The Saudi construction sector is expected to maintain its upward momentum in the second half of this year, the National Commercial Bank said in its latest Quarterly Review of Contract Awards in The Construction Sector. The report said the rate at which contracts have been awarded during H1'11 has brought numerous opportunities for both, large and SMEs players. The demand for improved services in infrastructure, power, and real estate sectors were the main drivers of high value contract awards. NCB Construction Contracts Index reached 205.3 points by the end of the second quarter of 2011, while the total value of awarded contracts reached SR34.5 billion to bring awarded contracts through the first half of 2011 to SR84.2 billion, indicating that 2010's total value of awarded contracts is likely to be surpassed this year. April's contract awards were valued at approximately SR16.4 billion, led by the power and residential real estate sectors “This frenzied pace is expected to continue through H2'11 as there are numerous high value projects that are in the bidding phases and are expected to be awarded in Q3'11. One such bid that is expected to be awarded is Phase 2 of the Haramain high-speed railway project at an estimated value of SR30 billion. Additionally, King Abdullah's royal decree regarding the 500,000 housing units to be constructed is expected to commence during H2'11. With oil projected to average at $95/ barrel in 2011, the surplus in state revenues will increase capital expenditures in construction in the medium-term,” said NCB chief economist Dr. Said Al-Shaikh in the report. The government's focus to fulfill its citizen's demands for improved infrastructure capabilities played a significant role as more than 31 percent of the value of awarded contracts during the second quarter were directed toward infrastructure related sectors. However, the residential real estate and power sectors garnered the highest percentage of the value of awarded contracts, accounting for 26 percent and 23 percent, respectively. Although the total value of awarded contracts fell compared to last quarter, the value at which the contracts are being awarded is staggering. The SR34.5 billion in awarded contracts during Q2'11 represents a 43 percent increase compared to Q2'10 where the value was SR24.2 billion. Furthermore, the SR84.2 billion in awarded contracts during H1'11 represents a 156 percent increase compared to H1'10 where the value was SR33 billion. The Construction Contracts Index (CCI) jumped to 205.3 points at the end of H1'11, which is a stark contrast to H1'10's CCI of 80.36 points. “This reflects the robustness of the construction industry over the past six months in particular as the initiatives from the annual budget and King Abdullah's royal decrees are currently being implemented,” the report said. In terms of geographical break-up, Riyadh accounted for the highest portion of awarded contracts by value with a 26 percent share, largely due to a significant residential real estate contract which will cover an area of four million square kilometers. The Eastern Province had 25 percent of the value of awarded contracts as a considerable portion of industrial, water and urban development contracts were awarded. The Makkah and Madina regions accounted for 16 percent and 15 percent, respectively. The main contract awards in those regions were residential real estate projects in Jeddah and a power contract in Yanbu.
