By Tom Arnold
Contractors to appeal to gov't to allow for staged payments amid tightening cashflows.
Construction bosses in Dubai are poised to call on the government to introduce regulations allowing for a process of staged payments on contracts to help ease their tightening cashflows.
Deferred payments on projects meant contractors were finding it increasingly difficult to meet their financial commitments, according to Dubai’s Construction Business Group.
Crisis teams should be formed in banks to examine contracts on a case by case basis to decide whether staged payments should be allowed, a delegation from the group recommended in a recent meeting with Dubai’s Chamber of Commerce, the group said in a statement.
The group, that is made up of senior management of contractors, also wants a relaxation of visa restrictions and the rules of transfer surrounding skilled labour to help them minimise spiralling costs.
It recommended cancelling transfer fees and the processing of new labour cards expeditiously.
The group has asked the chamber to broach with the Ministry of Labour a proposal that would make it easier to transfer visas for labourers and staff members.
Concerns were also expressed by the delegation about the “myriad” of new regulations being implemented to regulate and control the work practices of the building industry.
Rules as they stood in or before 2007 were strong enough to effectively control work environments, the group said.
It is seeking an easing of penalties for breach of regulations relating to labour camps, heavy vehicle driving licence policies, sewerage treatment and disposal, which they argue are an added cost burden.
Chamber officials urged representatives from the group to put together a set of proposals about visa conditions and their impact on skilled labour, in addition to submitting plans outlining a process of staged payments to keep cash flow coming in.
The chamber called the meeting with the group, that operates under the umbrella of the chamber, to hear the challenges its members were facing in their day-to-day operations in the difficult economic climate.
Projects in the UAE building sector are being disrupted by delays and cancellations due to a collapse in the real estate market and a freezing of the credit markets.
"The group has asked the chamber to broach with the Ministry of Labour a proposal that would allow labourers and staff members to re-enter the emirate after a year's time, instead of the existing six months re-entry rule." Does this mean that employees are now banned from returning to UAE for one year instead of six months? If this is the case, I can't see how it will help to improve the situation. UAE will end up losing experienced employees.
On one had we see developers announcing payment holidays and more flexible plans to try to keep buyers on side and stop them defaulting. On the other hand, the developers are short of cash so they want buyer cash now rather than when the project is finished. They cannot make up their minds. Either way, the system breaks. If the buyers do not stump up cash now, the project collapses and they lose their money. But if the developer does not relax payment terms, he is going to have many buyers simply unable to keep paying on schedule, and again the project collapses. Personally I would be terrified if I had bought in an off-plan project and was now being asked to front up cash to the developer because he's basically run out of cash. Effectively the developers cannot borrow from banks so they are trying to borrow from the buyers. If their business is too risky for the banks, would I as a buyer want to front up cash? If half the customers don't, the building won't get built anyway, and I'll just lose even more. I pointed out to some friends interested in buying 2 years back that the price difference between off-plan and completed property was a clear indication of a big risk element. Off-plans were half the price of similar completed ones. The only reason to justify that difference would be a serious risk that the off-plan one will not get built and you'd lose your cash. Why else pay a 100% premium for a finished property? It is a shame so many people ignored basic economic logic in their rush to grab some easy money.
Quote "It (Construction Contractors business Group)is seeking an easing of penalties for breach of regulations relating to labour camps, heavy vehicle driving licence policies, sewerage treatment and disposal, which they argue are an added cost burden" Does this mean Please let us break the law and dump sewerage where we want to so it doesn't get treated - oh and by the way please let us continue to run vehicles that are unroadworthy with worn out tires useless brakes and untrained drivers . and another thing let us do what we like in the camps so that the workers live in in cramped inhumane conditions like before and we take most of their wages back in accommodation charges. - Are these People real !!!!