Dubai Bonds Fall Into Distress as Iran War Heats Up

Dubai property developers are feeling the pinch of investor concern as the regional war rolls on into its second month.

Six Sharia-compliant bonds issued by Dubai-based Binghatti Holding and Omniyat Holdings have fallen into distress, Bloomberg reported.

The bonds are trading with a yield spread of over 1,000 basis points above the risk-free rate, according to data compiled by Bloomberg. Those six sukuk represent roughly 15 percent of dollar real estate bonds in West Asia. Unlike conventional bonds, the sukuk prohibit interest and generate returns from asset-derived profits.

Binghatti focuses largely on mid-market housing but has waded into luxury projects. The firm in 2024 announced plans for a Mercedes-Benz-branded tower in the emirate as well as one of the world’s tallest residential buildings. Omniyat concentrates its efforts on the ultra-luxury segment of the local market.

The real estate fallout from the war has been swift in Dubai’s once-hot market.

At the end of last month, a bond with the largest spread was trading at less than half of the threshold typically associated with distress. Since the war broke out, West Asia’s primary bond market has been effectively frozen. As a result, bond issuers have been left with few refinancing options and heightened financial pressure.

“Dubai real estate names were the most affected by the situation,” Zeina Rizk, co-head of fixed income at Amwal Capital, told Bloomberg. Short-selling by hedge funds added to a broad-based selloff across the sector.

A Binghatti spokesperson said that the company’s construction sites are fully operational and on schedule.

“Cancellation rates remain below 1 percent, consistent with historical norms, and March sales have hit approximately AED 500 million [$136.1 million] per week, matching pre-crisis levels,” the firm’s representative said, per Bloomberg.

Omniyat said the firm has active construction at all of its sites and there have been no purchase cancellations. Arada, meanwhile, has “taken proactive steps to reinforce liquidity as we prepare for the next 18 months,” the company said in a statement. “The outlook is manageable, with sufficient liquidity to meet all obligations over this period.”

Sobha did not return a Bloomberg request for comment.

Property companies worked fast to lock down locations for residential projects in Dubai and Abu Dhabi in recent years. Real estate bond issuance in the U.A.E. rose to nearly $7 billion last year, more than double 2024 levels, which set a record at the time. About $8 billion in debt is due by 2030.

— Chris Malone Méndez