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Developers halt more than 30% of projects across GCC

One third of real estate and construction projects in the GCC  have been cancelled or put on hold due to the economic downturn, a new report has revealed.

The research note by Kuwait Financial Centre (Markaz) shows that the UAE was home to 91 percent of the 31 percent suspended or scrapped developments in the region.

“This quick and huge contraction in supply was mainly on account of Dubai, which accounts for 91 percent of the $249bn of projects that got put on hold/cancelled,” the report said, according to the Saudi Gazette.
The economic downturn between October 2008 and end-March 2009 was cited as the reason for delaying or cancelling 72 percent of the projects, of which more than half were future projects.

“A significant contraction in activity due to cancellation or delaying of the projects should be painful for the sector and the pain would as well be felt in the overall economy depending on the extent of the sector’s contribution to the economy,” the report said.

The sharp fall in real estate prices across the GCC was a clear indication that demand had contracted and holding or stopping projects was inevitable, Markaz added.

The report went on to say that cancellations or holds were expected to continue in the UAE, mainly as a result of past oversupply and huge future supply pipeline.

Liquidity issues may also see the UAE and Bahrain suffer more project cancellation, where as the adjustment process had finished in Kuwait and Oman.

“Project cancellation is a function of market’s realisation of oversupply, the occurrence of which now depends on the visibility as to how the economy is expected to move forward,” the note said.

In Saudi Arabia, demand for clarity in residential real estate would deter major future cancellations, the report predicted.

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