Nakheel to award $2bn of construction contracts

17 December 2014

Developer will focus on building assets that produce recurring revenues

Dubai-based developer Nakheel plans to award more than AED7bn ($1.9bn) of construction contracts during 2015 as it continues to build new revenue-generating assets.

“We will award more than AED7bn next year,” Ali Rashid Lootah, chairman of Nakheel, told MEED on 16 December. “Contractors will be busy. We have plenty of work. We are one of the biggest customers for contractors.”

During the fourth quarter of 2014, Nakheel has tender a series of new projects including the Palm Gateway, the West Beach Club, the Palm Tower, and various packages on the Deira Island development. In addition to the contracts that have already been tendered, Nakheel plans to tender other new project soon. “Nad al-Sheba will be out [to tender] very soon,” says Lootah. “It is 1,500 villas, it will be [split into] about four packages.”

The Nad al-Sheba project was launched in July. It will comprise villas that Nakheel will own and lease as part of the developer’s strategy to treble its revenues from its leasing, hospitality and retail properties.

The drive to build assets that Nakheel will retain ownership of comes after a three-year period of strong sales that allowed the developer to clear all its bank debts this year ahead of schedule. As 2015 approaches, the market has softened and Nakheel is not planning any major sales launches until market conditions improve and the new supply that is being delivered is fully absorbed.

“There is a slowdown, so we do not want to oversupply the market, we are not dropping our prices, we do not want to rush. We have to see how the market is moving,” says Lootah. “The villa market, there is supply in the market and we don’t want to depress that, we have to think about the bigger interests of the economy. “

Once the market does start to improve, Nakheel will be quick to respond. “We have some villa plots available in Al-Furjan area and others, but we have to wait and see how the market is,” says Lootah. “If there is a sign of picking up in that sector then we will move; the designs are ready, it will not take time to launch a new project.”

Other developers will be watching how Nakheel reacts as it was the first developer to start selling off-plan real estate as Dubai’s property market began to recover in late 2011. That first project, Palma Residences is now complete.

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