Drop in steel prices in wake of crisis decreases construction costs by 30 pct 
UAE - 2009 February 2  

Construction costs have dropped in the UAE by an average of a third this year compared to the last quarter of 2008, it was reported on Monday.

The 30 percent fall, which amounts to between 50 and 100 dirhams per square foot, is strongly linked to the drop in steel price and underpinned by the fall in the value of the Euro, according to industry experts.

Prices of other materials have also fallen with aluminium, wood and glass and diesel seeing prices cut by between 15 and 45 percent, according to UAE daily Emirates Business.

“It is fair to say that construction execution charges or fees have decreased between 25 per cent to 30 per cent in comparison to the last quarter of 2008," said Faris Saeed, general manager of Diamond Developers.

"Obviously, there has been a slowdown and demand has reduced. But the steep fall in steel prices has had a major role to play in the fall in construction cost,” added Dawood Samy Khorshed, managing director at Master Civil Constructions.

The exact percentage of cost decline was hard to pinpoint because it varies in association with the type of building, size, material and location, Saeed said.

In Dubai and Abu Dhabi, construction cost currently range from between 400 dirhams to 900 dirhams, depending on the location of residential buildings.

"The bigger projects will incur higher construction execution charges compared to the smaller projects,” Saeed said

Meanwhile, Marwan Haloui, head of the technology division at DEC, said falling oil prices was the root cause of the cost cuts, as it was the main driver behind the reduction in steel, copper and cost of transportation prices.

He went on to predict that construction costs would fall by another 10 to 15 percent this year.

"The cost is expected to reduce even further and could come down by another 10 per cent to 15 per cent. Several factors including the steep demand of the prices of steel and cement have contributed to the situation,” he said.

Source: Arabian Business


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