Two Dubai property developers have seen their Islamic bonds, or sukuk, fall into distressed territory, with investor concern mounting over credit quality and refinancing risks as the war in the Middle East rolls on for a fourth week.
Six dollar-denominated sukuk issued by property firms are indicated at distressed levels, or trading with a yield spread of over 1,000 basis points above the risk-free rate, according to data compiled by Bloomberg. In total, they represent about 15% of dollar real estate bonds in the Middle East.
The Shariah-compliant bonds are issued by entities linked to Dubai-based Binghatti Holding Ltd and Omniyat Holdings Ltd, with a 2027 issue from Binghatti coming in as the most distressed. Binghatti’s core business is mid-market housing, though it has also made a push into luxury projects, unveiling plans for a Mercedes-branded tower and one of the world’s tallest residential buildings. Omniyat focuses on the ultra-luxury segment.
Even among bonds and sukuk that haven’t crossed the distressed threshold, spreads have ballooned since the start of the war. Risk premiums on a 2030-dated bond by an entity of Sobha Realty have surged from under 300 basis points to 800 basis points. An Arada Developments LLC vehicle’s 2030-maturing security has seen spreads more than double to 728 basis points.
Debt issued by all four of these firms have sub-investment grade scores at major rating companies, based on data compiled by Bloomberg. Their high-grade peers’ spreads have also widened, but losses are more contained.
Once-Hot Sector
The once-hot sector has soured quickly. At the end of February, the widest-indicated bond was trading at less than half of the threshold associated with distress. But the Middle East’s primary bond market has been effectively shut since the war broke out, leaving issuers with limited refinancing options and increasing pressure on lower-rated names.
“Dubai real estate names were the most affected by the situation,” with short-selling by hedge funds contributing to a broad-based selloff across the sector, said Zeina Rizk, co-head of fixed income at Amwal Capital.
A representative for Binghatti said in a statement that the firm’s construction sites are fully operational and on schedule despite geopolitical tensions. “Cancellation rates remain below 1%, consistent with historical norms, and March sales have hit approximately AED 500 million per week, matching pre-crisis levels.”
Omniyat said it is “in a strong position, fully funded, with substantial contracted revenue providing over four years of revenue visibility.” Construction is active across all of the firm’s launched sites and there have been no purchase cancellations, the statement added.
Arada 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 could not be reached for comment.
Fitch Ratings has placed both Binghatti and Omniyat on watch for possible downgrades, citing the impact of geopolitical risk on demand and the risk of higher construction costs. Still, both companies entered the recent period of volatility with solid balance sheets, Fitch said. Separately, Moody’s Ratings affirmed Binghatti’s rating last week, saying it has good liquidity over the next 12 months to cover its February 2027 maturity.
What Bloomberg Intelligence Says:
The GCC real estate party in bond markets appears to be ending before it began. A prolonged conflict could impede market access, which was helping to fund significant scaling up across the region. Government support looks inevitable, but its form and extent are as yet opaque. How the disparate group of issuers responds will be as varied as their business models and credit metrics. Some ratings are already pressured.
— Tolu M Alamutu, Senior Credit Analyst
Before the war, property companies had been on a debt spree as they raced to secure locations for residential projects in Dubai and Abu Dhabi. Real estate bond issuance in the UAE hit nearly $7 billion in 2025, more than double the 2024 number, itself a record. That’s created a growing wall of maturities, with about $8 billion due by 2030.
“There are pockets of opportunities appearing but some are waiting for better clarity on the outcome before stepping in,” said Amwal Capital’s Rizk.
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