsbc.com, 16 Sep 2017 43 ‘UAE federal debt management law set for this year’, thenational.ae, 12 Feb 2017


6 PEST analysis

6.1 Political factors

6.1.1 PPP framework

In 2016, the UAE government was preparing a framework to govern public private partnership

(PPP). This new initiative is expected to motivate private construction sector companies to

participate in infrastructure projects. It will also facilitate working between the private sector and

the government.44

6.1.2 Plans for creation of federal real estate regulatory authority

In August 2016, the UAE government was considering the establishment of a federal real estate

regulatory authority, as it did not have a government body to supervise the sector. However,

emirates such as Ajman and Dubai have their own real estate regulatory authorities: the Real

Estate Regulatory Authority (RERA) in Dubai and Ajman Real Estate Regulatory Authority.45

6.1.3 Promotion of sub-contracting

Sub-contracting of construction projects has become an essential part of modern construction

projects due to the increased complexity and different type of projects. The UAE government

recognises and allows sub-contracting in the construction sector. The law allows not just sub-

contracting of part of the project but also the complete construction work of the project, unless

otherwise stated by the law. However, the UAE law does not reduce the main contractor’s liability

for the work. Article 890 (2) of the Civil Code provides that the main contractor responsibility vis-

à-vis the employer shall remain as it is in respect of the subcontract works.46

6.1.4 Developing a framework to accommodate 3D printing technology

The UAE government acts swiftly to modify regulatory frameworks, which is a necessity due to

rapid technological advancement. To become the 3D printing centre of the world, Dubai

Municipality in July 2016 has been developing a framework of rules and regulations for 3D

printing in the construction sector.47

44 ‘UAE to pass PPP law by year-end’, constructionweekonline.com, 9 Nov, 2016 45 ‘Real Estate Regulation Act, 2016 (RERA) - Are we ready?’, grantthornton.in, Aug 2016 46 ‘Subcontracting in the UAE – Basic Legal Principles’, cbnme.com, 24 Nov, 2016 47 ‘Dubai Sets Up Rules and Regulations for 3D Printing in Construction, Moving Further Along the Road to Becoming the 3D Printing Center of the World’, 3dprint.com, 14 Jul 2016

“The documentation will be used to draft a new law encouraging more private sector participation in

infrastructure projects” "It will give the opportunity to the private sector to be comfortable when they

operate with the government.”

– Abdullah bin Mohammed al-Nuaimi, Minister of Infrastructure Development


6.2 Economic factors

6.2.1 Short-term and long-term economic outlook48

The short-term economic outlook for the country has improved, majorly due to recovering oil

prices as a result of Organization of the Petroleum Exporting Countries (OPEC) cuts implemented

in January 2017. This has resulted into a slightly stronger macroeconomic performance,

comprising growth, government finances and the current account position.

Backed by these factors, D&B upgraded the UAE’s outlook to ‘improving’ in February 2017. D&B

also upgraded the trend indicators on the Credit Environment Outlook from deteriorating to stable

and the Market Environment Outlook from stable to improving.

As per the First Abu Dhabi Bank (FAB, the biggest lender in the UAE), the UAE is expected to lead

economic growth in the Arabian Gulf region in 2017, primarily due to higher spending, spurred by

rising oil prices. Also, as per the FAB, the UAE was the first country in the GCC to execute fiscal

measures such as municipality fee increases, subsidy reduction and use of alternate sources to

fund government spending.49 It is expected that factors such as recovery in oil prices and growing

public and private sector activity propelled by preparations for Expo 2020 will witness real GDP

growth between 4% and 5% per annum over 2017–2020, which is higher than the 3.1% growth

in 2016.50

However, real GDP growth has slowed from 6.8% in 2012 to an estimated 3.5% in 2016. This is

majorly because of low oil prices, as compared with that during 2010–14, and the OPEC

production quotas. These factors have been putting pressure on the government’s fiscal position,

as a result of which the government is implementing spending cuts and considering raising tax

revenues. While government spending in the region has been a major driver of the economy of

the country, such spending cuts are expected to impact the country’s short-term economic

outlook.

In the longer run, the government is trying to diversify its economy from an oil-based one to a

more market-based one, particularly in Dubai, which will result in its improved economic

potential. The country is also implementing measures to reduce its involvement in the economy

by promoting privatisation plans. It is trying to make its private sector less dependent on

government contracts. Considering all of these measures, the long-term economic outlook for the

country looks positive at the moment.

48 Country Insight Report – United Arab Emirates, D&B, Jun 2017 49 ‘UAE set to lead region in economic growth, says NBAD’, thenational.ae, 22 Jan, 2017 50 ‘UAE GDP growth forecast to rise 4%-5% from 2017- 2020, driving projects rebound’, thearabianpost.com, Aug, 2017

“The city’s ground breaking approach to construction will have a major impact on the industry. Therefore,

this new system must be accompanied by new legislation that regulates the work in the field and also

preserves the results of the projects that will be implemented using this technology. A general frame for

the laws have been laid, and the rules were already amended to match with the new technology.”

– Khalid Saleh Al Mullah, Director of Dubai’s Building Department


6.2.2 Growing FDI in construction sector51

FDI in the construction sector grew at a CAGR of 5.9%, from USD 3.3 bn in 2010 to USD 4.4 bn

in 2015; however, it decreased by 8.3% y-o-y in 2015. It accounted for nearly 4.1% of the total

FDI in the UAE in 2015. Wholesale and retail trade (26.2%); real estate, renting and business

activities (25.8%); and financial intermediation (19.1%) were the top 3 sectors for FDI. Although

the share of FDI in the construction sector is small, it is expected to grow at a robust rate in the

next few years due to investor-oriented reforms in FDI. The reforms include simplifying the

process for obtaining construction permits, compensating for power cuts and reducing the lead

time for obtaining an electricity connection.

6.3 Social factors

6.3.1 Growing population

The UAE population is expected to increase at a CAGR of 1.4%, from 8,580,000 in 2015 to

10,581,000 in 2030. Urban population constitutes about 85% of the total population across the

forecast years and is expected to increase at a CAGR of 1%, from 7,282,000 in 2015 to

8,507,000 in 2030. Increasing population will drive urbanisation and demand for housing,

infrastructure and hospitals, which will further boost the construction sector in the UAE.52

6.3.2 Growing hospitality sector

The UAE hospitality industry is growing significantly and is boosted by the growing hospitality and

tourism industry. It is expected that in the UAE, about 59 hotels (which is about 18.7% of the

total new hotels to be opened in the Middle East and Africa) will be opened by 2017 - 2018.53 The

hospitality industry revenue is expected to increase at a CAGR of 10.8% to reach USD 9.8 bn over

2015–2020. The industry will also be driven by the Dubai 2020 Expo. These growth areas are

expected to provide a significant boost to the construction industry in the country.54

51 old.fcsa.gov.ae / Exchange rate (Average of 2015) 1AED = USD0.272259

52 ‘UAE population and statistical trends’, gulfnews.com, 17 Nov, 2016 53 ‘59 hotels set for opening in UAE in 2017, says report’, khaleejtimes.com, 15 Sep, 2016 54 ‘UAE hospitality revenue forecast to reach $9.8 billion by 2020’, thenational.ae, 23 Aug, 2016

3,029

6,8897,282

7,982 7,9238,507

6691311 1298 1377 1464 1549

0

3,000

6,000

9,000

2005 2010 2015 2020F 2025F 2030F

Urban and rural population

Urban Rural

Popula

tion (

‘000)


6.3.3 Affordable housing policy approved for Dubai55

In March 2017, the government approved an affordable housing policy that aims to provide

housing units for low-income working people and renovate some old areas in Dubai. The policy

classifies the low-income population into Emiratis and non-Emiratis, including expats and workers,

in planned sectors in Dubai.

6.4 Technological factors

6.4.1 Increasing innovations in construction sector

The UAE is among the world’s most-attractive construction markets that had a strong

construction pipeline of more than USD 700 bn in 2016, constituting over one-third of the GCC’s

pipeline. Many mega construction projects in the UAE’s pipeline contribute to the innovations

pipeline of the sector. In 2016, Legoland Dubai – Castle Kingdom, Abu Dhabi Midfield Terminal, Al

Habtoor City Theatre, Dubai Opera, and NAS Arena won Tekla Global Building Information

Modeling (BIM) Awards in recognition for their leading use of 4D digital models that have the

potential to increase productivity and collaboration.56,57

6.4.2 Increasing contribution of 3D printing in construction sector

3D printing has transformed the way buildings or homes are being built. The technology has

lowered costs and reduced the time taken to implement projects.

As per the Dubai Media Office, 3D printing in Dubai’s construction sector is expected to increase

by 2% in 2019 to up to 25% by 2030.58 Dubai 3D Printing Strategy aims to make Dubai a global

capital of 3D printing technologies by 2025, focusing on three key sectors: construction, medical

products and consumer products.

The use of 3D printing in the construction and building sector is anticipated to focus on

facilities and parks, lighting products, construction joints, bases and foundations, buildings,

55 ‘Low-income housing policy approved for Dubai’, gulfnews.com, 12 Mar, 2017 56 ‘UAE mega-projects rank among the most innovation and least wasteful’, technicalreviewmiddleeast.com, 24 Nov, 2016 57 ‘UAE projects world’s most innovative, least wasteful’, emirates-business.ae, 21 Nov, 2016 58 ‘25 per cent of Dubai’s construction to be 3-D printed by 2030, Ruler announces’, thenational.ae, 28 Apr, 2016

“Voluntary programmes and social responsibility initiatives have always been a top priority for Dubai government. “We

all have a shared responsibility to spread happiness among all members of the society through providing them and

their families with decent lives. Our ambitions in Dubai have no end and every new project we announce represent the

fruit of hard work made by various work teams.”

– Shaikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Crown Prince of Dubai

and Chairman of Dubai Executive Council

“This year has been a seminal moment for GCC construction innovation, and 2017 will see continued

momentum with government BIM directives, and pre-fabrication, and BIM gaining wider take-up. The

UAE’s strong showing in international awards demonstrates the country’s standing as a global BIM

leader,” said Paul Wallett, Regional Director of Trimble Solutions Middle East.”

– Paul Wallett, Regional Director of Trimble Solutions Middle East


mobile homes, stores and residential villas. The value of the 3D printing technology-based

construction sector in Dubai is expected to be about USD 816.7 mn (AED 3 bn) by 2025.59

6.4.3 Developing insulating material for the UAE market

Due to predominantly hot weather conditions in the UAE, technological advancements are focused

on developing insulating material that will reduce the UAE’s energy consumption (per capita

consumption), currently among the highest in the world. In March 2017, United Arab Emirates

University (UAEU) announced that its scientists had developed a composite form of insulation

material that aims to help the construction sector become more energy-efficient and eco-friendly.

The material, which has received patent approval, is made from a blend of unsaturated polyester

liquid with date-pits powder. Scientists expect the insulating material (made from agriculture

waste) to help cut the harmful emissions and pollutants in the environment.60

59 ‘UAE aims to be global hub for 3D printing’, gitex.com, 12 Mar, 2017 60 ‘UAE scientists creates new building materials from agricultural waste’, thebig5hub.com, 12 Mar, 2017

“We believe that 3D printing technology is capable of transforming the construction sector by lowering

costs and reducing the time it takes to implement projects. It will also help reduce manpower

requirements as well as waste generated from construction which can be harmful to the environment. We

will also focus on using this technology in other vital sectors such as medicine and consumer products to

offer goods and services at competitive prices.”

– Shaikh Mohammad Bin Rashid Al Maktoum, VP and Prime Minister of the UAE and Ruler of Dubai

"Materials typically used for insulation, such as polyurethane, polystyrene, and mineral wool, suffer from

low mechanical properties that limit their use in the construction process. This means there is the need for

an insulating material that possesses excellent mechanical and physical properties in terms of saving

energy, preventing water leakage, ease of handling, and which can be used extensively,"

"In the UAE, there is an ongoing search for alternative means and materials that preserve and minimise

the loss of energy in buildings,"

– Dr Basim Abu-Jdayil, Professor in Chemical and Petroleum Engineering, UAEU


7 Outlook

Moody’s Investors Service changed the rating outlook on the Government of UAE from negative to

stable in March 2017. Moody’s also affirmed the long-term Aa2 (rated as high quality and very

low credit risk) issuer rating.

The key drivers of this positive change are as follows:

Efficient policy response to the low oil price environment

Expected improvement in the fiscal and current account positions

Economy’s growth and diversification prospects

The outlook for the UAE construction industry appears to be positive as the industry is expected

to benefit from the rapid and further development of international events such as Expo 2020 and

government investments in transportation, infrastructure and tourism. While the sector is

expected to increase at a CAGR of 7.5%, from USD 44.5 bn in 2016 to USD 63.8 bn in 2021, its

contribution to the country’s GDP is expected to increase from 10.9% in 2016 to 12.7% in 2021

(refer to page 4).

Further, the government set aside USD 4.6 bn (AED 17 bn) in the 2016 budget for infrastructure

development until 2020. This investment will go towards the development of housing, roads,

health facilities, railways, schools and public buildings.61

Strong project pipeline in the UAE: According to MEED projects, as of spring 2017, the total

value of projects in the GCC that are either in the planning or delivery stage is worth USD 2.7 tn,

with the UAE’s share is estimated to be about USD 830 bn.62

Dubai is expected to have a positive outlook for the construction business in 2017 and

beyond, as it has a total of 4,000 active projects worth USD 313.6 bn underway. According to

the BNC’s Dubai Overview Report, the urban construction sector in Dubai has more than 3,200

active projects (equivalent to more than USD 245 bn). This is followed by the transport sector

with 187 projects (worth USD 32.4 bn), the utilities sector with 203 projects (USD 24.3 bn),

the industrial sector with 377 (USD 5.8 bn), and the oil and gas sector with 12 projects (USD

4.6 bn).63

Abu Dhabi has also become the next destination for investors eyeing long-term growth. The

emirate has earmarked USD 100 bn for investment until 2030. A major part of the investment

is expected to be in the real estate and transportation sectors. This investment is expected to

contribute to the significant growth of the UAE construction industry.64

61 ‘UAE Construction Industry Outlook to 2020: Infrastructure Opportunities following Dubai 2020 Expo Event and Market Challenges’, prnewswire.com, 30 Nov, 2016 62 ‘Construction 2017: A positive market outlook?’, deloitte.com, 2017 63 ‘Dubai’s projects industry bullish at Dh1.15 trillion’, khaleejtimes.com, 15 Feb, 2017 64 ‘UAE Construction Industry Outlook to 2020: Infrastructure Opportunities following Dubai 2020 Expo Event and Market Challenges’, prnewswire.com, 30 Nov, 2016


“The United Arab Emirates’ economy is the most diversified within the Gulf region. Diversification efforts

have helped the UAE to build up solid financial buffers that allow the government to continue supporting

the economy’s non-hydrocarbon activities such as real estate, construction, trade, retail and tourism. The

UAE remains a very attractive economy for international investors. Its favourable business environment

benefits from high productivity, excellent infrastructures, strong connections to international markets and

a dynamic private sector.”

– Seltem Iyigun, Coface MENA economist

“The UAE construction sector is projected to sustain robust growth over the coming years thanks to grand

ventures currently being implemented in Dubai, which will host the Expo 2020. Likewise, Abu Dhabi is

expected to announce a number of projects by the end of the second quarter which bodes good for the

entire construction sector.”

– Dr J.R. Gangaramani, President and executive chairman of Al Fara’a Group


8 Competitive landscape

8.1 Overview

The construction market, which comprises of more than 6,000 companies, is fragmented and

constitutes many domestic and foreign players in the market. Construction companies are

primarily located in Dubai and Abu Dhabi, as construction activity is mainly located in these

emirates.

Competition in the market is strong as small companies as well as large players all offer similar

services.65 To stay ahead of the competition, many companies have diversified in terms of the

sub-segments they operate in. Further, companies also focus on geographical diversification so as

to guard themselves against risk in any particular region. Diversification is usually difficult for

small construction firms, and large firms with scale tend to score over small ones. However, with

supportive government policies, SMEs are also gaining ground. According to Neil Petch, chairman

at Virtugroup (a holding company that provides consulting to start-ups in the UAE), “As of May

2017, 43% of contracts in Expo 2020 have gone to SMEs.” Further, because barrier to entry in

the market is low, the sector witnesses a lot of new ventures and start-ups. Rising number of

start-ups is further expected to increase the competition.66

Prominent construction companies include Orascom Construction Ltd, Dubai Holding Commercial

Operations Group LLC, Arabtec Holding, Damac Real Estate Development Ltd, Aldar Properties,

National Petroleum Construction Co, AL Hamra Construction Co, Al Naboodah, Dutco

Construction, HLG Contracting LLC and Al Fara’s General Contracting Co.

Among these, as per industry experts, the following are the primary construction companies in

the UAE: Arabtec Construction LLC, Al Naboodah Construction Group LLC, Dutco Construction

LLC, HLG Contracting LLC and Al Fara’a General Contracting Co LLC.

8.2 Arabtec Construction LLC67

Arabtec Construction LLC is a construction and engineering services company based in the UAE. It

is majorly involved in developing high-rise projects, mixed-use spaces, residential towers, hotels,

residential communities and luxury villas, airports, commercial developments, hospitals,

museums, stadiums and other miscellaneous projects.

The company has a backlog of USD 5.2 bn of booked construction work.

65 Marketline, accessed on 23 Jun 2017 66 ‘Behind the headlines – Dubai’s booming economy and what it means for your business’, vz.ae, 31 May 2017 67 arabtecuae.com, accessed on 13 Jun, 2017 / LexisNexis accessed on 13 Jun, 2017 / General Press search


The company operates as a subsidiary of Arabtec Holding PJSC, and has a strategic partnership

with Nasser Bin Khaled Al Thani & Sons Holding Company.

Key Facts

Company type Subsidiary

Headquarters Dubai, UAE

Website arabtecuae.com

Founded 1975

Employees ~40,000

Revenue -

CEO & Executive Director Raja Hani Ghanma

8.2.1 Key projects

Completed: Burj Khalifa, Ocean Heights, Sky Gardens, The Conrad Hotel, Infinity Tower,

Tiara Palm Dubai Hotel and Tiara Residences, Al Waab City, Hanging Gardens, The Address,

Downtown Dubai, Fairmont Hotel, Burj Al Arab, Emirates Palace Hotel, Al Furjan, Dubai Silicon

Oasis, Dubai International Airport, Terminal 2- Expansion, World Trade Centre, Doha, Qatar,

Dubai Maritime City, Dubai Pearl, Dubai Sports City (Stadium 1 and 4), and Ghantoot Horse

Racing Grandstand, Louvre Museum

Ongoing: Al Ain Hospital, Tiara Towers, Abu Dhabi Plaza, Msheireb Downtown, St. Regis Hotel

and Residences, King Abdulaziz International Airport, Midfield Terminal Building at Abu Dhabi

International Airport, and the Bahrain International Airport - Airport Modernization Program

8.2.2 Key developments

Date Description

21 May

2017

Arabtec Construction wins USD 398 mn contract for 2020 tower

Arabtec Construction has been awarded a AED 1.46 bn (USD 398 mn) contract by Wasl

LLC for the construction of the 2020 Tower in Dubai, UAE.

17 Apr 2017

Arabtec Holding appoints CFO

Arabtec Holding announced the appointment of Peter Pollard as its new group CFO.

Pollard joins Arabtec from outsourcing firm Serco Group, where he was working as

managing director of its Hong Kong business. Before that, he held a number of senior

financial positions in contracting and property companies in the UAE, Asia and

Australia. He had previously worked as the CFO at Leighton Contractors (now renamed

CPB Contractors).

24 Jan 2017

Arabtec Construction wins USD 1.1 bn contract for Bahrain airport terminal

Arabtec Construction and its JV partner TAV Construction of Turkey won a USD 1.1 bn

contract to construct a terminal at Bahrain International Airport.

The first bid on the project from contractors was invited in August 2014.

http://www.arabtecuae.com/


Date Description

28 Nov

2016

Arabtec Holding appoints CEO

Arabtec announced the appointment of Hamish Tyrwhitt as its CEO, effective 28

November 2016.

Before that, Tyrwhitt worked for 27 years at Leighton Holdings Ltd. He held various

positions in Australia and Asia before being appointed as Leighton’s CEO from 2011 to

2014. In March 2015, he became CEO of Asia Resources Minerals, an Indonesian coal

mining company listed in London.

7 Oct 2016

Arabtec Construction wins hotel contract in Dubai

Arabtec Construction won a USD 92.5 mn contract to build a five-star hotel at Dubai

Media City.

8.3 Al Naboodah Construction Group LLC68

Al Naboodah Construction Group LLC (ANCG) is a UAE-based contractor engaged in civil

engineering, building and MEP in the GCC. ANCG positions itself in the GCC construction industry

as self-sufficient, supplying its own asphalt, concrete, and plant and machinery.

The company’s civil engineering, building and MEP businesses have government departments,

major airports, private developers, architects, major contractors and private companies as clients.

The company is a part of Al Naboodah Group Enterprises.

Key Facts



Website alnaboodahconstruction.com

Founded 1960s

Employees ~16,000

Revenue –

CEO Colin Timmons

8.3.1 Key projects

Completed: Dubai International Airport Expansion (Phase 2), General Aviation and Heliport,

Dubai World Central Airport, Phase 1A and 1B, SP100 – Miscellaneous Airfield Works – Dubai

International Airport, Dubai International Airport - Refurbishment of Two Runways, Abu Dhabi

Airport Tunnel Project, Al Barari Development Phase 1 Main Villa, The Harvard Medical School

Retail, Auditorium and Conference Space, Dubai Police GHQ Forensic Building, The i-Rise

Tower, The Oberoi Centre at Business Bay, Arabian Centre Mall, 79 Villas – Lime Tree Valley,

Al Khawaneej Villas, Olive Point Villas, Sienna Lake Villas, Dubai Ring Road Phase 1 (Sheikh

Mohammad Bin Zayed Road)

68 alnaboodahconstruction.com, accessed on 13 Jun, 2017 / LexisNexis accessed on 13 Jun, 2017 / General press search

http://www.alnaboodahconstruction.com/



Date Description

19 Jun 2016

ANCG announces appointment of CEO

ANCG announced Colin Timmons as CEO of the company effective July 2016, while

its existing CEO, Steve Lever, will retire from his position on 1 July 2016.

Timmons joined the company in March 2016 as COO. Before joining the company,

Timmons held a number of senior roles with major UK-based construction

companies, and has been general manager for Al Faraa General Contracting Co in

Abu Dhabi.

8.4 Dutco Construction LLC69

Dutco Construction Company LLC operates in a diverse range of construction and engineering-

related fields in the Middle East construction industry. The company is a contractor for various

civil engineering, roadworks, drainage systems, bridges and dams in the UAE, and offers its

clients specialist scaffolding and formwork, interiors and plant divisions.

Dutco Construction is a part of Dutco Group of Companies, which was founded in 1947 and is

based in Dubai, UAE.

Key Facts



Website www.dutco.com

Founded 1947 (Dutco Group of Companies)

Employees 20,000 + (Dutco Group of Companies)

Revenue -

CEO Tariq Baker (Dutco Group of Companies)

8.4.1 Key projects

Recent projects: The Palm Island Interchange, the Ras Al Khor Crossing, the widening of

both Sheikh Zayed Road and Emirates Road and the improvement of Interchange no. 3.

Building works have included Dubai Heritage Vision, Dutco Group Headquarters Building, Town

Houses project in Mirdif and Dubai Global Village

69 dutco.com/construction/construction.aspx, accessed on 13 Jun, 2017 / LexisNexis accessed on 13 Jun, 2017 / General press search



Date Description

02 Mar 2017

Dutco group finalises acquisition of Balfour Beatty shares

Dutco Group finalised the acquisition of the minority shares held by the UK’s Balfour

Beatty within its joint companies Dutco Balfour Beatty, Dutco Construction Company

and BK Gulf for USD 13.8 mn.

8.5 HLG Contracting LLC70

HLG Contracting LLC (HLG) is a diversified international contractor in the Middle East. The

company is 45% owned by CIMIC Group, an international contractor and contract miner, with

annual revenue exceeding USD 9.9 bn*, and 55% by Riad Al Sadik, currently serving as a

Chairman of HLG.

HLG has an extensive track record in large-scale projects across the region, with a client base

across both the public and private sectors. It focuses on two core market sectors: infrastructure

and building

HLG was formed in 2007 following the merger of a building contractor, Al Habtoor Engineering

with Gulf Leighton, the CIMIC Group’s original operating company in the Gulf region.

Key Facts

Company type Joint venture


Website www.hlgcontracting.com

Founded 2007

Employees 28,000

Revenue71, 72 USD 489.5 mn as on 31 December 2016

CEO and Managing Director Moustafa Fahour OAM

8.5.1 Key projects

Completed: KPIZ Secondary Infrastructure Area A Phase 1B, St. Regis Saadiyat Island

Resort, ZADCO Accommodation and Utilities Project, Satah Al Razboot Field Development

Project, Khalifa Port and Industrial Zone (Industrial Zone Area A Infrastructure), Abu Dhabi

Islamic Bank - New Headquarters, Qusahwira Phase I, Development Building & Services,

Habtoor Grand Beach Resort & Spa, Dubai International Airport Expansion Phase II - Terminal

3, Concourse 2, Rashid Hospital, New Dubai Hospital, Goldcrest Views 1, Madinat Jumeirah

Resort Development, Shangri-La Hotel, Dubai, Jumeirah Beach Residence - Sector 4,

*As reported on company website 70 hlgcontracting.com, accessed on 13 Jun, 2017 / LexisNexis, accessed on 13 June, 2017 / General press search 71 cimic.com.au, accessed on 13 June, 2017 72 Exchange rate (Average of 2016)1AED= USD0.272258


Movenpick Hotel Jumeirah Beach, Dusit Thani, Dubai International Airport - Concourse 1,

Sheikh Rashid Terminal, Jumeirah Beach Hotel, The Galleries at Downtown Jebel Ali, Executive

Towers at Business Bay, Grand Millennium Dubai, Iris Bay, Burj Al Arab

Ongoing: Abu Dhabi International Airport – Infrastructure, Mafraq Hospital, Gate Avenue,

Bay Views Hotel at Business Bay, Jewel of the Creek, Al Garhoud Towers, EKFC 3 Long Term

Expansion, Access to Bluewaters Island, Fakeeh Academic Medical Center Main Construction

Works, JAFZA Convention Center – Phase 3, Al Habtoor City - Hotel Development, and Dubai

Pearl


Date Description

1 Apr 2017

HLG appoints CEO and MD

HLG appointed Moustafa Fahour OAM as its new CEO and MD.

Before this, he was executive general manager, Finance, at CIMIC Group, and prior

to that, he was group CFO at HLG Contracting.

9 Feb 2017

HLG announces Abdul Rahman Jarrah as its acting CEO

Abdul Rahman Jarrah, who was a member of Cimic subsidiary Thiess’ executive

leadership team, was appointed as acting CEO, replacing the former CEO Jose

Lopez-Monis, who was arrested in Dubai in August 2016 and subsequently released

without charge.

9 Feb 2017

HLG appoints CFO

HLG appointed Khalil Muhammad as its new CFO.

He joined HLG in 2010 as a CFO, Qatar. Khalil later assumed the responsibilities of

the KSA and Oman too. Prior to joining HLG, Khalil worked with Canadian Imperial

Bank of Commerce as director corporate and other, Diamond Trust Bank Tanzania as

general manager and PricewaterhouseCoopers Pakistan as manager assurance

services.

26 Jan 2017

HLG wins contract from Hasabi Real Estate

HLG won a contract valued at USD 109.18 mn73 for the construction of Al Garhoud

Towers by Hasabi Real Estate – Dubai’s development company.

The project is scheduled for completion in Q3 2018.

30 Nov 2016

Shareholder changes in HLG

HLG announced the completion of the transfer of HLG shares from one of its

shareholders (Al Habtoor Holding LLC) to another shareholder (Riad Al Sadik).

CIMIC Group’s shareholding in HLG is unchanged at 45%.

HLG confirms the change of its name from Al Habtoor Leighton LLC to HLG

Contracting LLC. The withdrawal of Al Habtoor from HLG marks the end of a

partnership that was formed in 2007 when Al Habtoor Engineering merged with Gulf

Leighton, part of CIMIC Group.

29 Nov 2016

HLG wins contract from United Development Company (UDC)

HLG won a contract valued at USD 158.9 mn7 for the construction of Al Mutahidah

Towers by United Development Company (UDC) – Qatari public share holding

73 Exchange rate (Average of 2016)1AED= USD0.272258


Date Description

company.

The project is scheduled for completion in Q3 2019.

3 Nov 2016

HLG wins contract from Dubai International Financial Centre (DIFC)

HLG won a contract valued at USD 133.41 mn for the construction of the Gate

Avenue at DIFC Project in Dubai, UAE, for Dubai International Financial Centre

(DIFC).

According to the website, the first phase is set for completion by end-2017.

8.5.3 Al Fara’a General Contracting Co LLC74

Al Fara’a General Contracting Co LLC (AFGCO) is a civil construction company that provides

engineering and construction services and solutions. It offers a comprehensive array of

capabilities in building, civil engineering, MEP and contracting-related specialities (ground

technologies, structures, airports, healthcare, hospitality, education, defence, oil and gas).

The company has operations in the UAE, the KSA, Qatar and Oman, and partners in Korea, the

UK, Canada and the US. Al Fara’a General Contracting operates as a subsidiary of Al Fara’a

Group.

Key Facts


Headquarters Abu Dhabi, UAE

Website www.alfaraa.com

Founded 1980

Employees 18,000

Revenue –

President and Executive Chairman Dr. Jawaharlal R. Gangaramani

8.5.4 Key projects

Recent projects: Abraj Al Raha, Abu Dhabi Future School - Al Zakher, ADNIC, ADNOC Filling

Stations, Al Ain Labour Village, Al Barsha Hotel Apartment, Al Bateen School, Al Jimmi Mall, Al

Khabisi Wedding Hall, Al Mada-2 Residential Complex, Al Mazrouie Tower, Al Muwaji

Residential Complex, Al Samaliah Island - Student Accomodation, Al Sayegh Tower, and Al

Shaheens School

74 alfaraa.com, accessed on 13 Jun, 2017 / General press search



Date Description

1 Sep 2016

Al Fara’a Group starts first phase of Maryah Plaza

Phase 1 of the Maryah Plaza was announced to be completed in 2016 when the

project was launched in 2013; however, work on the phase was delayed because

of a downturn in the property market.

Al Fara’a Group is the main contractor for the project, awarded by Farglory Middle

East.


Confidentiality

CURRENCY: All amounts in this report are in USD unless otherwise stated.

This report is forwarded to the client in strict confidence for the

use by the client as one factor to consider in connection with

credit and other business decisions. CRIF D&B disclaims all

liability for any loss or damage arising out of or in any way

related to the contents of this report. This material

is confidential and proprietary to CRIF

D&B and/or third parties and may not be reproduced,

published or disclosed to others without the express

authorization of CRIF

D&B or the General Counsel of CRIF D&B.

-- End of Report –

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