Rising material costs and labour shortages are posing major challenges to UAE developers, impacting project budgets and completion timelines, besides squeezing profit margins, industry players said.
Construction material suppliers such as concrete manufacturers now demand full payment upfront instead of the earlier practice of a 120- to 150-day credit period, forcing developers to purchase materials at premium rates, further escalating construction costs, they said.
Real estate companies, in turn, are navigating the tough market conditions by securing raw materials in advance, negotiating bulk contracts, and optimising project timelines.
They are also resorting to innovative construction techniques like modular building and prefabrication to streamline execution and reduce costs in an increasingly expensive market.
Building material prices are expected to rise by 10-15 per cent over the next 12 months in the wake of the continued surge in the launch of real estate projects, besides developers pushing to meet delivery timelines.
Labour costs are expected to continue rising as demand surpasses supply, sector experts said.
“Developers today are facing major challenges due to the combined impact of rising material costs and shortage of skilled contractors and labour, which are driving project costs higher, while further squeezing margins,” Anis Sajan, Vice Chairman of Danube Group, told Arabian Business.
“Besides, the shift in procurement practices due to insistence of material suppliers such as concrete manufacturers for full payment upfront in the wake of tightening supplies, instead of the long credit period for payment, is forcing developers to purchase materials at premium rates, further escalating construction costs,” he said.
Sajan said developers are adopting a multi-faceted approach to navigate rising costs and supply constraints.
Ali Jaber, CEO of GJ Properties, said the UAE’s real estate sector continues to demonstrate strength despite rising labour and construction material costs.
“While these increases can pose challenges to project budgets, as strategic developers we account for such factors over time and due to inflation,” Jaber told Arabian Business.
Industry insiders said if the pressure on raw material and labour costs persist, they may be forced to resort to hiking property prices to pass on the additional project costs.
Strategies for construction challenges
As part of their multi-pronged strategies to tackle the challenges on the construction material front, industry insiders said developers are striking direct deals with manufacturers to secure bulk orders to minimise cost fluctuations, besides ensuring steady supply pipelines.
Industry players are also embracing technological advancements such as prefabrication, 3D printing, and AI-driven project management to enhance efficiency and reduce construction timelines, they said.
On the labour front, developers said they are addressing the skilled worker shortage through training and development.
The Danube vice chairman said labour training and development are critical for sustaining long-term growth in the construction sector.
“Companies like ours heavily invest in upskilling local labour,” he said.
Regarding challenges on the materials front, he said: “By directly importing construction materials for both trading and our own projects, we can lock in costs early, shielding us from market fluctuations and price volatility.
“Our team works closely with manufacturers to ensure timely deliveries, maintaining a seamless flow of materials even in challenging market conditions.”
The GJ Properties’ chief executive said their company is adopting various strategic measures to manage costs efficiently.
“We leverage our long-term supplier relationship to optimise procurement strategies, besides integrating innovative construction techniques to help us mitigate cost pressures without compromising on quality,” he said.
Material and labour costs surge
Industry insiders said building material costs have remained relatively stable, but with the surge in demand from new developers and increasing interest in homeownership in Dubai, prices are expected to rise by 10-15 per cent on a short-term basis.
Additionally, global supply chain disruptions have also impacted the availability and pricing of key materials, they said.
Sajan said while supply remains stable for now, rising demand will give suppliers the upper hand, allowing them to adjust prices accordingly.
He said labour costs are also expected to continue rising as demand surpasses supply.
Additionally, to ensure projects are completed on schedule, developers have no choice but to offer higher wages to attract and retain skilled labour, further driving up overall construction expenses, he added.
“With a shortage of skilled workers and an increasing number of projects, developers face the challenge of either absorbing these costs by adjusting their margins or passing them on to buyers through higher property prices,” the Danube vice chairman said.
The GJ Properties’ chief executive, however, said streamlined project timelines and smart design principles can help developers to ensure that their projects remain on track, offering value to investors and end-users alike.
“The industry in UAE has seen a very healthy growth in this sector as well, which helps developers adapt efficiently to maintain steady growth in an evolving market landscape,” Jaber said.
Follow us on
