Navigating the Mystery of Escalating Construction Expenses in the UAE and Saudi Arabia

Haroon Sajjad
Mar 6
3 min read

Updated: Nov 4

The construction industry in the UAE and Saudi Arabia has evolved into a hub of innovation and rapid development. Yet, rising construction costs are emerging as a significant challenge for companies, developers, and stakeholders. Understanding the reasons behind these increases and strategies to manage them is essential for anyone involved in the sector.

This article explores the key drivers of escalating construction expenses and practical approaches to mitigate their impact.

Understanding the Factors Behind Rising Costs

Several interconnected factors are contributing to the surge in construction costs in the UAE and Saudi Arabia:

Raw Material Volatility: Steel prices have increased by over 50% in the past two years due to global supply chain disruptions and growing demand. Cement costs have risen by around 35%, influenced by regional construction activity and import restrictions. Additionally, meeting sustainability and eco-certification standards adds to material expenses.
Labour Shortages: The competition for skilled labour has pushed wages up by as much as 20% in some regions. Labour scarcity affects productivity, leading to longer project timelines and higher costs.
Regulatory Compliance: Governments in both countries enforce strict safety and sustainability regulations. While necessary, delays in approvals or compliance-related costs can inflate budgets if not managed effectively.

Project Management: The Art of Balancing Budgets

Strong project management is critical for balancing budgets. A detailed project plan that outlines scope, timelines, and expenditures forms the foundation for cost control.

Leverage Technology: Tools like Building Information Modelling (BIM) and project management software allow teams to visualise projects, track progress in real-time, and optimise resource allocation.

Proactive Monitoring: Continuously reviewing project variables enables early identification of potential overruns, ensuring timely corrective action.

Navigating Regulatory Landscapes

Strong project management is critical for balancing budgets. A detailed project plan that outlines scope, timelines, and expenditures forms the foundation for cost control.

Leverage Technology: Tools like Building Information Modelling (BIM) and project management software allow teams to visualise projects, track progress in real-time, and optimise resource allocation.
Proactive Monitoring: Continuously reviewing project variables enables early identification of potential overruns, ensuring timely corrective action.

Emphasizing Sustainable Practices

Adopting green construction standards may initially raise costs, but it can lead to long-term financial and strategic benefits:

Operational Savings: Energy-efficient buildings can reduce operational expenses by up to 30%.
Investor Appeal: Sustainable developments attract environmentally conscious investors.
Government Incentives: Complying with green building standards can make projects eligible for financial incentives.

Strategic Procurement Strategies

Effective procurement strategies help mitigate cost increases:

Bulk Purchasing: Negotiating bulk orders or fixed-price contracts can reduce material costs by up to 15%.
Local Supplier Partnerships: Building relationships with reliable local suppliers ensures material availability and pricing flexibility.
Forecasting Needs: Anticipating future requirements protects against market volatility.

Wide angle view of construction materials waiting for delivery — Construction materials secured for a building project.

Learning From Historical Data

Analysing past projects provides critical insights into cost drivers:

Identify Patterns: Understand recurring issues like scope changes, labour inefficiencies, and material waste.
Improve Forecasting: Historical data helps refine budgeting and resource allocation.
Benchmarking: Compare strategies used by industry peers to adopt proven cost-saving measures.

The Importance of Collaboration

Strong partnerships among contractors, clients, and suppliers are key to managing costs:

Open Communication: Regular meetings allow for proactive problem-solving.
Shared Expertise: Collaborative efforts enhance efficiency, sustainability, and quality.

Conclusion

Rising construction costs in the UAE and Saudi Arabia present complex challenges, driven by raw material volatility, labour shortages, and regulatory requirements. However, with proactive project management, strategic procurement, sustainable practices, and strong stakeholder collaboration, companies can navigate these hurdles effectively.

Success in the modern construction industry requires adaptability, innovation, and foresight—ensuring projects are not only cost-effective but also sustainable and high-quality in the rapidly evolving built environment.