Fragmentation isn’t stopping mega-developments

Project launches are down, and delivery schedules are lagging by as much as a year, and yet it appears to be full steam ahead for some of Dubai’s biggest developers. We spoke to industry experts about the apparent trend of megaproject launches at a time of falling transactions.

IN CONTEXT- Fragmentation is showing through in Dubai’s housing market, with 2Q data showing transactions falling 19% q-o-q, as launches collapsed to 5.3k units from 45k in the quarter before. That’s all happening just as delivery volumes reached their highest level in years.

Part of the dip in launches can be explained by data earlier in the year. Cavendish Maxwell’s Ali Siddiqui tells us that the lion’s share of 1Q launches came in January, with momentum already moderating through the rest of the quarter after the market saw “an exceptionally active launch cycle over the past few years.” Paired with the usual Ramadan slowdown, Siddiqui points to the moderation trend starting to emerge before the outbreak of the regional war, which also triggered a downturn in market activity.

The developer split

It’s also shaping up to be a tale of two types of developers, with Fitch’s Diego Della Maggiore noting a growing prioritization of projects likely to achieve certain funding, capex, and pre-sale rate thresholds like large-scale builds, with more established players best placed to be behind such projects.

While 2025 was a good year for smaller developers, Siddiqui also sees larger players dominating when it comes to launches going forward, with the market favoring “larger, well-capitalized developers.” Smaller developers may end up focusing instead on JVs, partnerships, and a general, more measured strategy, Siddiqui says.

That trend is already in action, with recent large-scale launches from Emaar and Majid Al Futtaim — the size and scale of which are hard to ignore. Emaar is lining up a AED 200 bn mixed-use project, complete with residential, commercial, retail, and civic assets, while Majid Al Futtaim is planning a AED 62 bn mega-community.

The master-planned communities approach offers several draws for Tier 1 developers over numerous, smaller projects, especially in current market conditions, Siddiqui tells us. The phased delivery approach allows for more flexibility when it comes to managing pricing, supply, and construction timelines at a time when “transaction volumes are moderating and off-plan absorption is being tested,” he says. All this considered, “the shift toward master-planned communities is likely to continue,” Siddiqui tells us.

This tactic also helps larger developers match sales with execution capacity by allowing the release of units in a staged approach, Maggiore tells us. On the flip side, “smaller developers may find that harder, especially if land, construction, and financing costs stay high,” he adds.

Megaprojects are here to stay, for now: Should population inflows to Dubai continue, sales absorption hold steady, and demand remain for locations like Dubai South, Maggiore sees the big players as continuing to opt for the big-ticket, phased developments. “If demand softens or execution bottlenecks ease, launch activity could broaden again across more mid-sized schemes,” he added.

What to expect: “This is likely to translate into fewer headline launches, larger project sizes, and longer delivery schedules, while actual unit release remains staggered over time,” Maggiore says.

Working through the soft patch

Escrow isn’t everything: Continued building through soft patches is often chalked down to escrow-backed pre-sales, but Siddiqui and Maggiore tell us there’s more to consider here. While escrow-backed pre-sales are an important mechanism for helping project delivery, they’re still very much project-specific, rather than used to fund a wider pipeline, Siddiqui says.

And when this runs dry? Homebuilders will turn to working capital lines to plug a gap if escrow funds drop, Maggiore tells us. However, he also points out that the lion’s share of debt raised from debt capital markets goes towards land acquisitions.

There’s also an important timing consideration. Maggiore tells us that, typically, buyer payment plans are structured to be paid as 60% during construction and 40% at project handover, meaning that for developers to tap into escrow funds, construction should be progressing. Here, pre-sales appear to fund a large portion of construction costs, bolstered by other avenues like equity and financing, he adds.

Delays ≠ cancellations

When it comes to the risks, “it’s important to distinguish between delays and cancellations,” Siddiqui adds. Despite moderating sales activity, rising construction costs, and tighter financing conditions, Siddiqui emphasizes that most affected projects have had their timelines adjusted, with only a few seeing outright cancellations. Strong capital positions and experience are also on the side of the most well-established developers, meaning that the primary risk lies in delivery timelines, he said.

It’s a different story for smaller developers, however. The risks are bigger for smaller developers whose balance sheets are less prepared to handle overrun costs and a prolonged sales slowdown, he said.

Is there an oversupply issue?

A larger danger lies in a supply and demand mismatch, as the property market is seeing record handovers and an uptick in supply at the same time transaction volumes are falling and demand-side indicators like new residence permits are down 15% q-o-q.

REMEMBER- Fitch previously forecast a 15% market correction for this year on the back of an uptick in supply. Currently, the macroeconomic shock is showing through on the volume side, rather than pricing, Maggiore tells us. “The same supply pipeline is meeting softer tourism, slower expatriate inflows, weaker sentiment, and tighter liquidity conditions,” he adds.

It’s also a question of where, according to Siddiqui, who points to possible “localized imbalances in specific segments and locations.” He also noted that completion rates often fall below projections and that a supply and demand mismatch has long been a staple of the market.

The outlook

The confidence is still there for bigger names. The groundwork for these larger builds would’ve been laid prior to softening conditions, meaning that pushing ahead signals conviction in the market’s structural demand trajectory, Siddiqui tells us.

Phased launches are a way of staggering costs for them. While smaller players are more at risk, for larger names, sukuk and bond issuances, the option to tap strong institutional and sovereign support, and strong credit profiles to keep access to funding on the table are also all on their side, according to Siddiqui.

Scaling back capex is also in the cards, Maggiore said, while also pointing to the possibility of authorities stepping in to allow deferred land payments, more flexibility when it comes to escrow mechanisms, or financing to attract buyers. Developers could also team up via JVs, co-investment, and land partners, he adds.