9 min read
Challenges Facing the UAE Construction Industry in 2024 and How to Address Them
Published 1 Feb 2024
Overall, the UAE construction market has seen a noticeable technological upturn, which may tell us that the difficulties are not serious. However, despite modern solutions, sometimes difficulties can arise outside technological progress.
In this article we shed light on what is worrying the UAE construction industry and our forecasting for 2024.
In this article we shed light on what is worrying the UAE construction industry and our forecasting for 2024.
Contents
Current Industry Challenges in the UAE
Here, we provide the most common challenges.
Intense Competition
The UAE construction market is characterized by intense competition among local companies and international players as well. Most likely, the number of players will continue to grow, and according to Mordor Intelligence, the industry is expected to remain strong in 2023 and 2024, with growth of 3.3% in real terms projected for 2023 and 3.9% for 2024.[?]
The competitiveness is also supported by government initiatives and the implementation of advanced projects such as smart cities, 3D printing in construction and other.[?][?]
However, according to Mordor Intelligence, with a few players holding a significant share, the market has an observable level of consolidation.[?]
Possible solution:
However, according to Mordor Intelligence, with a few players holding a significant share, the market has an observable level of consolidation.[?]
Possible solution:
Focus on building a strong reputation
Emphasize expertise
Deliver high-quality projects
Provide excellent customer service
Specialize in niche areas
Offer innovative construction solutions
Skilled Labor Shortage
High competition in the industry and a shortage of skilled candidates in various specializations create an untenable situation in the Middle East's construction industry. This situation arises from several factors, including an aging workforce, insufficient investment in apprenticeship programs, and competition from other sectors.
The demand for skills such as budget control/commercial management, tech proficiency, project management, and relationship building is particularly pronounced.
Possible solution:
The demand for skills such as budget control/commercial management, tech proficiency, project management, and relationship building is particularly pronounced.
Possible solution:
Invest in training and development programs
Collaborate with educational institutions
Promote construction-related education
Explore international recruitment strategies to attract new talents
Project Delays and Cost Overruns
Various factors contribute to project delays, including:
Inadequate planning
Unexpected site conditions
Delays in obtaining necessary approvals and permits
The complexity of regulatory processes and the intricate nature of construction projects in the region can result in prolonged timelines.
These delays have severe consequences for contractors in the UAE. They may be compelled to allocate additional resources, incurring extra costs for labor and materials. Furthermore, failing to meet project deadlines can lead to penalties and contractual consequences.
Possible solution:
These delays have severe consequences for contractors in the UAE. They may be compelled to allocate additional resources, incurring extra costs for labor and materials. Furthermore, failing to meet project deadlines can lead to penalties and contractual consequences.
Possible solution:
Conduct thorough project planning and risk assessment
Establish effective enterprise resource planning systems like First Bit ERP Contracting
Maintain open communication
Address issues during construction proactively
Regulatory and Legal Compliance
The UAE has a complex regulatory framework governing construction projects, with numerous laws and regulations at both federal and emirate levels. Several key challenges include:
Frequent Changes in Regulations. The regulatory environment in the UAE construction industry can undergo frequent changes, especially the taxation.
Strict Building Codes and Standards. The UAE enforces stringent building codes and standards to ensure the safety, quality, and sustainability of construction projects.
Permitting and Approval Processes. Obtaining necessary permits and approvals for construction projects involves navigating through bureaucratic procedures, causing a project's setbacks.
Environmental Regulations. Increasing emphasis on sustainability and environmental conservation in the UAE has led to stricter regulations related to construction projects' environmental impact.
Labor Law Regulations. Labor law comes into force in 2024, this heralds both the resolution of some difficulties, but may also portend new challenges in the legal sector.[?]
Possible solution:
Invest in legal expertise
Stay informed about regulatory changes
Establish robust internal processes
Maintain open communication with regulatory authorities
Sustainability and Green Building Practices
Balancing environmental goals with economic viability poses a significant hurdle.
The need for more sustainable materials and technologies, along with shifting traditional practices, demands industry-wide adaptation. Additionally, the integration of green building principles is hindered by the existing infrastructure and regulatory frameworks.
Possible solution:
The need for more sustainable materials and technologies, along with shifting traditional practices, demands industry-wide adaptation. Additionally, the integration of green building principles is hindered by the existing infrastructure and regulatory frameworks.
Possible solution:
Invest in research and development of sustainable practices
Promote awareness among the workforce
Collaborate with sustainability experts
Adopt internationally recognized green building certifications
Cultural and Language Differences
Cultural differences significantly affect communication in the UAE construction industry. The UAE's construction industry has a highly diverse cultural and ethnic mix in its workforce, with nearly 90% of the construction labor workforce consisting of non-UAE foreign nationals made up of 202 nationalities.[?] The high diversity of the workforce, with a mix of nationalities involved, can lead to conflicts in interpersonal communication, limiting the ability of construction organizations to cooperate effectively. This can result in serious problems, including decreased productivity and project failure if not managed properly.
Possible solution:
Possible solution:
Foster a multicultural work environment
Provide language and cultural training
Develop strong intercultural communication skills
Workers Day: ILO asks governments to prioritize social justice
Source: gazettengr.com
Source: gazettengr.com
Poor Procurement Strategy
Poor procurement strategy causes complex challenges in planning, risk management, monitoring supplies and as a result projects can face delays, work disruptions, overcost and other. The issue is global among countries, and the UAE is also among them.
Possible solution:
Possible solution:
Make assessment and analyze current state
Outline you strategy
Make deep market research
Implement digital tools
Read more about how to build a procurement strategy in construction
First Bit provides ERP software which will help you streamline your processes, enhance efficiency, and ensure success in every phase of your construction endeavors. With this solution you can clarify your objectives, set the strategy and monitor all the processes info in-one-click.
Construction Industry Trends Expected in 2024
Despite the considerable number of challenges, new trends continue to gain momentum in the UAE. Here, we will emphasize the most important ones.
Foreign Direct Investments in Construction
The UAE continues to be an attractive destination for foreign direct investment (FDI) in the construction sector. In 2022, the country achieved its highest FDI inflows in history, reaching AED 84 billion, representing a 10% growth from 2021.[?] The UAE's construction equipment market is also expected to grow at a CAGR of 6.20% from 2022-2029, indicating sustained investment in the construction industry.[?] The government's investment in public infrastructure further underscores the country's commitment to developing its construction sector and attracting foreign investment. These trends suggest a positive outlook for foreign investments in the UAE's construction industry in 2024.
Hospitalities Development
The tourism trends in the UAE for 2024 are expected to encompass a variety of aspects, including:
Growing demand for authentic Emirati cultural experiences
Increase in sustainable and eco-luxe resorts
Rise in sleep tourism, and a focus on culinary tourism
Furthermore, UAE residents are placing emphasis on sustainability, with a significant percentage willing to pay more for environmentally friendly travel options. The year 2024 is also anticipated to see a focus on trips centered around film and television, concerts, and restaurant tourism, reflecting a shift in travel patterns towards more specific and experiential offerings.
The UAE's vibrant hospitality sector is preparing for this anticipated rise in tourism, with plans to attract 40 million visitors by 2030 and an expansion of hotel rooms to 250,000.[?]
The UAE's vibrant hospitality sector is preparing for this anticipated rise in tourism, with plans to attract 40 million visitors by 2030 and an expansion of hotel rooms to 250,000.[?]
The market size of the UAE Hospitality Industry is expected to grow from USD 7371.2 million in 2023 to USD 9459.8 million by 2028, registering a CAGR of 5% during the forecast period.[?]
Green Construction
The green building tendency in the UAE is on the rise, driven by various factors and initiatives. The country has seen a significant increase in sustainable structures, with notable green projects in cities like Abu Dhabi and Dubai.
The UAE has implemented mandatory efficiency standards for new buildings, such as the Estidama rating in Abu Dhabi and green-building regulations in Dubai. In addition, the country has approved National Building Regulations and Standards aimed at reducing energy consumption in buildings by up to 25%.[?]
The UAE has implemented mandatory efficiency standards for new buildings, such as the Estidama rating in Abu Dhabi and green-building regulations in Dubai. In addition, the country has approved National Building Regulations and Standards aimed at reducing energy consumption in buildings by up to 25%.[?]
Digitalization and Automation
The UAE is at the forefront of embracing digitalization, automation, and innovative technologies in the construction industry. The country is leveraging robotics, automation, and artificial intelligence (AI) to revolutionize construction processes, enhance efficiency, and ensure worker safety. Key trends in this domain include:
The adoption of Building Information Modeling (BIM)
The use of drones for site surveying
The integration of AI to streamline construction processes
The UAE's construction sector is also experiencing a digital revolution, with a focus on automation, intelligent designs, and green technology solutions, presenting new business opportunities for investors.[?] These trends are not only set to redefine the industry's landscape but also unlock new opportunities for growth and sustainability, ultimately playing a pivotal role in the nation's economic growth and urban development.
Tips From First Bit
Challenges in the construction business are constant and there are no tools that can help you get rid of them permanently, but digital tools such as FirstBit ERP software will allow you mitigate risks, optimize workflows, and set the competitive mood for your project.
Project Costing
Project costing feature will simplify your data access, providing an organized list of project’s info. Here, you can manage your tasks and monitor complexion rate.
Project Graphs Interface
Besides, the software allows you to:
Upload BOQ for accurate project costing
Track project profitability, expenses, and desired outputs
Allocate material, labor costs, and overheads efficiently
Set up and control material budgets
Accounting and VAT
FirstBit ERP software allows you to monitor real-time project cash flow, analyzing project P&L, cost, and revenue structures.
Also, the program helps you compare current cash flow with a planned one.
Costing analysis
Detailed cash flow
In addition, with FirstBit ERP software you can:
Create VAT reports compliant with UAE FTA standards
Issue and track PDC checks
Conduct profitability analysis for each project
Procurement
Generate procurement requisitions directly from sites. View consolidated information on orders, transitions, and receipts in one screen.
Requisition
Under the requisition tab, you can:
Manage materials and inventory orders, purchases, transfers, and consumption.
Track and control material limits for efficient company management.
By integrating these FirstBit ERP features, construction companies can effectively address challenges, enhance competitiveness, manage labor shortages, control project costs, ensure regulations compliance, and streamline working processes all in one click.
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