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14 April 2024

Measures to help construction and property sectors proposed

Dr Ahmed Al Banna (SUPPLIED)

By Mohammed Elsidafy

A list of measures to help the construction and property sectors dealing with the challenges they face has been drawn up at forums organised by Dubai and Abu Dhabi's chambers of commerce and industry.

The delegates called for simpler procedures to transfer the sponsorship of a worker from one employer to another; scrapping of fees for transferring sponsorship; government intervention to provide essential liquidity for the sector; and cancellation of new legislation covering contractors as the laws that applied before 2007 were adequate.

But economist Dr Ahmed Al Banna said the chambers' recommendations would simply alleviate the financial burdens on companies and would not on their own restore the real estate sector to its former state.

"Some companies expanded greatly in a badly planned way during the boom," he added. "Following the crisis some companies have suffered from the cancellation or delay of some projects."

Al Banna underlined the importance of government intervention to provide the liquidity needed to revive the real estate sector, especially as banks are failing to provide finance. This was despite the fact that the government had allocated Dh120 billion to provide liquidity.

He said nobody could predict when the industry would get back on track as the losses suffered by the different sectors of the economy had not yet become clear. He expected the extent of the losses would become clear during April and May and at that point moves to support the vital sector could be introduced.

Ezzat Merei, CEO and partner at Ahmad bin Desmal Contracting Company, said lack of liquidity was the main factor that was affecting the sector. "The banks should again play their role and provide liquidity to developers, consultants and contractors," he added.

Salem Al Mousa, head of Al Mousa Group, said the contracting sector suffered from poor management despite its importance and the level of government expenditure on infrastructure over the past 40 years.

He said a new unified contract should be introduced to set out the responsibilities of each of the three parties involved in the construction process – the investor, developer and contractor.

"I have been calling in vain for a unified contract for 25 years. The time is right to bring it in to replace the British, Egyptian and Jordanian contracts that are used at present," he said.

Al Mousa said in the years of growth the sector had suffered from a lack of effective regulation. It depended on bank guarantee as contracting companies were allowed to execute projects much larger than their financial position would normally allow, regardless of the firm's capital. A company was required to secure only 10 per cent of the value of a contract to obtain the bank guarantee needed to implement the project, in contravention of Central Bank regulations.

"With the global financial crisis and the faltering state of many contracting companies it is time that these firms shouldered their responsibilities," he said. "They have to take their calls for the simpler transfer of labour, cancellation of sponsorship transfer fees and other demands to the government, which has never hesitated to provide the best environment for business and investment."

However, Saeed Khalfan Al Marri, head of Dubai Chamber's building and construction contracts group, said the time was not right to introduce a unified contract.