Sorouh gets $1.5bn contract from government

Real estate developer said that it will provide 9,000 homes over the next five years.
Sorouh gets $1.5bn contract from government
EMIRATI HOMES: Sorouh Real Estate has signed an agreement with Abu Dhabis government to build $1.5bn worth of homes for Emiratis. (Getty Images)
By Bloomberg
Mon 19 Apr 2010 12:31 AM

Sorouh Real Estate, Abu Dhabi’s second biggest developer by market value, signed an agreement worth $1.5 billion with the emirate’s government to build homes for Emiratis. The “Watani” and “Shamkha” communities will provide 9,000 homes over the next five years, the company said in an emailed statement. The first phases of the developments should be completed in August 2011 and in 2013, it said.

Real estate development contracts of this size have waned since the global financial crisis crimped economic growth in the UAE. Property prices in Abu Dhabi, the UAE’s capital, have dropped 33 percent since September 2008, according to CB Richard Ellis Group Inc.

Values fell even as the country has a shortage of about 30,000 homes, according to Majed Azzam, a real estate analyst at Al Futtaim HC Securities.

Sorouh’s profit tumbled 74 percent in 2009 on declining sales and asset writedowns, the company said in January.

The company expects to complete all the projects it has started, Managing Director Abubaker Seddiq Al Khouri said April 15 in an interview. Sorouh is the emirate’s second biggest developer after Aldar Properties.

In an emailed response, Saud Masud, real estate analyst, UBS AG, said: "Sorouh’s story is a still a bit challenging. On a standalone basis the company will be challenged to raise financing and target affordable housing by itself.”

The shares have dropped 16 percent in the past 12 months. They fell 2.9 percent today to $0.64. The agreement was announced after markets closed today.

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