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Omar Musharraf, managing director for debt solutions and DCM at Arqaam Capital, told Zawya that investor demand for GCC real estate bonds and sukuk is unlikely to rebound this year with the debt market closed for developers through the remainder of 2026. He cited spiralling pre-development costs and supply chain disruptions that followed the outbreak of the United States and Israel’s war with Iran along with the subsequent blockade of the Strait of Hormuz. Musharraf added that while there may be occasional issuances next year once completed blocks of apartments and villas come through, real estate companies are out of the game for now. According to a Fitch Ratings report published on June 12, the agency revised its GCC corporate outlook to deteriorating because of the geopolitical risks that have weighed on sectors including real estate.
Fitch Ratings separately revised its EMEA homebuilders sector outlook to deteriorating from neutral in a June 1 assessment that highlighted the same geopolitical pressures across the region. A Goldman Sachs research note from March 2026 examined how long and how bad the Iran conflict could become, noting potential declines in non-oil GDP for some GCC economies amid higher energy prices and disrupted trade routes. The closure of the Strait of Hormuz removed around 400 million barrels from global oil supply in the conflict’s early stages, triggering price increases of about 50 percent that rippled through construction and development expenses. Analysts cited in reports on the economic impact of the 2026 Iran war warned that prolonged uncertainty could lead to project delays, cancellations and added strain from land bank commitments for developers already facing liquidity concerns.
Dollar bonds issued by regional property developers came under pressure in March as concerns over credit quality and refinancing risks intensified, according to data referenced in the Zawya report. Dubai’s real estate equity index dropped about 15 percent in a single week during that period while sector names led a broader selloff with credit spreads widening by roughly 180 to 250 basis points. The violent rebound in yields followed an earlier focus on real estate at the start of the year that had produced levels not previously seen in the region. Jad Raouda, partner for fixed income sales and trading at Arqaam Capital, said the marginal buyers now scrutinising these names are conducting extensive homework and proving highly selective.
Musharraf noted that at the height of the conflict, planned issuers faced questions of market access rather than pricing, with perhaps 20 percent of those originally intending to tap the market potentially falling away. He explained that the current environment has grown harder for debut issuers and certain sectors such as real estate even as the broader DCM business continues to function in the region. Escrow regulations in Abu Dhabi and Dubai have continued to offer near-term liquidity support for developers, yet extended geopolitical uncertainty risks eroding investor confidence further. A subsequent Fitch Ratings update on July 1 found that GCC banks’ credit fundamentals have proved resilient so far and can remain so in the second half of 2026 assuming no resumption of major military combat.
In May, Arqaam Capital worked on Saudi Arabia’s Dar Al Arkan Real Estate Development sukuk that raised $600 million in a five-year dollar-denominated senior unsecured offering priced at 7.25 percent with a 7.375 percent yield. The Tadawul-listed firm, which has shifted from wholesale land sales toward retail and vertical projects, directed the proceeds toward growth and existing developments. Musharraf described the issuance as the only real estate deal deemed fit to access the markets at that time because it centred on a land bank play rather than retail exposure. He stated that retail developers now find themselves out of the game for a while with the market closed to them and that they recognise the reality as well.
The conflict that began with airstrikes in late February 2026 has compounded challenges for the GCC real estate sector already navigating post-pandemic demand shifts and tighter regulatory scrutiny on unlicensed storage and development. Allianz Research in an early March 2026 report outlined branching scenarios for markets and economies, projecting that sustained energy inflation could pressure discount rates and earnings across exposed sectors including real estate and construction. Regional sovereign wealth funds with more than $3 trillion in assets have historically buffered such shocks through diversified investments, yet the immediate transmission through higher borrowing costs and reduced liquidity has left developers selective about new debt raises.
