Greater IRR an ally for building retrofit initiatives in the GCC region

Dubai, UAE: A typical performance-contracting retrofit project can yield an IRR of 35% and above, which is a massive incentive for building owners, said Mehmood Abdul Rehman, Managing Partner of UAE-based Greenfield Trading. “Which bank will give you returns of that kind on your savings?” he asked, adding that 35% represents 15 times more than what an owner can get in countries where the rate of interest on bank deposits is in the range of 2-2.5%. The metrics are in favour of building owners, which Rehman said, ought to encourage them to go ahead with retrofit projects, even if they are unable to raise finance from banks and other financial institutions.

Rehman expressed optimism that retrofit initiatives would succeed in the UAE and other countries in the GCC region, adding that several factors worked in their favour. In Dubai, for instance, government bodies, like the Dubai Electricity and Water Authority (DEWA) and the Dubai Supreme Council of Energy, he said, are supporting the retrofit movement. Another factor, he said, was an atmosphere of greater market enablement. Earlier, building owners were bogged down by the cost of replacing energy-inefficient equipment, he said. Today, however, some manufacturers are able to offer equipment on lease basis. “Today, the equipment is hypothecated,” he said. “It is safe and can be moved from one place to another.”

(The writer is the Editor of Climate Control Middle East and the Editorial Director & Associate Publisher of CPI Industry.)