Echoes of past: Real estate faces cost surge

ANIS SAJAN, Vice Chairman of Danube Group, draws parallels between the current market and previous boom cycles, warning of potential steel shortages and urging developers to prepare for escalating costs in the construction industry.

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THE UAE's real estate sector is booming, but a hidden threat looms and developers must brace themselves for a significant challenge: building material prices in the UAE are set to skyrocket, with concrete and other key materials becoming increasingly expensive.

Developers, driven by the urgency to complete projects on time, are left with no choice but to secure materials at higher costs, adding pressure to project budgets.

The strong demand for real estate and infrastructure development is reshaping the supply chain dynamics, with suppliers and contractors gaining the upper hand in negotiations.

Dubai's real estate market continues to experience unprecedented growth, with off-plan transactions now accounting for 63 per cent of all property sales in 2024, up from 54 per cent in 2023, according to a recent report. The total residential sales surged by 40.3 per cent year-on-year to 170,992 units – more than five times the number of transactions recorded in 2020. This sharp increase highlights strong investor confidence and a rising demand for new developments.

ROLE OF CONCRETE PRODUCERS, CONTRACTORS

As developers rush to complete projects on time, the demand for skilled and reliable contractors has skyrocketed. Contractors, in turn, depend heavily on building materials to deliver projects efficiently. Among these, concrete remains the most crucial component, and its supply dynamics have shifted dramatically.