The Abu Dhabi government has stepped in to provide more support for the emirate’s ailing real-estate sector.

On 18 April, the government’s Urban Planning Council (UPC) said it had signed contracts with four local real-estate developers to deliver an additional 7,500 new homes for locals in Abu Dhabi, Al-Ain and the western Al-Gharbia region.

Like other Gulf countries such as Bahrain and Saudi Arabia, housing for locals is a major issue for Abu Dhabi. With the new contracts, it is now planning to build more than 13,000 residential units as part of its Emirati Family Housing Programme.

UAE firms chosen

The developers that have been chosen to deliver the projects are Sorouh Real Estate, Tamouh Investments, Royal Development Company, and Al-Qudra Real Estate, all of which have been forced to stall projects since the decline in the UAE’s property market began in late 2008.

According to US-based consultant Jones Lang Lasalle, property prices in Abu Dhabi have fallen by up to 45 per cent from AED21,530 ($5,862) a square metre in 2008 to AED11,840. The firm’s outlook for 2011 predicts further declines. “In 2011, downward pressure on sales prices and rents will put Abu Dhabi in the mid-downturn stage of the property cycle,” says Jones Lang Lasalle in the report. With limited sales and falling prices, the UPC contracts are a welcome boost to the real-estate sector as they will allow developers to remain active as the government will underwrite the cost of the projects.

Sorouh will build 1,022 homes in Al-Ain as part of a 2 square-kilometre development known as Al-Ghareba near to Jebel Hafeet, Abu Dhabi’s highest mountain. The developer will also build 448 villas on a 1.3 sq km site at Sila to the west of Abu Dhabi city.

 Tamouh will build 3,000 villas and local community buildings at the 4.4 sq km Jebel Hafeet Emirati housing project outside Al-Ain. In Al-Ain, Al-Qudra will develop 2,000 homes on 3.75 sq km of its Ain al-Fayda development. Royal Development Company will build 500 villas on a 780,000 square metre site on Yas Island, which is being developed by another local developer Aldar Properties.

The contracts, which follow similar awards made last year to Sorouh and Aldar, are the latest in a string of measures introduced by the government that provide much-needed support for real-estate developers in Abu Dhabi.

In January, it agreed a $5.2bn rescue plan for Aldar. The cash injection comes from the $3bn sale of assets on Yas Island, including the Ferrari World theme park, and the sale of $1.4bn of residential units and land.

A further $762m will be raised through the issue of a convertible bond to state-owned Mubadala Development Company, which is also a major shareholder in Aldar.

The deal was announced after a $2.86bn impairment to the value of Aldar’s assets at the end of last year, which cut the firm’s equity base to $1.1bn from $4bn. In February 2010, Aldar sold the Marina Circuit, which hosts the Abu Dhabi Formula 1 Grand Prix, to the government after reporting a $153m loss in the fourth quarter of 2009.

Shamka scheme

The government is also supporting the real-estate and construction sector with the Shamkha South development 50km south of Abu Dhabi island.

 In March, state-owned Abu Dhabi General Services (Musanada) awarded four infrastructure contracts worth an estimated total of $2bn on the development. The contracts are the largest construction contracts to have been awarded in the UAE this year. The winners of the contracts are the local Saif bin Darwish, a joint venture of Saudi Arabia’s Al-Rahji Construction and Beijing-based China State Construction Engineering Corporation, the local Tristar Engineering & Construction and the local Ghantoot Transport & General Contracting.

Contractors looking to work on new projects in Abu Dhabi say the market is now dominated by the government. “The government is the really the only client spending money in Abu Dhabi at the moment,” says an international contractor. “There are lots of different agencies and investment vehicles, but underneath it all it is the government.”