Can the construction industry comply with local environmental law while coping with the pressure of rising costs and inflation?
The general awareness witnessed in the construction market prompts two questions that Antonios Dimitracopoulos, Partner at Bin Shabib & Associates (BSA) LLP explores: how can one comply with local environmental law while at the same time coping with the increasing financial pressures of rising costs and inflation.
There were two predominant issues that kept coming up at the recent Arabian Construction World Summit held in Abu Dhabi: green buildings and inflation.
The degree of awareness that was shown at the summit, on environmental issues as well as energy conservation, was overwhelming. There were many self-imposed goals on zero carbon emissions. These were coupled with perseverance on the part of many property developers to ensure that their projects utilise the infinite energy resources of the sun or the wind and recycle or biodegrade their waste.
It is generally preferable that actions of respect towards the environment and, consequently, towards others are carried out voluntarily and not by force. However, in practice this is a rather romantic aspiration. Were it not so, there would be no reason to have laws and courts and there would certainly be no reason to have lawyers.
So how close is Dubai to walk the talk of environmentalism and promulgate laws that function both as guides and as chastising instruments of enforcement?
The Dubai government has passed a general directive on all buildings on the emirate to become green. However, everyone seems to be at a loss as to exactly what that means and what specifications need to be complied with for a property developer or a contractor to function within the ambits of the law.
The Federal Law 24/99 for the Protection and Development of the Environment generally deals with issues of pollution and protection of the environment, but its provisions are far too general for the content of the law to be constructively applied to construction. Specific regulations that set out technical specifications and minimum requirements applicable to the construction of buildings should be issued.
Currently, as far as any requirement to have green buildings is concerned, this law would be either inapplicable or every building, save a few recently embarked upon projects, would be in an indirect breach of it.
There are, of course, very serious costs implications in setting out a de rigueur list of environmentally focused requirements. The overall cost of construction will rise substantially, putting a strain on financing modules and ultimately on the local community, the purchasers, tenants or end users.
As indicated, the second hot topic at the summit was inflation and rise on costs.
A lot was voiced about possible de-pegging of the UAE dirham from the US dollar and of the need to at least revalue the currency while maintaining the US dollar peg. From an engineering perspective, the constantly escalating cost of materials, staff and equipment is tackled with very expensive fast-track design and construction methods that claim to guarantee a long-term saving on costs.
This, of course, even if true, will not make one project less expensive than the previous one, as costs will continue to escalate. The saving claimed can only be envisaged when a comparison is made between fast-track design and conventional methods within the same project.
Whatever the way out of the current inflation may be for the UAE, it is clear that if honourable goals that come with hefty price tags are to be enforced upon, viable regimes must be applied.
The two hot topics that were raised at the recent summit can actually complement each other. A stabilisation of the UAE's currency exchange rates and US dollar valuation will help the local construction industry abide with any specialised legislation eventually issued, imposing strict environmental restrictions.
It is a positive sign that keen awareness of these issues can be felt. This can pave the way for solutions to be drawn together and assist both the buoyancy of the construction market and the preservation of the environment.