Developers to prioritize cashflow over big gains in the near-term: In the midst of regional instability, UAE real estate developers will likely take a defensive approach, hitting the brakes on project expansions and prioritizing cashflow to navigate a sudden cooling in buyer sentiment, according to Fitch Ratings. Capturing the 20% endprofit margin could be sidelined to ensure sufficient liquidity for land and future projects.

This comes amid expectations of a slowdown in the sector. Dubai’s real estate engine “would face a slowdown if foreign buyers lose confidence in the safety of the location,” Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence, tells EnterpriseAM.

As expected, immediate property viewings have fallen, Fitch Ratings said. Despite that, a backlog of pre-sales and funds held in escrow provides a near-term safety net for rated firms.

Enter authorities? To prevent a deeper downturn, UAE authorities are expected to step in to interfere, Fitch says. Potential interventions include land payment deferrals, escrow flexibility, and new purchaser financing schemes. However, Fitch warns these measures could increase the debt burden on developers, as seen before.

The demand gap: The primary vulnerability of the UAE market is its heavy reliance on expats and overseas demand, with local residents comprising only 40% of Dubai buyers. Meanwhile, the other 60% are international investors who often pull back during signs of conflict.

Regional expansion could also take a pause, as developers prioritize protecting their home operations.

Background

Emirati developers have been riding the property boom wave over the past few years with frequent major project launches and plenty of expansion abroad. Emaar has been scaling its presence across the region, with new projects in Egypt and Saudi Arabia, while Modon has pledged bns of USD in investments in Egypt’s Ras El Hekma. Meanwhile, Arada has been eyeing an entry into Saudi Arabia and an expansion of its presence in London.

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