The UAE’s building boom survives a 25% materials shock — for now

The UAE’s construction pipeline is holding — for now. Developers are keeping projects on schedule even as imported material costs climb 20-25% from pre-war levels, Moody’s Ratings said in a report picked up by The National and Arab News. Construction is continuing “largely as planned,” with resilience so far “[exceeding] the expectations of many market observers,” the agency said.

The detour is costing more: Shipments have been rerouted through Oman, Saudi Arabia, and the UAE’s east coast to reduce reliance on the Strait of Hormuz, slowing down execution.

“Contractors are so far absorbing most of the cost inflation,” Moody’s said, as fixed-price contracts and advance purchases should limit the hit to developers’ margins and cashflow over the next 12 months.

IN CONTEXT- We previously reported that data-center and hotel construction costs could rise by about 10%, while UAE material prices had already jumped as much as 71% y-o-y as surging demand collided with shipping and freight bottlenecks.

The good news? Developers have stockpiles to fall back on. They typically hold two to six months of critical imported materials, while “as projects approach completion, developers increase buffer inventories” to avoid handover delays, Moody’s said. Many projects due through end-2026 were already advanced or sufficiently supplied when the disruption began.

Local sourcing helps too: Concrete, steel, aluminum, and ceramics are largely sourced inside the UAE. Suppliers are also adding capacity — Bildco plans to add 1 mcm of concrete production in Abu Dhabi — while the government is drawing up a list of 150 critical commodities, including industrial goods, under its new supply-chain resilience program. Products like elevators, air-conditioning systems, and MEP components remain more exposed to global supply chain disruptions.

Some developers also have an extra cushion: Binghatti, Sobha, and Emaar have more control through integrated construction arms, whereas others who rely on third-party contractors might be more exposed. Moody’s said such models provide “greater control over procurement and construction processes,” though contractors also entered the shock with stronger margins and fewer labor shortages.

The demand picture is also splitting by emirate. Abu Dhabi and Sharjah have held up best, while Dubai’s off-plan transaction values fell more than 50% in June from February. Timely handovers are therefore critical: Developers collect 20-40% of sales proceeds at completion in Dubai and Abu Dhabi, versus around 60% in Sharjah.