DUBAI, (Reuters) – Some Dubai-based construction contractors are concerned over when they will receive further payments from state-linked developers despite cash beginning to trickle into their accounts in the former Gulf Arab boomtown.
Five out of eight contractors contacted by Reuters said that while they had started receiving money from the developers, payments were still slow and way behind schedule.
Dubai, which owns stakes in major local developers, launched a $20 billion bond programme in February, issuing the first half to the United Arab Emirates central bank to enable the government to help firms meet debt and other obligations. “No, it’s still not enough. We are waiting to see the full impact of the bonds filtering through to these companies,” said a director of a large construction firm, speaking on condition of anonymity.
“One entity is particularly bad but we are now recovering funds and although we haven’t been paid for January or February, they have cleared October to December.”
The emirate’s once-booming real estate sector — which boasts the world’s tallest tower and artificial islands shaped as palm fronds — has come to a grinding halt in recent months as developers slow or cancel projects and property prices fall.
Several Dubai-based contractors have said they are owed hundreds of millions of dirhams by state-linked developers and some may face bankruptcy as credit dries up.
A director of an international contracting firm said last week it received a 7 million dirham ($1.91 million) payment from a government-linked developer, its first payment in five or six months, and was owed “in excess” of 100 million dirhams.
“It was only 7 million but it’s significant that they’ve done something … if they want to hang it out and delay (the rest of the payment) for a year, then that is no good for us. We need to get paid quickly.”
Dubai’s government said on Monday it would continue to meet all its contractual obligations, including to contractors, and would not limit the number of construction firms licensed to operate in the emirate.
Emaar Properties, in which the state is the largest stake holder, said payments for contractors and consultants were based on a credit cycle agreed with each firm.
“All payments that meet the criteria have been honored and will continue to be cleared, in line with our contractual agreements,” Emaar said in a statement emailed to Reuters.
State-owned Nakheel declined to comment. no one at Dubai Properties and Sama Dubai were not immediately available for comment.
London-based MEED has reported that contractors who are owed money would not be paid for work they have carried out on Dubai government-backed schemes as the emirate will only settle debts with contractors it wishes to work with in future.
The government denied the MEED report but said it would not decide how firms that had received aid would use the funds.
“We are still waiting for payments from a government-linked firm,” a source at an international contracting firm said. “I am expecting a call from them in the next few days … until we speak to them I don’t know what the situation is for us.”
Nasser al-Shaikh, the head of Dubai’s department of finance, said last week the government would not reveal the names of the firms receiving support from the first bond proceeds, although key beneficiaries were developers and companies in which Dubai’s government holds some ownership stake.
“It’s the bigger, more visible and public contractors that are getting paid first as they are linked to more visible projects,” said Saud Masud, real estate and construction analyst for the Middle East and North Africa at UBS.
“I think it is going to get harder as more developers are putting pressure on contractors to reduce costs and renegotiate contracts.”