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Sat 27 Dec 2008 04:00 AM

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Surging ahead

BMI forecasts Kuwait's construction industry to grow at 4.22% during 2008-12.

Kuwait's skyline has undergone a complete transformation in recent times with its construction industry valued at US $1.64 billion in 2006. In its newly released Kuwait Infrastructure Report, BMI forecasts the industry to grow at an average rate of about 4.22% during 2008-12. Kuwait correspondent Abigail Mathias reports.

Kuwait's skyline has experienced a complete transformation in recent times. The Kuwait Property Exhibition, Kupex, was held last October. It captured the heightened flurry of activity in the country's construction industry.

Real estate developers from as far as the Cayman Islands, Seychelles and Bulgaria participated in the event, along with local and regional groups.

Reports from the Oxford Business Group suggest that the real estate and construction sectors grew by 7.9% in 2006 and contribute approximately 6% of the nation's economy.

The National Bank of Kuwait reported that the value of real estate sales grew by 67% in 2007. Total real estate investment tradings have increased during the first quarter of 2008 to account for US $1.3 billion (KD385 million) compared to $1.7 million during the fourth quarter of 2007 with a decrease of 21.5 %.

The sector has been receiving increased investor attention. Around $8 billion of private investment and $3 billion in government investment is expected to come into the sector in the next five years.

The Ahmadiah group was established in 1954 and has been Kuwait's leading name in the civil engineering and building construction industry. The Bayan Palace and Amiri Diwan are just some of the prestigious properties built by the group.

The stunning Souq Sharq spread over 2.5km coastline with entertainment, shopping and commercial facilities was built by the company in a period of just 26 months. The 60-storey Arraya 2 Office Tower is a part of the group's current projects.

Yousef Attia, project manager of Ahmadiah Contracting and Trading Company, says, "One of the main attributes of the success of our company is our large and varied portfolio. From hotels, to government and public buildings and corporate enterprises our clients know that we complete our projects on time.

"The Arraya 2 Office Tower is the first skyscraper to be licensed in Kuwait," says Attia. The building's construction began in late 2005 and it is expected to be completed in April 2009.

He adds: "So far the real estate companies that we deal with in Kuwait have not been affected by the financial crisis. There is uncertainty in the market for sure and everyone is being a little cautious but I still believe there is a lot of potential for good business here.

Attia believes the construction industry is merely reflecting the volatility that exists in other sectors. He says, "The general mood in the industry is one of anxiety. The first few months of 2009 are not expected to be bright. I believe the stock market will pick up again because unlike the US and Europe, the construction market in the Gulf is backed by investments which are supported by a steady supply of oil."

The Kuwait market is facing a definite set back at the moment but we have to look at it like this, if one goes over a speed breaker one can't stop, one has to move on."The Kuwaiti infrastructure sector has its share of drawbacks. High growth levels in the construction industry are somewhat mired by bureaucratic procedures.

Further, the country's real estate sector is largely fragmented due to limited plots and restricted development space. Foreign companies have to often bear with high levels of duties and taxes.

Adnan Bergouthi of Boubyan Ready-Mix says, "Our company is a leading player in the market right now but we cannot do much without vital raw materials. Sometimes the bigger projects really suffer because of lack of materials."

The company is planning to expand to Qatar and the UAE but fears that the shortage of supplies might hamper growth here as well.

BMI forecasts Kuwait's construction industry to be valued at KD 0.63 bn (US$2.19bn) in 2012, making up 1.97% of the GDP. However, a rapid pace of development may entail higher raw material prices and lead to labour shortages.

The OBG reports that just like Jordan, demand for commercial property in Kuwait has been stimuated by the Iraq war. A large number of new companies have set up shop in the country, using Kuwait as a base to target the large and affluent Iraqi market.

Proman Project Management was set up in Kuwait in 2004 as a local firm specialising in project and construction management. It is a subsidiary of Efad Holding, Kuwait. "We have successfully managed several major projects in the country. Some of these are still ongoing either in the stages of design, start of construction or nearing completion of construction," says Geoff Pollitt, project manager of the company.

"With regards to the global financial crisis, Kuwait is experiencing similar construction constraints as elsewhere, although the majority of major projects under construction tend to be continuing as normal.

It is fair to assume that Kuwait is no different to other areas in the Gulf, where investors and developers are being cautious and seeking alternative sources of financing projects until the crisis is over or at least improved," says Pollitt.

He adds, "The construction industry has found it difficult in procuring construction materials and dealing with the escalating prices. This has severely affected project budgets. We are fortunate as most of our projects are proceeding as normal.Our projects in design will also carry on as normal."

Project Kuwait is a $41 billion project that will develop the northern oilfields and other offshoot projects which have fuelled an economic boom in the country.

The surge in demand for commercial land following the Iraq war was difficult to meet with existing supply. This helped push a new legislation to allow the building of taller buildings. The country had a maximum height for buildings of 20 storeys, but in 2005 new legislation allowed for 100-storey buildings.

This opportunity has encouraged a rush to develop a new skyline in Kuwait City and according to industry analysts, total expected supply coming up until 2009 is around 750,000m2.

Bubiyan Ready-Mix, a subsidiary of the Insha'a Holding company, was founded in 2005 with the objective of supplying wet-mix concrete materials observing the tremendous statewide progress in the building and construction field.

The company set up a ready-mix concrete factory operated through the most advanced technology, to supply all types and grades of ready-mix concrete materials.

Adnan Bergouthi, general manager and partner, Bubiyan Ready-Mix explains, "We are working on big projects like the Kuwait Business Town which comprises six towers. We are also working on many residential complexes and private villas in the Shuwaikh area."The company successfully obtained the International quality certificate (ISO) in a short time. "The Kuwait National Industry has also awarded us with a prestigious Kuwait Quality certificate," says Berghouthi.

Orient Real Estate Investment Company (OREIC) was established in 2000 under the name Fajr Al Balad General Trading and Contracting Company (W.L.L). From 2006 the company is operating under the name OREIC name with a capital of KD12 million.

Deputy manager Abdulaziz Al Dhubaib says, "Construction companies are very competitive in the Kuwait market and this brings out the best in each of us. The main problem in the market here is the cost of the material since it has changed four times its original price. Another issue is the time of the design and approvals for the engineering drawing."

According to Sustainable Business Services, GCC per capita consumption of cement is three times greater than the global average and Kuwait was ranked as the second greatest per capita consumer of cement in the world in 2005, after the UAE.

National Construction Real Estate Company is a leading ready-mix concrete supplier in the Kuwaiti market, operating under the trade name K-Mix.

Ibrahim Abu Daqar, deputy general manager NCRC K-mix says, the current economic crisis has "reduced liquidity thereby reducing production by 10 to 20%." Describing the company's future plans he says, "The company wishes to expand our organisation locally and internationally.

We have formed alliances with reputable internationally recognised project management offices to jointly manage projects requiring specialist support. In addition to procuring projects in the Gulf region, we have interests in procurement of projects in Syria and North Africa.

Upcoming projects in KuwaitThe Public Authority of Housing: will provide 69,000 new housing units by 2014, while the Ministry of Education has promised to build 340 new schools by the same period.

The Madinat Hareer (City of Silk) in Subiya, estimated to cost more than $86,000 million. Once completed, this project would include one of the world's tallest tower, and numerous housing, health, education, environmental, business, and tourist centres.

Capital Tower : A70-storey high rise multi use development comprising underground car park, five floors podium with retail and entertainment, 53 floors for offices and 16 typical floors for a five star 200 key hotel with health spa, conference facilities, 1500m2 ballroom and restaurants.

Symphony Complex: This project is multi use and includes office tower and a shopping mall. The complex also includes the first Missoni boutique hotel in the world. This exclusive hotel will include suites, executive rooms, a spa, conference and banqueting facilities. The project is due for completion in early 2009.

Julia'a Resort: This project is a coastal resort, located 60 km south of Kuwait city. The project comprises a five star hotel, island beach, a man-made canal with adjacent chalets, health club, restaurants, cinema and sports amenities. The project is designed and ready to start construction.

Khabary Future City: This mega urban development project is in the early stages of design and comprises high rise four and five star hotels, residential units, restaurants, cinemas, health clubs, mosques hospital and associated clinics, above and below ground car parking.

4 Fahad Al Salem Street: A high rise building in the heart of Kuwait city. This project is a 33-storey office building comprising, basement, ground floor, mezzanine, two mechanical floors, 26 office floors and three roof levels.

Other major projects include US$14bn Al-Zour refinery, US$3.3bn Failaka Island development, the US$2bn planned expansion of Kuwait International Airport (KIA) and a major road development programme including the construction of an eighth ring road.

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