Thursday, May 22, 2008

Buildings go years without utilities

Would you build if you didn't have reasonable assurance you'd get utilities for the building? What investors would tie up their money with these prospects? There are a not insignificant number in Sharjah and Ajman. Emirates Business 24|7 has the story:
Some 30 towers with hundreds of residential and commercial units are sitting empty following a wait of up to five years for services such as electricity, water and sewerage, said real estate sources in Sharjah and Ajman.
The CEO of Sharjah's Noor Al Mamzar Property, Khalid Abdul Aziz Al Suwaidi, said the waiting list for public utilities was "years' long", in both emirates, but the problem was worse in Ajman.
Al Suwaidi said he knew of developers in Sharjah, who had to wait four years for services after obtaining their building licences.

And he said the problem was different in the two emirates because Sharjah produces its own power, while Ajman is dependent on federal sources. Ajman has already experienced power cuts as the demand on the electricity grid has outgrown supply. As a result, new buildings cannot be hooked up to the main network until more power is created.

Sources close to the negotiations, who did not wish to be named, told Emirates Business Ajman has already reached out to international companies to discuss building its own power plants. Ajman officials recently held meetings with representatives of a Canadian firm to discuss building a power plant – which could cost as much as Dh1bn – powered from gas from coal.

Meanwhile, the waitlist for utility services has grown so long some investors have begun to treat a notice of confirmation that supply will be provided from the municipality as a commodity that can be sold. These investors then sell projects that will be hooked up for much more than they paid for the land, without every building anything, said Obeid Al Tunaiji, CEO of Al Tunaiji Property. The promise of electricity and water, he said, has become enough to increase the value for developers.

Emphasis added. It simply makes no economic sense in the Gulf to build power plants fired by gas from coal.

Thanks to The Sandbox for the pointer.


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