Construction & Real Estate

RAK: Material wealth

From Saudi Arabia to Qatar, governments across the Gulf region are ramping up spending on building projects, with this likely to generate a host of opportunities for Ras Al Khaimah’s construction materials industry, a mainstay of the local economy. Private consultancy Ventures Middle East released a report predicting that UAE spending on interiors will rise to $821 million in 2011, up from $709 million in 2010, with the largest gains to be made in residential structures. As they move off the design board and into the construction stage, these projects should mean big business for RAK’s buildings materials producers. With limited hydrocarbons reserves, RAK’s government has long placed greater emphasis on developing the emirate’s industrial capacity. Indeed, with relatively low land prices, a central location in the region and access to raw materials, the emirate has many competitive advantages when it comes to industry, and local firms have made the most of these to become significant regional players in the sector. Founded in 1989, RAK Ceramics has grown into the world’s largest manufacturer of ceramic and porcelain tiles. The firm has posted positive numbers, despite the challenging economic conditions of the past year, announcing that its profits in 2010 were just over Dh270 million ($73.5m), up from roughly Dh262 million ($71.3m) in 2009. With interior finishing set to rise in the region, demand for the company’s products, including floor tiles, porcelain tiles and sanitary ware, is set to increase. Steel production is also on the rise in the emirate. Last April RAK’s ruler, Sheikh Saud bin Saqr Al Qasimi, inaugurated a steel pipe manufacturing plant of SeAH Steel Corporation. SeAH, a South Korean company, partnered with RAK Investment Authority (RAKIA) to invest $70 million in the construction of the plant. Local producers should be able to take advantage of an improving regional market for the material. Steel consumption is set to grow by 5-6% in 2011, led by construction projects in the UAE and Saudi Arabia, Al Ghurair Steel’s head of business activities, Saadath Thajudeen, said earlier this year at an exhibition in Sharjah. The long-term growth prospects seem promising as well, thanks to the largely pro-business posture of the government and a continually improving infrastructure. The government has used a combination of RAKIA and free zones to spur growth. Free zones offer perks such as 100% foreign ownership, full income and corporate tax exemption, and 100% capital and profit repatriation, while RAKIA works to attract firms to the emirate to set up operations there. Meanwhile, infrastructure improvements demonstrate the government’s readiness to further improve RAK’s trade links. The emirate’s fifth port facility, RAK Maritime City, was officially inaugurated by Sheikh Saud last May. The area, directly adjacent to Saqr Port, includes a dedicated harbor, 8 million square meters of leasable area, and all the legal and financial perks of operating in a free zone. Source: Oxford Business Group

Kuwaiti real estate liquidity falls in June

Liquid assets of Kuwait's real estate market in June 2011 have dropped by 11.4% from the previous month, with trades worth KD277.2 million compared to KD312.8 million, Kuna has reported Transactions during the month comprised KD263.2 million worth of contracts and KD14 million for broker fees, while real estate for investment purposes rose 50% from KD86.7 million in May to KD138.6 million in June. Source: AMEInfo

Price of construction materials rises in Egypt

According to data by Egypt's Central Agency for Public Mobilization and Statistics (CAPMAS), costs for some major construction materials are continuing to rise in 2011, with steel taking the lead with a 42% increase over the last year, Ahram has reported. Steel prices in June were up 12% compared with the previous month, but the cost of timber and water supplies remained stable, the figures showed. Source: Ahram

Saudi Arabia: Building bonds

Plans by the Saudi Arabian government to boost public expenditures and invest in the nation’s infrastructure could prompt local companies to step up their own investments. As Islamic financial services expand in the Kingdom, some of these borrowers may well turn to sharia-compliant bonds as a means of finance. Since late February, King Abdullah has announced two major investment packages aimed at further diversifying the national economy and strengthening social programs such as state-funded housing, health services and education. Hundreds of billions of dollars are expected to be injected into the economy over the coming decade, which will likely create a steady flow of capital into a wide range of sectors, including construction, utilities, technology and communications. As local players in these fields turn their attention to new state-funded projects, they may well seek sources of financing to boost their own capabilities. For some companies, the use of sukuk (Islamic bonds) could be a viable alternative to borrowing via conventional debt. Source: Oxford Business Group

Jordan: Real estate on the rise

With residential sales well up so far this year, Jordan’s real estate sector looks to be rebounding from the downturn it experienced during the global economic crisis. Questions remain, however, as to whether the surge can be maintained for the rest of 2011 in the face of rising interest rates and a possible end to state-backed incentives. Figures issued in early June show that there was a 42% increase in real estate trading in the first five months of 2011 compared to the same period in 2010, with a total of $3.68 billion worth of transactions. Though an excellent overall performance, the 42% increase does represent something of an easing in the market – $2.4 billion of those sales were made in the first three months of the year, with $1.3 billion in transactions having been carried out in March alone. The rise in sales has in part been spurred by lower prices, with costs for residential properties in many segments of the market down by some 20% from their pre-crisis peaks. Though not close to the nearly 50% drop in prices seen in some Gulf states, the retreat has prompted more buyers to re-enter the market, assisted by lower interest rates and state incentives. One of the measures credited with revitalizing the sector was the raising of the exemption threshold on property registration fees for homebuyers. In May 2009 the government announced it would waive registration fees on the first 120 square meters of apartments of up to 300 square meters in size, the exemption having previously covered apartments up to 150 square meters. In June the following year it extended the exemption further, applying it to the first 150 square meters of homes under 300 square meters, while also cutting property taxes in half. According to data issued by the Department of Land and Survey (DLS), the exemptions have saved homebuyers more than $285 million. However, unless the government extends the fee holiday, the exemption on charges is set to close at the end of June, a move that could make potential buyers think twice. Source: Oxford Business Group