A. SREENIVASA REDDY (ABU DHABI)
The Dubai real estate sector is expected to remain resilient and withstand the headwinds generated by the present geopolitical crisis, according to the latest assessment issued by S&P Global Ratings.
The global rating agency has dealt with the various dimensions of the problems raised by the present situation in a paper titled “Credit FAQ: How Long Can Dubai Residential Real Estate Withstand War-Related Strains?”.
S&P Global Ratings ruled out a market crash similar to 2008, underlining that the emirate’s stronger regulatory framework and improved fundamentals will help support the sector even amid heightened uncertainty.
A key positive highlighted in the report is the continuity of construction activity, with developers maintaining project execution despite external pressures.
“We understand that construction activity continues normally, and the city has a track record of ensuring minimal construction delays during other stressors, specifically the COVID lockdowns,” S&P Global Ratings said.
The agency also emphasised the role of government policy support, particularly visa reforms, in sustaining long-term demand.
“We believe that the UAE government’s visa reforms will create a degree of stability and stickiness for residents and home/property owners,” the report said, referring to initiatives such as the Golden Visa that grant long-term residency to investors.
S&P further pointed to the effective crisis management framework in the UAE, noting that authorities have ensured safety, food security and continuity of goods and services, thereby reinforcing investor and resident confidence.
Another structural strength is the tightened regulatory environment, which now provides safeguards for both developers and investors. The report noted that buyers are required to commit a significant portion of payments—typically 30% to 40%—before reselling under-construction properties, which helps maintain market discipline and reduces speculative activity.
In addition, regulations governing developer practices offer protection to project execution and cash flows. Developers are permitted to retain up to 40% of property value under certain conditions, enabling them to manage projects more effectively and mitigate risks associated with investor defaults.
S&P’s base-case scenario assumes that the current geopolitical tensions will be relatively short-lived, with the most intense phase lasting up to four weeks. This expectation supports the view that any disruption to the real estate market will remain manageable.
Importantly, the report highlighted the strong financial position of Dubai’s major developers, which provides a significant buffer against market volatility. The four rated developers — Emaar Properties, Damac Real Estate, PNC Investments (PNCI/Sobha Realty) and Omniyat — have built up substantial presales and revenue backlogs covering several years of activity.
S&P noted that it incorporates “substantial headroom” in credit metrics for these developers, allowing them to absorb temporary shocks arising from lower sales or slower cash collections.
The developers also benefit from low leverage levels, which enhances their ability to withstand short-term disruptions.
“The low leverage of these developers would also help them absorb a relatively short-lived shock,” the agency said.
Liquidity remains another key strength. Strong sales momentum over the past three years has resulted in ample cash collections and significant escrow balances, sufficient to cover construction costs.
Developers such as Emaar and Damac hold substantial cash and liquid investments, while PNCI and Omniyat also maintain adequate liquidity buffers supported by escrow accounts and ongoing project cash flows.
S&P also noted that debt maturities remain manageable, with no immediate need for additional funding in 2026, further supporting the sector’s financial resilience.
Overall, the agency said Dubai’s real estate sector is underpinned by stronger fundamentals, improved regulation, and solid developer balance sheets, which together position it to navigate the current geopolitical challenges without significant disruption.