Raw material costs to surge 20%

INFLATION BLUES  New projects are likely to bear the brunt of increasing construction costs (AFP)

Construction costs across the UAE are likely to soar by as much as a fifth in the coming year due to rising inflation, growing cost of raw materials and increasing salaries, according to new research.

International real estate and construction consultancy EC Harris said inflation in the industry had slowed – compared to a 25 per cent rise in 2006 – but input prices continue to rise. Its figures showed raw material costs alone would be approximately 19 per cent higher in the coming year.

Experts said overheads will also rise due to the success of an amnesty for illegal workers, which saw more than 250,000 people leaving the country. This in turn has led to manpower supply issues and rising salaries among unskilled workforce.

Yesterday, Imad Al Jamal, vice-president of the higher technical consultative committee at the UAE Contractors’ Association, was among the first to seek official intervention to stabilise prices.

“One of the main reasons [for price rises] is inflation,” he said. “There are a lot of indirect taxes that are being levied. There is a shortage of labour and yet the initial cost of employing an expatriate worker is between Dh6,000 and Dh8,000.”

He said the increase in construction costs was going to be more evident on new projects rather than those where contracts have already been awarded.

In the past 12 months the price of raw materials such as cement, concrete and rebar (steel reinforcing rod) has increased by 15 to 20 per cent, and steel beams by 45 per cent.

Arabtec, the largest UAE construction firm by market value, last month raised the salaries of its more than 30,000 employees. A senior official of Arabtec Construction said the salary raise will increase the company’s labour costs by one per cent.