Construction firms in Dubai struggle to get payments from some developers as major projects stall.
Builders struggle to get payments
Construction firms in Dubai are struggling to get payments from some developers as major projects stall and further doubt is cast over the feasibility of others. Meraas Development, a company controlled by the Dubai government, became the latest to announce a review of a major development, the Dh350 billion (US$95.3bn) Jumeirah Gardens City project, in light of the global economic downturn.
It followed an announcement by Nakheel on Sunday that it was delaying work on projects including the Trump International Tower and Hotel on Palm Jumeirah, Waterfront, Palm Jebel Ali and The Universe. The Jumeirah Gardens City project, which will raze the district of Satwa in Dubai to make way for a number of tall towers, a park and a canal system, was only launched at Dubai's Cityscape in October.
"We are simply reviewing our business strategy, as well as the phasing and rollout of the Jumeirah Gardens project, to make sure the development proceeds in the most opportune way to meet changing investor needs," Meraas said. The company said there would be more clarity on the project by the beginning of next year. Contractors including Dutco Balfour Beatty, Samsung Engineering and Construction, Al Habtoor Leighton Group and Murray & Roberts are among those working on Nakheel's projects.
"We're still reviewing things at the moment to see where we stand," said Grahame McCaig, the general manager of Dutco Balfour Beatty. "Getting payment is worse than usual; we've really struggled to get paid by a lot of people. At the moment, the cash issue is far bigger than the workload one." Al Habtoor Leighton Group, a joint venture between Australia's Leighton International and Dubai's Al Habtoor Engineering, had been working on the Dh2.9bn contract to build the Trump International Hotel and Tower in partnership with Murray & Roberts, a South African construction firm, since July.
The company is trying to recover costs now that the project has been suspended, but said last week's Dh8.85bn contract win to build Dubai Pearl would help to cushion the blow. It is not yet known when work on Trump Tower will resume. "This is something we're in discussions about," said Chris Gordon, the general manager of corporate affairs and strategy at Leighton International. "We've been fortunate in that we've secured work on other projects, so that should cover things, and we can move staff on to those."
Mr McCaig added that developers were legally obliged to reimburse contractors for costs incurred, should a contract be cancelled. "They either cover the costs incurred to date, or agree [on] a reasonable cost. It's an important part of the termination process." While Samsung Engineering & Construction, a South Korean firm, has not had any of its deals with Nakheel stalled, the company has been experiencing delays in payments on certain jobs.
"We're getting delays in payment by about two to three weeks now," said Beejay Kim, a senior manager with Samsung Engineering, which is also building Emaar's Burj Dubai with Arabtec and BESIX Group. Samsung Engineering is one of five companies that have been invited to bid for the construction of the kilometre-high tower, which will form part of the Dh140bn Nakheel Harbour & Tower development in Dubai, also launched at Cityscape in October. Groundwork started earlier this year and is among Nakheel's projects that are expected to go ahead. email@example.com