The Dubai government is adopting a new strategy of delaying construction projects that are already under way, one leading developer tells MEED, as the impact of the credit crunch continues to hit the emirate's real estate sector.

The latest projects to be delayed are the One Zabeel project and the Meydan racecourse grandstand, both of which are being built by government-owned or government-backed developers. Contractors working on the schemes have had contracts terminated in recent weeks.

The move to shelve these schemes heralds a U-turn in the government's strategy. In November 2008, state-owned DP World told MEED that while projects in the planning stage would be delayed, projects that were under way would go ahead (7:11:08).

The estimated AED3bn ($817m) One Zabeel project was launched by the Investment Corporation of Dubai (ICD) in June 2008. Construction work on the project, which includes offices, residences, retail outlets and a five-star hotel, had already started but the contract for the enabling works with the local Dutch Foundations is now understood to have been cancelled.

"[The] One Zabeel [project] that was announced last year has been temporarily deferred as per the new strategy devised by the government of Dubai to extend the timelines of projects that are yet to commence," says a spokesman for One Zabeel.

"Our decision is in line with these directives and reflects a proactive step to balance liquidity in the market and enable contracting firms to reallocate their resources to ongoing projects.

Towards this end, relevant contracts have been temporarily put on hold."

It is unclear how the government's strategy of delaying projects will benefit contractors, even if it means they can reallocate resources, as many other projects are also being cancelled.

At least three contractors submitted bids for One Zabeel in August 2008. However, one of the bidders, the local Al-Shafar General Contracting, was forced to lay off up to 1,000 staff in December 2008 because of projects being put on hold, cancelled or delayed.

The project is now expected to be completed by 2012, at least a year later than previously expected. If it is to meet the new deadline, an award must be made by the end of 2009. "As per the new project timeline for One Zabeel, the project...is expected to be completed in 2012," says the spokesman.

The project is located opposite the World Trade Centre in Dubai and involves the construction of three interconnected towers. Unlike One Zabeel, the Meydan racecourse grandstand project is well advanced and the structure is largely complete. However, it has also been put on hold.

The joint venture between the local Arabtec Construction and Malaysia's WCT has stopped work on the AED4.6bn grandstand at Nad al-Sheba racecourse after the contract was cancelled by the client, Meydan, on 6 January.

The 1-kilometre-long grandstand was due to be completed in late 2009, in time for the Dubai World Cup.