The Abu Dhabi Housing Authority has awarded Aldar Properties a contract to build nearly 1,000 villas in Al Falah as part of the government's infrastructure boost.
Under the new contract, Aldar will build 996 four and five-bedroom villas in the emerging 12.5 million square foot Al Falah district to the east of Abu Dhabi International Airport.
"In terms of the real estate market in Abu Dhabi we have seen some positive momentum in the first quarter this year compared to the last quarter of 2012," said Ali Eid AlMheiri, the chairman of Aldar and the proposed vice chairman of the new Aldar Sorouh company set to be created when the developer merges with rival Sorouh.
"We have seen a lot of demand for our residential products on Al Raha Beach and a lot of demand in our retail offering," he said.
The new homes come as an extension to the 4,857 homes Aldar has built at Al Falah, of which 2,079 have been handed over to residents.
Government housing projects have in recent years become an increasingly important source of revenue to both Aldar and its future partner Sorouh as the market for off-plan private sales has dried up in the capital.
Last year Aldar made Dh200m (US$54.4m) in net profits from its National Housing Programme work - out of a total net profit of Dh1.3 billion - and said it expected to make about the same amount from the sector this year.
Mr AlMheiri said that Aldar had sold 125 homes at its Raha Beach scheme during the first three months of the year - more than it managed for all of last yearwhen, according to company accounts, it made just 102 private sales.
He added that Aldar expected prices to grow by between 2 and 5 per cent over the coming year.
When asked if he was concerned about the thousands of new flats set to come onto the Abu Dhabi housing market over the coming year, Mr AlMheiri said; "I will be happy if I see prices stabilise because of all the new stock that is coming into the market. That's why we're not building any new apartment projects right now. Prices in Dubai might be going up. Prices in Abu Dhabi are stabilising. So maybe it makes more economic sense for [investors] to go back to Abu Dhabi."