It will be the government that will headline major construction-related activity in the medium-term. Image Credit: Gulf News Archive

Dubai: Building of new homes by private developers in the UAE dropped during the fourth quarter of 2020, while the decline in government-sponsored infrastructure projects proved less of a concern for the construction sector.

Even non-residential projects from the private sector was in decline between October to end December, according to RICS Construction Activity Index for the UAE. (RICS is the UK-based Royal Institution for Chartered Surveyors.)

Financial constraints remain the biggest constraint in limiting construction activity, with 81 per cent of respondents in the RICS survey citing this reason. Competition and insufficient demand are also the “main factors holding back activity”.

Industry sources now hope that government-led projects will again lead the way into boosting fortunes, especially in the final stretch leading to the Expo in Dubai, which is scheduled from October. But for a full recovery, private sector activity too needs perking up.

More jobs at risk

Industry sources expect workloads on private residential and private non-residential to fall through this year, and expect the same to happen with headcount and profit margin.

  1. In the RICS survey, a net balance of -53% of respondents in UAE said their workloads on private residential and private non-residential fell in the final three months of 2020;
  2. A net balance of -28% saw a fall in infrastructure workloads.
  3. Respondents saw a rise in workloads from telecom/tech driven projects and in energy sector, but a fall in transport.

Government leads

This is true across countries. “With infrastructure a key driver in leading this bounce back, greater government spending will be vital,” said Sean Ellison, Senior Economist at RICS. “Many governments have committed to substantial infrastructure spending, bringing forward shovel-ready projects and we can expect more fiscal stimulus.

“How effectively this capital is put to use will dictate the speed of our recovery.”

Tread carefully on new projects

Based on feedback from private developers, their focus will be on cost savings and build to demand. It will be some time before offplan sales recover fully in Dubai, and which means less chances of new launches – and more construction – happening.