Still Building

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Sharjah's construction industry has managed to work its way through the global financial crisis, avoiding the slump that other regional economies have witnessed.



Although some projects have been delayed and a few others cancelled, overall the market is standing strong. The $4.9bn Al Nujoom Islands development undertaken by Al Hanoo Holding, which will see the construction of 10 islands and ultimately house up to 40,000 people, is well on track to meet its completion date of 2010, while a series of state-sponsored projects are also set to meet their deadlines.



The government's commitment to support the development of a diverse economy, and in particular the industrial segment, is one of the foundation stones of the sector.



As the main centre for industrial production in the UAE, Sharjah has worked hard to attract manufacturing firms to its shores, while encouraging local producers. One of the key elements in this programme is to provide the infrastructure needed to maintain industrial growth, which in turn has fostered the domestic construction sector.



Officials have said that, despite the global economic crisis, work on all major infrastructure construction projects, valued at some $400m and including new roads and a sewerage system for Sharjah city, were running on schedule and to budget.



Indeed, the downturn of the global and regional economies has brought some benefits to Sharjah's construction sector, with prices of key materials and freighting costs falling sharply. Since April, prices for domestically produced cement have fallen by around 13%, while the drop for imported cement is close to 20%.



The plunge in the cost of steel has been even more steep, with prices down by as much as 50%. Though many contractors have been forced to lower their margins in order to secure work, new orders for steel and other materials are on the increase.



According to Saif Mohammed Al Midfa, the director-general of Expo Centre Sharjah, which hosts the annual metal-manufacturing and steel-fabrication industry exposition SteelFab, there are definite signs the building trade is picking up.



"The very worst of supply cuts and de-stocking measures appear to be over as inventories are being used up by continuing infrastructure projects. These projects – such as infrastructure, oil and gas, and construction – are now expected to generate demand for metal-working, metal-manufacturing and steel-fabrication equipment and products," Midfa said in late June.



Materials costs are expected to begin edging upwards as soon as freight costs start to rise again, having dipped due to lower fuel prices and transporters slashing tariffs in response to falling demand in the earlier part of this year.



Sharjah and its construction sector have also benefitted from the emirate's close proximity to Dubai, with many residents living in Sharjah but commuting to the neighbouring city for work. With rental costs in Sharjah up to 30% lower than those in Dubai, the emirate has become something of a bedroom suburb, increasing demand for housing and prompting a wave of residential developments and state-sponsored infrastructure projects.



Though rental costs in Dubai have fallen in the past six months, there has not been a mass exodus to the emirate, according to Rajesh Chandrasekharan, chief operating officer of real estate portal Gowealthy.com.



"The low cost of living, ever-improving amenities and the easing of traffic jams have prompted many expatriate families to stay put in the emirate, despite declining rents in neighbouring Dubai," he said in late May.



This is good news for the construction sector, which will hope the demand for lower-cost housing will sustain more building activity.



Sharjah's expanding tourism sector is also contributing to the construction industry's growth. According to the SCCI, a further 4000 hotel rooms are expected to be added to the emirate's accommodation stocks by 2011, a 50% increase on present levels. With arrival numbers climbing by around 11% a year and reaching 1.5m in 2008, the sustained demand in the tourism trade will impact directly and favourably on the building sector.



With a focus on demand rather than speculation, Sharjah's construction has been better placed to weather the recent economic downturn and, ultimately, to take advantage of the expected upswing.

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