RAK projects update
Known for its diverse economy and investor-friendly policies, Louise Birchall looks at the real pros and cons of doing business in the UAE’s most Northern emirate, Ras Al Khaimah, with a focus on legislation, and an insight into projects planned, underway and on hold.
While some projects have had to be scaled back or placed under review in Ras Al Khaimah (RAK), many of the emirate’s flagship developments are forging ahead. In an Oxford Business Review 2010 report on RAK, Ras Al Khaimah Investment Authority (RAKIA) said its property developments, including tourism projects worth $3.27 billion, are on track; under planning or construction. The value for property development projects underway in RAK reached $1.36 billion, while $1.9 billion represents investments abroad such as a free industrial zone in Georgia.
The report also highlights infrastructure as a major investment area in RAK, with increased government spending on roads, ports, airports, power generation, desalination, manufacturing and industrial zones. The federal government has allocated a budget of $4.36 billion for infrastructure projects and RAS Al Khaimah is expected to receive a substantial allocation of these funds for local upgrades.
Substantial construction work lies ahead for RAK International Airport, which is angling to corner more of the passenger and cargo business within the UAE. The national carrier, RAK Airways, has already invested more than $27.23 million in infrastructure development. Furthermore, to meet energy demands, the UAE is expected to award contracts estimated to be worth $40.03 billion to build several reactors.
Looking beyond the large-scale projects, considerable effort is also being directed towards the public sector and social infrastructure, such as new schools, hospitals and services.
AMBITIOUS PROJECTS
In line with the emirate’s target of attracting two million tourists a year by 2012, with plans to add approximately 3700 rooms over the coming years — trebling current supply — one of the region’s largest developers, Rakeen, is spearheading projects such as the $1.8 billion Al Marjan Island, which is progressing to schedule, according to Rakeen managing director Ghassan Youssef (see page 35 for the full construction update). The man-made island will span 2.7 million m² of reclaimed land. The first development to be completed on the peninsula of the island will be the $272 million mixed-use Bab Al Bahr; comprising six pyramid-shaped residential buildings — which are scheduled for handover in August — a hotel, shopping mall and an office tower. Marbella Bay, a luxury residential development by Manazil Real Estate Sharjah is also being developed on the island and is planned to be completed in 2011, as is the Pacific residential project by Select Group. “It is common that some challenges arise when mega projects of the scale that Rakeen has undertaken unfold. The key is to overcome them in the smoothest possible way, without any adverse consequences,” explains Youssef.
“For instance, construction on our Bab Al Bahr project commenced just a few months before the global recession and it was a big challenge for us since we had already committed to our clients that we would start handing over at the end of 2010. The same goes for Al Marjan Island as we had awarded infrastructure works of island numbers three and four in mid-2009. However, despite these challenges the projects are on track. The recession period gave us an opportunity to focus more on our projects and be able to ensure their timely completion.”
Youssef says Rakeen’s projects in Ras Al Khaimah have not been affected by the global economic downturn, with the company still selling at a price of $300 per square metre being a good indicator. “RAK’s industrial sector performed well in 2008-2009 in the face of difficult market conditions and there is currently an excellent base for expansion. Also, the property and construction sectors in Rakeen have remained buoyant, with major projects moving forward despite a challenging 2009”.
STALLED PIPELINES
However, The Big Project can reveal that three major, ambitious projects in the pipeline have been put on hold for the foreseeable future; RAK Convention Centre, RAK Financial City and Jebel Al Jais (see page 36 for more information).
All three projects belong to Rakeen and have been delayed until “we see what will happen in the market”, according to a marketing representative at the company.
Meanwhile, another key player in the emirate, RAK Properties, is progressing with the construction of Mina Al Arab, a residential, retail and tourism development made up of six districts, occupying a 2.8 million m² area along a nine kilometre stretch of beach. The first phase of the development Grenada Villas (93 units) is ready to be handed over in June 2010, RAK Properties MD and CEO Mohamed Sultan Al Qadi confirms to The Big Project. Julfar Tower, another of RAK Properties’ projects, is “substantially complete and will be ready to handover to customers in the fourth quarter of this year,” reveals Al Qadi.
RAK is suffering from a huge shortage of high-end residential and commercial space and Julfar Towers has been developed to fill that gap, he adds.
“Interest in Julfar Towers has been very high for both residential and commercial units, all of which were packaged creatively to create interest for the investors. For example, Julfar Towers was the first commercial tower in the UAE to offer free zone office space for it owners, through a tie up with RAK Free Trade Zone
“We managed to create interest for the residential tower by linking the payment plan to the construction, which gave investors more confidence in the project and more security for their investment. Investors were able to pay for what was achieved construction wise,” says Al Qadi. investor friend or foe?
In fact, RAK’s diverse economy and light regulation have been a major draw for investors over the years, with 2010 proving no exception. RAKIA issued 370 licences to businesses between the period of January to April 30, this year, representing a 78% growth on the corresponding period in 2009, increasing the number of registered companies to 2941. But how does this affect the construction industry? Regional legal consultancy Bin Shabib & Associates partner – construction Antonios Dimitracopoulos and dispute resolution lawyer Andrew Gibson have worked with numerous clients in the industry in Ras Al Khaimah. They say the lack of ‘red tape’ there, compared to more developed emirates such as Dubai and Abu Dhabi, is unlikely to be a purposeful manoeuvre on the part of the RAK Government. However, Dimitracopoulos suggests that for some investors the lack of ‘red tape’ is a good thing. “Indeed the rapid growth of Dubai’s real estate sector is testament to this position as most of the development took place prior to the latest real estate laws now effective.
“However, the attitudes of investors — many of whom having already had their fingers burnt during the recent downturn in the regional construction market — appear to have adapted in the sense that legislative and administrative hurdles are now becoming recognized as a positive step. This is because they have a tendency to introduce uniform standards among what would otherwise be a volatile and fragmented market.
“This in turn benefits the construction industry in the long run, which is dependent not only upon liquidity, but the restoration of investor confidence. In the short run, however, developers tend to associate all compliance-related issues as being an unnecessary burden, and moreover, an additional expense,” he asserts. Dimitracopoulos says the legal risks for developers, investors and contractors operating in RAK differ greatly.
