- June 18, 2025
- Posted by: shah
- Category: shahgaron
In recent years, supply chain disruptions and procurement-related challenges have plagued real estate projects in the Middle East. The region faces the threat of delays in the completion of construction projects and high risks of cost overruns. A recent Middle East report concludes that project delays are averaging 22.5 months (or 83% of the overall schedule). While it’s impossible to control macroeconomic factors, one of the facets that construction companies can control is how they handle their complex project team, including contractors and sub-contractors.
In the modern environment, construction companies in the Middle East have to manage a complex network of contractors and subcontractors, which adds to their existing challenges. To avoid non-compliance penalties, real estate companies spend around 17% of their project-related costs on regulatory compliance.
Additionally, compared to the U.S. real estate market, construction companies in the Middle East lag in adopting technologies like the cloud. This has further led to project management-related inefficiencies and delays.
Here’s a look at 6 contractor-related challenges faced by construction companies in the Middle East:
1. Lack of streamlined cash flow
A 2023 report found that cash flow and payment-related issues impact 26.6% of real estate projects in the Middle East.
Lack of cash flow management often leads to construction delays. To ensure on-time delivery of large-scale real estate projects in the Middle East, construction companies must pay their contractors and subcontractors on time.
What is causing this problem? For multiple reasons, construction firms are relying on outdated invoicing systems to manage their project funds. Apart from a steady cash flow, companies need healthy business credit for managing any downturns or “worst-case” scenarios in the industry.
2. Crippling labour shortage
The Middle East construction industry faces a severe labour shortage – with an estimated requirement of 2 million workers over the next 3 years. With the median age of workers at 41 years, the industry is trying to attract younger workers. Additionally, real estate project developers require professionals (with varying skills) – like architects, engineers, and equipment operators.
As Middle East construction companies rely heavily on importing talent, it’s challenging for them to acquire the necessary skills and expertise in a competitive labour market.
To address this problem, construction firms need digital technologies like Artificial Intelligence (AI) to automate manual tasks and streamline their project management.
3. Cost escalation
Construction costs in the Middle East are set to increase by 7% in 2024. Real estate projects in the region often exceed their allocated budget due to issues such as:
- Material shortage
- Design-related changes
- Failure to comply with industry regulations
Project delays by contractors also increase labour and material costs for construction companies. Further, inflationary pressures continue to challenge this industry despite the recent stability in oil prices. As new real estate projects are launched, the growing competition between UAE and Saudi Arabia is putting stress on the existing supply chain operations.
Digital solutions in the form of supply chain and inventory management are the only answer to these pressing challenges.
4. Lack of financial management
Among the leading industries in the Middle East, construction has a substantial backlog of projects in real estate, hospitality, and industries. Financial management in the Middle East construction industry faces a host of challenges including:
- Limited cash flow
- Project delays and cost overruns
- Contractual disputes
- Reduced profit margins
- Fluctuations in material costs
Most of these financial problems arise due to the complexity of large-scale construction projects, which include multiple stakeholders and investors. Construction firms need a strong proactive approach to implement best practices in financial management. Additionally, they need industry-designed digital solutions to:
- Improve their budgeting and cost estimation.
- Streamline their project management initiatives.
- Diversify their revenue streams.
5. Procurement-related challenges
The 2020 pandemic exposed the severe limitations of the supply chain operations in the Middle East construction industry. The 2023 report on construction supply chains listed the following major risks:
- Climate change and environmental concerns
- Geopolitical conflicts
- Cyberattacks
- Shortage of construction materials
With the growing scale and complexity of real estate projects, supply chains, and procurements are more likely to be disrupted. Inefficient procurement can directly impact project completion and low-quality constructions.
Construction companies need efficient project management – with real-time visibility into supply chains to prevent any disruptions.
6. Lack of communication
Traditionally, the construction sector in the Middle East has lagged in adopting automation and communication tools. This has led to inefficiencies in communication between stakeholders – including contractors and subcontractors – thus causing project delays.
With the emergence of mobile technology, this is slowly beginning to change for the better. In Q1 of 2024, the number of smartphone shipments in the Middle East reached 12.2 million – thus marking a 39% year-on-year growth.
Besides leveraging mobile communication, construction firms need to clearly define their contractor guidelines and expectations. Stakeholders must also be regularly updated on the latest progress of construction projects to avoid any inefficiencies or delays.
In summary
Without efficient management of contractors & sub-contractors, construction companies in the Middle East will suffer a drop in productivity levels and profit margins. Designed for the engineering & construction industry, Shahgaron’s Plexup digital solution can streamline financial management through its:
- BOQ management
- Supplier contract management
- Project material requests
Among the leading technology solution provider in the Middle East, Shahgaron is enabling construction companies in the region to address their growing operational challenges.
If you want to know more about how our solution can work for you, contact us now.