Dubai's top two builders turn to bank borrowings

[DUBAI] Dubai's two biggest builders are turning to bank borrowing to help fund projects as a rise in late payments from their customers takes the shine off a booming construction market.

Arabtec Holding PJSC, the contractor that helped push Dubai stocks into a bear market in June, said that money owed by clients rose to 8.8 billion dirhams (S$2.98 billion) through the second quarter from 7.2 billion dirhams at the end of last year. Drake & Scull International, the emirate's second-largest publicly traded builder, took two term loans totalling about 199 million dirhams in the first half, according to its financial statements.

While both builders are benefiting from rising orders, the need to borrow from banks means costly interest payments and could slow the completion of projects, according to analysts. A rapid expansion of Arabtec's backlog has added to the company's arrears, while delays for redesigns and cost overruns in Saudi Arabia are hurting cash flow and profitability at Drake & Scull.