Customs waiver to lower realty inflation

(PATRICK CASTILLO)   

 

 

The government’s move to exempt cement and steel from custom fees is likely to lower the inflationary pressure that the construction industry is currently facing, say real estate developers and contractors.

 

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and  Prime Minister of the UAE and Ruler of Dubai, yesterday issued a decree to exempt cement and steel from customs duties until further notice, and to allow all contractors and developers to import these two materials with no restrictions.

 

The decree aims to control the rising prices of construction supplies, Dubai Customs said in a press statement. “The move will steady raw materials prices that had being rising endlessly,” Imad Al Jamal, vice-president of the UAE Contractors Association, told Emirates Business. The decision is a wise one and will stabilise the real estate market, he added.

 

“It is certainly a good move and will alleviate the inflation that was hurting us,” said Oger Dubai General Manager Mohamad Fakhouri. “Until now we were buying locally, but the move will make us think. But it will certainly help us mitigate our losses on projects.”

 

According to Qatar-based Gulf Organisation for Industrial Consulting (GOIC), the domestic shortage in production led to skyrocketing cement prices, as one tonne of bagged cement reached between Dh350 and Dh380 in 2005, up from comparable figures of Dh320 in 2004, and Dh190 in 2003.

 

The Dubai Government took a similar approach two years back, real estate experts said, that resulted in control of prices of raw material. Industry sources said the customs duty on cement and steel supplies was about five per cent.

 

Emirates Business had reported earlier that UAE ready-mix concrete supply companies were struggling with a huge backlog of orders from contractors due to shortage of cement in the country. The shortage – triggered by the high cost and lack of cement – has forced some ready-mix companies to cease production.

 

“The inflationary pressure on the construction sector has been phenomenal and it was high time that something had to be done,” said ETA Star Executive Director Abid A Junaid.

 

However, he added importing cement from other countries could not be a viable option for companies. Besides there being no proper storage facilities in the country, demand for cement has been growing in the international market.

 

“The prices of cement have to be regulated within the country,” Junaid said.

 

The average inflation rate for construction in Dubai is increasing at a rapid speed of around one-and-a-half per cent a month, Dr Andy Davids, technical director of Structures, Hyder Consulting Middle East, recently said.

 

The cement grinding capacity in the UAE is likely to surge by 51 per cent in 2008, settling at 35.4 million tonne per annum, prior to leaping a further 14 per cent in 2009 to record 40.5 million tonnes per annum. Demand for iron and steel products are estimated to surge to 19.7 million tonnes by 2008 from 15 million tonnes in 2005, according to GOIC.ÿ

 
 
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