Construction chief predicts many firms will go bust

CONSTRUCTION CRISIS: A number of builders in the region will go out of business due to cancelled projects and higher costs, it is claimed. (Getty Images)

A number of contractors could go out of business over the next three to four months due to a combination of project cancellations and continued labour and overhead costs, the managing director of a leading Dubai industrial construction firm has said.

March would be crucial for the industry in the UAE as by then it would become clearer which projects banks were willing to lend money to finance, Minoo Jamaji, MD of Roshan Construction, told Arabian Business.

He said his own firm, which specialises in turnkey industrial construction, had seen the value of the contracts in its order book for 2009 slide by around 15 to 20 percent to 1.5 billion dirhams during the last four months because of projects being cancelled or delayed.

But he said contractors in the freehold sector had been harder hit by a slowdown in the construction industry, with up to 80 percent of the projects some firms were involved in suspended in recent months.

“The next three to four months will be a test of survival and will be crucial for contractors to decide who moves forward and who will stop,” Jamaji said.

“Many will go bust as so many contractors have had projects cancelled and clients have not been paying, while overhead and manpower costs have continued.

“Up until now banks have not been giving a clear picture on whether they will give finances to developers and investors.

“March will see banks decide how much financing is available and developers will continue with projects accordingly as they depend on banks to build, plus by March we know how bad the market will be.”

His comments follow those by Sachin Kerur, a partner with construction law firm Pinsent Masons, who said that February and March would be crunch time for the industry as developers decide whether to go ahead with projects that have been placed on hold, or cancel them.

A number of projects in the Gulf have been cancelled or have slowed down due to a collapse in the real estate market and a freezing of the credit markets as banks decline to finance new projects due to the high risks involved.

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