Quote:
Originally Posted by Investoman_uae
Lets talk about cost of construction. Anyone here a Quantity Surveyor? Or Project Manager?
I just need to hear their views about whats goin on with contractors in this market.
Alot of contractors are very worried, I was just talking to a client of mine and also a bank manager about how there is an element of fear.
When a contractor agrees with a developer a price per square foot, now what they do, is they always put a clause in the contract to say that if the prices rise above 25% (example) they will share this loss with the developer.
The contractor cannot pay the rise in construction prices off his pockets alone during the term of construction.
Developers like Damac are facing a huge problem with this issue. They are not making much profit, cos the cost keep getting closer to the selling price, especially when they promised to provide such flashin futuristic towers. Its gona cost them alot, and I am not sure if they can deliver what they promised they will deliver.
If they cant, then they will delay it until they can afford it or get finance help from the banks.
Just wanted to share this concern in the market right now.
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I understand that this must be a major concern for many developers, but like investors they gambled. Many developers sold their units years ago, working on the principle that they could bank the money brought in by stage payments and make more money by delaying the projects. This has now gone spectacularly wrong as inflation, especially in construction costs, has risen phenomenally.
The reputable developers like Cayan, start their projects within a few months of first sales and accordingly are able to manage their finances better. Other developers like Damac started selling Ocean Heights back in early 2005 and have only just started building. The question is why?
Again, the Cayan project Infinity went spectacularly wrong when the marina wall collapsed yet Cayan have delayed payments and put back the date of completion rather than just not telling people when the development is going to finish, like so many developers in Dubai.
The rising building costs are a real cause for concern - especially for developers who have sold all the units years before completion. I just hope that many people do not come to lose their money as some developers fall by the wayside.