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Dubai: The investment budget of Dubai Lifestyle City, a residential project, has increased to almost Dh4 billion due to increased costs, officials said.
The project, a part of ETA Star Group based in Dubailand, had originally budgeted Dh2.4 billion as its cost, which is now expected to cost between Dh3.5 to Dh4 billion.
Raza Seddiqi, executive director, Dubai Lifestyle City told Gulf News: "People say the prices of labour and construction materials have gone, but not necessarily."
He said that the UAE market is not a buyer's market; it is a seller's market because there are not many good construction companies available as they are all over booked. So the cost increase is artificial, not real.
"We are realising now that the cost escalation is opportunity cost. Contractors are marking up profits by 40 to 70 per cent. That is opportunity cost. Take it or leave it," Seddiqi said, "This is why the budget has escalated."
The development is currently negotiations with contractors. "We have shortlisted three contractors and will be awarding the contract within the next week," Seddiqi said.
The project should be completed by end of 2009, he said.
While the budget has almost doubled, so have the prices. "We had a sales strategy. We know the market trends and knew that over a period of two years, the cost of construction will increase. Although, at the same time, we never wanted to tax our customers in anticipation of the increased costs," Seddiqi said.
We are realising now that the cost escalation is opportunity cost. Contractors are marking up profits by 40 to 70 per cent. That is opportunity cost. Take it or leave it."
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