UAE’s construction sector is on fast-track growth in 2023 – and can speed up more

The UAE’s construction industry is set to expand by 3.5 per cent due to an uptick in real estate projects, improved energy market receipts, and investment in non-energy infra projects.

This year’s growth rate is higher than 2022’s 2 per cent. Over the next four years, the sector is expected to grow at a higher CAGR of 4 per cent. The uptick in numbers is primarily attributed to increased residential demand and tourism-related inflows. In line with the nation’s vision to double its GDP to Dh3 trillion by 2031, the infra and construction sector will support non-oil GDP activit.

Looking at absolute numbers, the UAE’s project pipeline amounts to $29 billion over the next two-year period and $199 billion over the next five years. The numbers are sizeable compared to Saudi Arabia’s $521 billion and Qatar’s $53 billion over the same period. While lower energy prices coupled with high interest rates could translate into lower public borrowing, past commercial credit utilisation trends suggest sustained wholesale credit growth, which could grow by a 5-7 per cent CAGR over five years, assuming 50-70 per cent utilisation. Or 2-4 per cent on a 20-40 per cent utilisation rate.

Below, we look at a few mega projects, some of which have already seen their work start:

Etihad Rail

The 1,200 kilometre network will extend across the UAE from the Saudi border to Oman. With a cost of Dh40 billion), the project benefits will be visible over the longer term. Annually, the project is expected to serve 16 million passengers and 50 million tonnes of freight.

The India–Middle East–Europe trade corridor announcement could further see participating nations leverage the rail project.

Abu Dhabi Midfield Terminal

The trial operations at the much-awaited facility have started. Once open, the terminal buildings are expected to accommodate up to 11,000 passengers and hour, or around 45 million passengers annually. The UAE’s latest tourism numbers suggest a massive uptick in foreign visitor arrivals.

At 742,000 square meters, it is one of the world’s largest airport terminals and will significantly increase Abu Dhabi International Airport’s passenger and cargo capacity.

Dubai Urban Tech District

To be located on 140,000 square meters, the development will be home to venture capitalists and provide an urban ecosystem for new-age tech start-ups and associated industries. Following a zero-carbon policy, the district will feature facilities to host conferences, seminars, business incubation and other amenities.

Private projects

The UAE is witnessing several mega announcements in private projects, including the Burj Binghatti, the Dubai Wasl Tower and Abu Dhabi-based Saadiyat Grove.