A detailed analysis of the construction industry of UAE, its growth opportunities, current trends, SWOT and PESTLE analysis followed by business proposal and conclusion.

1. BUSINESS PROPOSAL FOR
CONSTRUCTION INDUSTRY OF UAE
SUBMITTED TO SUBMITTED BY
Dr. Jagdish Shettigar Krati Jain
Dr. MonikaJain 19DM096
Section-A

2. TABLE OF CONTENTS
1. Introduction
2. Main trends in the construction market
3. Major growth drivers
4. Funding and investment
5. Why doing business in the UAE
6. Competitive landscape
7. Regulatory trends
8. Threats
9. SWOT Analysis
10.PEST Analysis
11.Business plan
12.Financial projections
13.Conclusion
14.References

3. CONSTRUCTION INDUSTRY
INTRODUCTION
It is one of the most flourishing and growing industries across the globe. This
industry is primarily concerned with the designing and construction of real
estate properties. It also includes the repair of already existing buildings and
other changes or modifications in the same are also included under this Industry.
The construction market of UAE covers the emerging construction projects in
diverse sectors, like commercial construction, industrial construction,
residential construction, infrastructure (transportation construction), and
energy and utility construction.
The construction industry in UAE faced a slowdown in 2008 due to the global
financial crisis but it attained its growth momentum in the year 2017. This was
assisted by both private and public sector investment in commercial, transport,
residential and energy infrastructure projects, which led to an upsurge in
demand for the construction industry in UAE. It is anticipated that the
construction industry will continue to expand over the period from 2019 to
2024, which will be driven by investment in projects such as transport, energy
and social infrastructure development under several programs like Strategic Plan
2021, Dubai Tourism Strategy 2020, and National Strategy for Higher Education
2030, the Energy Strategy 2050. The forthcoming World Expo 2020, which is to
be hosted by Dubai, is also expected to be a major growth driver for this industry.
It is one of the most important sectors for the UAE economy. The UAE leads the
Gulf Cooperation Council (GCC) in terms of value of awarded contracts for the
year 2019 as it has contracts worth $48.4 billion, followed by Saudi Arabia. When
it comes to the contribution of construction sector to national GDP, the UAE
surpasses other countries in the region with the value reaching $33.2 billion in
2018. It is estimated that the UAE construction industry will register a CAGR of
5.5% in the period from 2019 to 2024 and the GDP of this sector is likely to grow
at a rate of 4.9%.

4. Industry leaders of UAE are optimistic about the growth projections in the
construction sector for the forthcoming years. The leaders will have to execute a
three-pronged approach in order to rationalize governance and controls,
optimize human performance and innovate with technology so as to maintain
this trend and become future-ready.

5. The construction industry will have an advantage from new construction
projects and also from further changes or improvement of the already existing
projects.
Main Trends in the construction market:
A substantial part of the construction sector in the UAE is the investment in
infrastructure. Following are the number of active projects in different sectors:
SECTOR ACTIVE PROJECTS VALUE(USD)
Transport 187 32.4 billion
Utilities industry 203 24.3 billion
Industrial 377 5.8 billion
Oil and gas 12 4.6 billion
Development of smart cities is another trend that is impacting the construction
sector of UAE. This idea will be executed across the UAE with a major emphasis
on Dubai. The UAE government plans to make Dubai one of the smartest cities by
2021 which will incorporate everything from to free, pan-city high-speed Wi-Fi
to smart transportation solutions which will in turn help increase Dubai’s
reputation and investment capabilities.
Because of diversification of the economy, the emirates focus has been on to
develop service industries of higher value. Expo 2020 held in Dubai will also
create a short term boom for the commercial infrastructure because of the
construction activity associated with it. And hence in the coming years, for UAE,
the clear outperformer within the construction industry will be commercial
infrastructure.
The Dubai 3D Printing Strategy was launched in April 2016 with the aim that by
2030, 25% of the total buildings will be based on this technology. This initiative
will enhance the status of UAE and Dubai as the chief centre of 3D Printing
Technology. The three main areas of focus will be- construction, consumer and
medical products. However, the major emphasis will be on the construction
sector with Dubai Holding as the first project to be undertaken.
Major growth drivers:
Population growth (with rise in population the demand for affordable housing
increases) and rising tourism (because of hosting of mega events) will act as the
main drivers of growth for this industry although it is challenged by a drop in oil
prices, the reason being that UAE has been impacted less by the fall in oil prices
when compared to other GCC countries. It is expected that an increase in
population will lead to an increase in demand in residential, retail, commercial,
healthcare, hospitality, and infrastructure sectors in the UAE.

6. Funding and investment:
The following are the various means of funding in the UAE construction industry-
In case of international projects, the size of the project determines the type of
financing.
WHY DOING BUSINESS IN THE UAE?
Following are the features which make the UAE an ideal target market:
1. Strategic location- It’s location between Asia, Europe and Africa (on the
Southern Silk Road) and its association and proximity with the world’s
rapidly developing economies provide an advantage to UAE where it can
benefit from the ample trading opportunities available . For the Indians
Emirates is a way to gain access to the world and likewise China sees
Dubai as a hub for Africa.
2. Free Zones- UAE has free zones which offers economic incentives such as
exception from corporate-taxes, import-export duties, and full foreign-
ownership. Special economic zones along with free zones provide a tax-
free business environment.
3. Ease of Doing Business- The UAE leads the Middle East region on this
parameter. In 2019, UAE was ranked 16th in the Ease of Doing Business
ranking.
4. Solid infrastructure- Infrastructure combined with telecommunications
and internet access make the UAE as one of the biggest international hubs.

7. The government also invests consistently for the development of
infrastructure.
5. Increase in Foreign Direct Investment- In the Middle East region UAE is
one of the leading countries attracting huge amounts of Foreign Direct
Investments.
6. Strong financial reserves- The UAE has and maintains its financial reserves
which attracts investments and it’s durable banking sector also makes UAE
as a safe place for investment.
7. Knowledge economy- The UAE’s rapid development across all areas from
development of software to biotechnology, infrastructure development,
policies facilitating investment along with political stability makes it one of
the most attractive and important destination in the World for doing
business.
8. Multinational human resources- The presence of varied human resource
skills is also one thing which the investors benefit from.
9. Efficient government services- The government policies lay huge emphasis
on the private sector. New policies have been introduced from time to time
with focus on reducing the tariff barriers and also the legal barriers which
act as a hurdle. Today UAE is certainly one of the world’s most dynamic
economies and an ideal place doing business.
10.Economy diversification policy- The diversification policy has helped
transform key sectors like trade, tourism, transport and many more.
11.Dealing with construction permits in UAE- This includes the procedure,
amount and time required to construct a building and also determines the
strength of the building in terms of quality control index.

8. Competitive landscape:
The presence of key international players makes the construction sector of UAE
very much competitive. Also it is expected that the construction industry will
provide many growth opportunities especially during the coming years, which
will increase the competition further in the construction sector.
The construction market is fragmented and constitutes many domestic and
foreign players. Competition in the market is strong as small companies as well
as large players offer similar services. The construction costs offered by UAE are
one of the lowest because of intense competition and low wages. Construction
companies are primarily located in Dubai and Abu Dhabi, as construction activity
is mainly carried out in these emirates.
Name of a few top construction companies:
1. ALEC Engineering and Contracting
2. CSCEC Middle East LLC
3. Arabtec Group
4. ASGC Construction
5. TAV Group
6. Consolidated Contractors Company (CCC)
7. Arabian Construction Company
8. Khansaheb Civil Engineering
9. Six Construct
10.BAM International
The factor that makes this industry stable is that UAE is affected less by the price
fluctuations as compared to the other countries in the region.
While UAE clearly remains the leader when we talk about the GCC construction
industry followed by Saudi Arabia with the gap between the two narrowed down.

9. It is expected that the project awards for Saudi Arabia will increase from US$31
million (in 2018) to US$40 million (in 2019).

10. Regulatory Trends:
The regulatory modifications that are being introduced (in UAE) across the
construction sector will have a short term as well as a long term impact. These
trends will eventually improve the sustainability as well as the relations and
association between the designers, stakeholders and contractors. The coming up
of new laws coupled with the innovation in the digital field (such as block chain
which will enable improved workflow and provide instant updates) will help
simplify the documentation process and stimulate transparency and
collaboration across the sector. But increased regulation leads to increase in
costs that have to be borne by the industry which is generally difficult and not
feasible for the smaller firms.
The UAE’s Construction Opportunity
Over the past 10 years the UAE has invested more than $438 billion dollars for
nearly 6000 projects and these projects have transformed the UAE. But the
falling oil prices since 2014 has dramatically changed the economics of the
region. Projects spending has slowed right down. It has become harder to find
new project opportunities which means that the construction companies are
facing new challenges. According to contractors in the UAE say that cash flow is
their biggest concern, but with $820 billion worth of projects planned in the UAE
the government needs to roll out a new approach to construction. New forms of
contract can remove old problems. Design and Build contracts can reduce
crashes and speed up projects. New financing models will enable projects to go
ahead, closer partnerships are needed between public and private sectors. The
value of PPP projects planned across the country have increased, alternative
sources of financing are emerging. Over the next four years the UAE will be the
most dynamic construction market in the region.
Despite the fall in oil prices, many opportunities are still present for the
construction industry of UAE because of the coming up of a large number of
infrastructure projects leading up to Dubai Expo 2020, 2021 National Agenda
and Abu Dhabi Vision 2030.
Threats:
1. Effect from changing climate conditions-
In UAE the climatic conditions are particularly harsh in comparison to other
countries. The climate conditions of the region comprise of high temperatures
and humidity along with occasional sand storms. Such climatic conditions make
construction task difficult and also pose a threat to the workers. In the coming
tears, the increased humidity and heat is said to affect the health and also cause a
decrease in productivity in the construction sector. The UAE Climate Change Risk
and Resilience Report describes the global impact of heat on the workplace

11. which would lead to productivity loses of nearly USD 2 tn by 2030.
Other environmental factors that pose a threat to the construction industry are-
 Sea level rise risk: The idea of coastal urbanisation is growing rapidly in
the UAE, thus making it vulnerable to the risk of rise in sea level. Several
prominent hotels and resorts are presently under construction across the
coastal belt region.
 Greenhouse gas emissions: Increase in the level of greenhouse gases
(GHG) has also become a challenge. Most of the buildings are not efficient
and are not suited to cope up with the arid climatic conditions present in
the region. The designs are such that they lay more emphasis on cost and
aesthetics rather than environment. Hence the demand for water and
electricity that the structures generate is much more higher which act as
source of emission of greenhouse gases.
2. Growing competition- In UAE several firms are present in the sector
which makes the industry very much competitive. Many international
companies are keen on targeting the construction market because of its
high growth potential and low risk factor but it is ultimately the local
players who continue t dominate the region. An increase in costs could be
one of the outcomes of the increasing competition. To survive amidst such
stiff competition it is necessary for the companies innovate their products
and services from time to time.
3. Cash flow constraints- The common problem that the contractors face is
the delay in payments as since cash is important for the functioning of any
firm, this problem affects the sector as a whole.
A survey was conducted to determine some of the challenges faced by the
industry and the results showed late payments as one of the most common
issues.

12. 4. Uncertainity over oil prices- Fluctuation in oil prices affect the
government spending in GCC countries including UAE. The fall in oil prices
result in a decrease in government expenditure thus impacting the overall
economy and this uncertainity affects the construction industry of the
country as well.
SWOT ANALYSIS:
Strengths-
 International business and investment from overseas
 Growing non-oil sector
 Tax free business environment
 Technology capability
 A highly competent and experienced team
Weakness-
 New company
 Highly competitive environment
 Disparities between Emirates
 Lack of financial resources
Opportunities-
 Progress towards diversification
 Opening of new international markets
 Transfer of technical expertise
Threats-
 Competition from other emerging markets in the middle-east
 Threats from natural disasters and government policies

13. PEST Analysis:
a) Political factors-
 PPP Framework- Public Private Partnership is an initiative undertaken by
the UAE government wherein both the parties get into an
agreement/contract for the overall infrastructure development of a
country.
 Sub-contacting- In the construction sector, the government of UAE has
authorized sub-contracting and it is now a key component of almost all the
modern construction projects.
b) Economic factors-
 Growing FDI- FDI in the construction sector has been increasing and it is
expected to grow in the coming years. This is because of some major
changes like the procedure to obtain construction permits has been
simplified, the lead time to have an electricity connection has also been
reduced etc.
c) Social factors-
 Growing population- The population of UAE is expected to increase of
which the urban population is a major part. Urbanisation will lead to
increased demand for housing, hospitals, infrastructure etc. which will
provide a boost to the construction sector.
d) Technological factors-
 Increasing innovations- The UAE is amongst the most attractive
construction markets and has adopted systems like Building Information
Modelling (BIM) and 4D digital models in order to increase quality and
productivity.
 3D Printing- This technology has completely revolutionized the
construction industry and has also reduced the costs and the time required
for completion of a project.
Business Plan: The overall idea is to set up a construction industry in UAE and
within that the major focus would be on infrastructure development as this
subsector has immense growth opportunities in the years to come owing to the
Expo 2020 hosted by Dubai. It is one of the growing industries which is why it
will be an ideal target business for us to set up.
Target market- Dubai will be the major area of focus because the development
here is expected to be robust because of Expo 2020 which will act as a major
driving force for the industry. The creation of smart cities is another factor
impacting the industry which will be implemented with a major emphasis on
Dubai since the UAE government plans to make Dubai the world’s smartest city
by 2021.

14. Reasons to target the infrastructure market within the construction
industry:
Our business plan will focus on the infrastructure sector (especially of Dubai) of
the construction industry of UAE as it is assumed that it will be the fastest
growing sector within the industry in the years to come. Also it is the second
largest sub-sector in terms of revenue generation and comes after the residential
sub-sector.
The objective of the 2021 National Agenda for the infrastructure sub-sector is to
make the Emirate the first country globally in terms of quality of seaports,
airports, and roads. Investment worth US$50 billion is being made for new
projects as well as for the expansion of older projects by the UAE airports for the
next 15 years. Notable improvements are also seen in the maritime transport
sector in terms of seaports and construction of ships and dry docks. Development
projects for the ports are also undertaken from time to time in order to cope up
with the economic growth.
Financial Projections:
Costs in AED
Total fee for incorporating the business 5000
Cost for permits, licence and liability
insurance 7000
Cost for acquiring a suitable facility 1835000
Cost for acquiring construction equipment 734000
Additional expenditure 18350
Working capital 11010000
CONCLUSION:
 As infrastructure development is expected to take place at a robust rate in
UAE (and Dubai in particular), hence we are focusing in the right direction.
 As economy of UAE is also increasing so the demand for proper housing,
and infrastructure, healthcare and hospitality industries is also expected to
increase in the years to come.
 Our objective is to set up a construction company in the UAE comprising of
people with diverse skills and abilities and an experienced management
team.

15. REFERENCES:
1. https://www.government.ae/en/about-the-uae/economy
2. https://www.khaleejtimes.com/business/real-estate/why-construction-industry-is-booming-
in-dubai
3. https://www.statista.com/map/asia/united-arab-emirates/construction
4. https://www.meed.com/regulatory-trends-driving-regional-construction-sector/
5. https://www.mideast-capital.com/the-uae