Investor appetite for Gulf Cooperation Council (GCC) real estate bonds and sukuk issuances is projected to remain stagnant for the rest of the year, with executives at financial services firm Arqaam Capital characterizing the debt capital market as essentially “closed” to property developers for the remainder of 2026.
Omar Musharraf, Managing Director for Debt Solutions and DCM at Arqaam Capital, noted that investor enthusiasm for real estate entities will remain subdued for the immediate future. Speaking to Zawya, Musharraf indicated that while next year might see minor, sporadic debt issuances, developers will likely remain sidelined for the rest of 2026 until a fresh wave of completed residential inventory—including apartments and villas—is officially delivered to the market.
These observations surface as regional developers grapple with intensifying liquidity pressures driven by soaring pre-development expenditures and severe supply chain bottlenecks. These headwinds stem from the geopolitical fallout of the military conflict involving the United States, Israel, and Iran, alongside the subsequent blockade of the strategic Strait of Hormuz. Rating agency Fitch reported that while strict escrow account frameworks in Abu Dhabi and Dubai offer short-term cash flow buffers, prolonged geopolitical instability threatens to erode investor confidence, potentially triggering project delays, cancellations, and heightened financial strain from existing land bank obligations.
Musharraf highlighted that at the peak of the regional conflict, developers planning to enter the market faced an absolute barrier to market access rather than just unfavorable pricing dynamics. Months into the hostilities, he projects that while the broader regional debt capital market will remain resilient, roughly 20% of the originally planned issuances will likely be abandoned, with debut issuers and vulnerable sectors like real estate bearing the brunt of the downturn.
The sector’s vulnerability was evident in March when dollar-denominated bonds issued by regional property developers faced intense selling pressure due to escalating concerns over credit quality and refinancing vulnerabilities. During that period, Dubai’s real estate equity index plummeted by roughly 15% in a single week, with property firms spearheading the market sell-off as credit spreads widened sharply by 180 to 250 basis points.
Jad Raouda, Partner in Fixed Income Sales and Trading at Arqaam Capital, remarked that the year started with a heavy concentration on real estate offering unprecedented regional yields, which triggered a swift and aggressive market correction when sentiment turned. He added that marginal buyers assessing real estate assets are now conducting exhaustive due diligence and exercising extreme selectivity.
A notable exception occurred in May when Arqaam Capital facilitated a $600 million sukuk issuance for Saudi Arabia’s Dar Al Arkan Real Estate Development. The Tadawul-listed company secured the capital through a U.S. dollar-denominated, fixed-rate senior unsecured offering priced at 7.25% with a yield of 7.375%. While Dar Al Arkan—which traditionally focused on wholesale land transactions before diversifying into retail and vertical developments—intends to use the proceeds to bankroll ongoing projects and corporate growth, Musharraf clarified that this deal was a unique exception. He explained that the transaction was only viable because it functioned primarily as a land bank play rather than a retail endeavor, concluding that the market remains firmly locked for retail developers who are now acutely aware of their sidelined status.
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