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UAE Budget 2018 opens construction floodgates towards Expo 2020

Expo 2020 is not just a show.

It’s the grandest of all shows and Dubai, host of the event, has not taken this responsibility lightly.

When Dubai adopted its 2018 budget, spending $15.5 billion or some 20% more than 2017, it worried more about securing funds to host Expo 2020, than adding on a deficit of $1.7 billion.

The investment value of the Expo is estimated at 25 billion dirhams (Nearly $7bn).

Dubai’s budget sees more than 20% of it allocated to infrastructure spending, an increase of more than 40% from 2017.

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Fringe benefits

Expo 2020 has the potential to stimulate Dubai’s real estate market, according to a February 20th, 2018 rating agency Standard and Poor’s (S&P) statement.

“Rents and prices of the real estate market fell 5% to 10% in 2017 and will continue the trend until 2019,” said S&P in its study titled “Dubai’s Real Estate Slump Is Set To Persist, With Only Expo 2020 Offering Any Hope.”

“In 2020, the sector could well start to benefit from the potential increase in economic activity and positive business sentiment attached to Expo,” S&P noted.

Setting up the venue for Expo 2020 requires an expansion of Dubai Metro by the Roads and Transport Authority RTA.

The event expects 25 million or more visitors and floods of new residents to Dubai.

S&P warned that a speculative surge in real estate prices unrelated to demand/supply dynamics could be a negative side effect of the boom.

In January, real global estate service firm JLL said approximately 575,000 new real estate units could enter the market until 2020.

Read: Which Dubai addresses will come at a premium one year before Expo 2020?

Construction activity

Preparations in the run-up to Expo 2020 are proving to be a catalyst for the UAE construction industry aided by a spike in oil prices which are seen hovering in the$60-$70 range.

“There is a large amount of current activity but concerns remain about the volume of works after 2020. Meed Projects estimate that around 30% of the $3.8 billion in construction contracts for the Expo have already been let, with another 60%in the final procurement stage and expected to be let during 2018. The volume of new projects awarded across the UAE is expected to decline in 2019 and 2020,” Alan Baker, JLL national director, project and development services, Mena, was quoted by Khaleej Times.

According to Avin Gidwani, CEO of Business News for Construction (BNC) Network: “As the demand for hotel rooms, housing and the need to expand infrastructure increases, one can see activity in a number of construction sites across Dubai.”

Read: Get ready for GCC economy boom time

Pro Partner Group, a UAE business setup company, said the country’s industries are gearing up to benefit from the expo’s six-month duration, with a number of sectors expected to enjoy substantial growth.

“Construction, transportation, tourism, hospitality, retail, and leisure sectors have obvious potential to benefit from increased spending and infrastructure,” Pro Partner Group, said on its site.

There are currently around 99 hotels under construction in the UAE, and this is expected to increase as we approach 2020.

 2017 was key

In the 2017 budget, the Dubai government announced an increase of 27% in annual infrastructure spend ahead of Expo 2020.

By the end of 2017, Dubai Expo 2020 are expected to have awarded over 1,200 construction contracts, worth in excess of $3.3 billion, said Pro Partners.

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“With the additional spend in infrastructure, it is estimated that of the potential 300,000 jobs created by Expo 2020, 30% of these will be within the construction sector alone.”

Trade Arabia estimates that over $8bn of investments are allocated to transport and infrastructure projects in and around the Expo 2020 site, creating a construction boom in the UAE, quoting a BNC report

Iconic developments

Many landmarks and structures are expected to remain as permanent fixtures over a 438 hectare exhibition legacy site, stated a Big 5 construction exhibition report.

The Dubai 2020 Urban Master Plan includes blueprints to build a thriving metropolitan district connected with modern infrastructure such as a $2.9bn Dubai Metro Red Line Extension, the $2bn Phase 2 expansion of Al Maktoum International Airport and a $390 million in planned roadworks.

“The hosting of the World Expo in Dubai in 2020 has provided a strong stimulus for construction activities in Dubai, with nearly 200 active transport projects currently in the pipeline throughout the UAE to the tune of $34bn,” Josine Heijmans, Portfolio Event Director of The Big 5 said.