Dubai: The Dubai Government continues to scale up infrastructure-related spending that would meet the city’s expansion needs well beyond the six-month Expo 2020 in October next year. In its latest budget outlay, a substantial Dh9.2 billion has been earmarked for infrastructure.
Apart from making funds available, the government also intends to utilise the laws aimed at creating public-private partnerships in mega projects. In a likely boost for the construction sector, the budget announcement also mentions making available long-term financing via “project financing mechanisms through the government”.
Government stimulus goes hand-in-hand with reforms that were introduced last year. The latest budget outlays continue the ‘one-two theme’ of government initiatives supporting infrastructure spending.
Access to availability of liquidity had been one of the sticking points construction industry sources had been talking about in the last 12-18 months.
The housing sector also gets its due in the latest budget, with 33 per cent of expenditures allocated for this plus education and health care. How much each category will receive via government spending has not been revealed.
Any continued fund flow into the housing sector will boost the wider real estate market.
“Government stimulus goes hand-in-hand with reforms that were introduced last year,” said Nasser Malalla, a senior partner at law firm, NM Associates. “The latest budget outlays continue the ‘one-two theme’ of government initiatives supporting infrastructure spending.”
In last year’s budget, infrastructure allocation had increased by 46.5 per cent over the 2017 fiscal year, and made up 21 per cent of total government expenditure. Key infrastructure-specific works are done — or nearly there — at the Expo site. In fact, the Expo 2020 works made up 43 per cent of total government spending in 2018.
The Expo 2020 is projected to have an overall investment value of Dh25 billion. Another key infrastructure-related project, the Dubai Metro’s Route 2020, requires funds of Dh10.6 billion, according to earlier estimates.
In a statement, Arif Abdul Rahman Ahli, who heads the Planning and Budgeting Department at the Department of Finance, said: “The fiscal year 2019 is an update to meet the requirements of Dubai 2021 Plan and a transparent expression of a stable financial position.”
Construction could be in for a win-win situation this year. More priority project contracts are due, related to Expo 2020 works and otherwise, as are regulations easing fund flows into projects.
The UAE-wide regulations were recently eased to smoothen this process, helped by Central Bank directives.
“Central Bank relaxation of rules on lending to [the] real estate sector implies greater money flows into this space in 2019 and the lead up to the Expo,” said Malalla. “This would imply a stronger growth trajectory for the broader economy.”
The earlier upper limit for the banking sector to the real estate development sector was set at 20 per cent. That threshold was removed late last year.
