Some Dubai developers are seeing parts of their credit stack tip into distress, and they’re working hard to deliver messages of confidence to investors. Developers, including Binghatti, Sobha, and Arada, are all tapping their PR teams and issuing statements about solid sales, strong track records, and their stellar liquidity positions.

What happened? Six USD-denominated property bonds by Binghatti Holding and Omniyat have entered distressed territory, where spreads blow past the 1k basis point threshold that typically signals deep investor concern about repayment risk, according to Bloomberg data we picked up yesterday.

Some are not exactly distressed, but much pricier: A 2030-dated bond issued by a Sobha Realty entity, for instance, saw its spread surge to around 700 bps from below 300 bps, while a similar maturity from Arada Developments more than doubled to 707 bps, according to the data.

This marks a sharp reversal from just a few months ago, when real estate players were aggressively tapping debt markets at tight spreads to bankroll new developments here at home. This comes as regional tensions sharply inflate risk premiums for the real estate sector — which has been thriving until now on the back of a multi-year price boom.

“The Dubai property market will get negatively affected [due to the war] and hence sukuks from these developers have seen [an] aggressive sell-off, mostly from international sellers who are exiting their position,” Muhammad Ahsan, senior head of treasury, global markets, investment banking, and international business at Bank Nizwa, tells EnterpriseAM. Hedge fund short-selling has also contributed to the breadth and speed of the sell-off, Zeina Rizk, co-head of fixed income at Amwal Capital, told Bloomberg.

Some of it had partly been brewing — just exacerbated by the war. “Credit markets had already started differentiating between the top versus medium-quality developers since late 2025,” Ahsan said. “Stronger and more well-established property developers such as Damac were seeing tighter spreads on new issues this year, which was not the case for Binghatti and Omniyat,” he added. Remember, the sector has been bracing for a cooldown in prices for a while now.

ZOOMING OUT- Dubai as a whole is bearing the brunt of the regional repricing, with CDS moves showing a widening of 19 bps versus just 6-7 bps in Abu Dhabi and Saudi Arabia, according to Mashreq Capital (pdf), reinforcing the view that Dubai’s more cyclical non-oil credit story is where investors see the most risk.

Pushing back against the narrative

Binghatti issued a statement saying that its construction sites remain fully operational and on schedule despite geopolitical tensions, adding that cancellation rates are still running below 1%, and that March sales are holding at around AED 500 mn per week, broadly in line with pre-crisis levels.

Omniyat said it is “in a strong position, fully funded, with substantial contracted revenue providing over four years of revenue visibility,” adding that construction activity remains ongoing across all projects with no purchase cancellations reported. Arada and Sobha similarly reaffirmed their liquidity positions and healthy backlogs.

Despite developer optimism, capital outflows persist: Foreign investors pulled USD 843 mn out of the UAE last week, with the exodus almost entirely concentrated on property stocks and bonds, according to Mashreq Capital.

The timing isn’t great, but defaults are not a risk yet

The war has made it much more difficult to access refinancing as a wall of maturities — roughly USD 8 bn through 2030 — begins to come into view. The good news is: These are mostly well spread out, and Omniyat and Binghatti’s maturing bonds are not due until 2027, giving them plenty of time to arrange internal liquidity through project deliveries this year or get bank financing, Ahsan said.

“Even if the primary markets are shut for them, they have strong banking relationships to get funding,” Ahsan said, adding that he doesn’t foresee any sukuk defaults.

But ratings agencies are watching this space: Fitch placed both Binghatti and Omniyat on watch for potential downgrades, citing the impact of geopolitical risk on demand and the possibility of higher construction costs, even as it acknowledged that both companies entered the current period with relatively solid balance sheets.

Moody’s, meanwhile, affirmed Binghatti’s rating last week, pointing to sufficient liquidity to cover its February 2027 maturity.

Zooming out further

There’s been a massive drop in tradability across regional bond markets. Average liquidity for GCC sukuk is down roughly 20% this year, according to Fitch Ratings. But, the real pain is in high-yield real estate: bid-ask spreads have quadrupled to 2 points, according to Mashreq Capital, suggesting there are almost no natural buyers left, and leaving sellers trapped unless they accept a fire-sale price.

Could the issue spread to other sectors? Sectors like hospitality, retail, tourism, logistics, and transportation are all at risk because of the war, Ahsan said, but most of the flagship companies in these sectors are national champions such as Emirates, Emaar, Aldar, DP World, and Dubai Aerospace, he explained. “Smaller players in these sectors will definitely take a bigger hit but those are not in the public debt markets,” he noted.

Tags: