DUBAI: One of Saudi Arabia’s biggest urban development projects is paying as much as 15 per cent less towards construction costs as cuts in state spending reduce pressure on supplies of building materials and labour in the kingdom.
Fahd Al Rasheed, group chief executive of Emaar the Economic City (EEC), said construction firms’ pricing had become more competitive, leading to a drop in costs of 10pc to 15pc per square metre.
“Local production levels for all building materials – as well as imports – were set for a time of boom in contracting,” which has caused oversupply, Al Rasheed said.
“Also, now that the number of contracts being issued by the government is much lower, contractor capacity has also improved, leading to contractors lowering their margins to compete for new work.”
EEC, a consortium affiliated with Dubai’s Emaar Properties Group, is developing King Abdullah Economic City, a massive business, industrial and residential zone on the Red Sea coast near Jeddah, with backing from the government.
This year, some real estate developers in Saudi Arabia have had difficulty acquiring permits to sell homes before they are built. This practice, known as off-plan sales, can make development easier by allowing companies to use the proceeds of sales to fund construction.
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