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UAE developers weather Hormuz disruption as contractors absorb rising costs, says Moody’s
Construction on 2026 and 2027 handovers remains largely on track despite a 20-25% jump in imported material costs, with fixed-price contracts shielding developer margins for now
- PUBLISHED: Wed 1 Jul 2026, 3:25 PM
UAE real estate developers are managing the fallout from ongoing disruption to shipping through the Strait of Hormuz better than many market observers expected, with construction timelines for the most part holding steady, according to a new report by Moody’s Ratings.
The report finds that inventory levels remain adequate, contractors are so far absorbing the bulk of cost inflation, and developers are taking pre-emptive steps to preserve liquidity as supply chains are rerouted at higher cost and with longer lead times.
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A memorandum of understanding signed between the US and Iran on June 17 established a 60-day ceasefire and freer passage for shipping while talks continue on longer-term arrangements. While described as a credit positive development, the ceasefire has already seen violations from both sides, suggesting de-escalation will be gradual. The report’s central scenario anticipates significant disruption persisting into the autumn, with trade normalisation not expected until 2027.
The prolonged uncertainty sharpens the focus on developers’ ability to procure materials and hand over projects on schedule – a critical factor given that handovers typically unlock 20-40 per cent of sales proceeds in Dubai and Abu Dhabi, and around 60 per cent in Sharjah.
Deliveries on track
Feedback from rated issuers, according to Moody’s, indicated 2026 and 2027 deliveries remain on schedule. Building material inventory coverage currently stands at two to six months, with more advanced projects holding higher stocks of fit-out materials, since most imported goods go into interiors and electromechanical systems installed after the structural phase.
Core materials such as concrete, steel, aluminium and ceramics are largely sourced domestically and have seen little disruption. Items such as lifts, air-conditioning equipment, MEP components, lighting, wood joinery, natural stone and furnishings are more exposed, being import-dependent.
As projects near completion, developers typically increase buffer inventories to avoid last-mile delays, meaning many properties scheduled for delivery through end-2026 were already close to completion – or had materials secured – before disruption began. Shipments through Gulf ports are increasingly being rerouted via Oman, Saudi Arabia and the UAE’s East Coast to bypass the Strait, adding transit time and complexity but keeping construction on pace for most large developers.
Contractors, not developers, absorbing cost
Imported building material costs have risen by roughly 20-25 per cent compared with pre-conflict levels, developers report. Crucially, these increases have so far been absorbed largely by contractors rather than developers.
According to Moody’s, most rated developers – including Emaar Properties, Aldar Properties, Damac Real Estate Development Limited, DIFC and Arada Developments – rely primarily on third-party contractors, while others such as PNC Investments and Binghatti Holding have integrated or related-party construction capabilities.
Either way, near-term protection comes from fixed-price construction contracts or material prices locked in ahead of time, limiting the effect on margins and cash flow over the next 12 months, said the global ratings agency.
Contractors, meanwhile, appear able to absorb the added pressure for now, having built up stronger margins during the UAE property market's recent upcycle. Easing labour shortages compared with pre-conflict conditions are also helping sustain operations. There is no evidence yet of widespread contract renegotiation, though that dynamic could shift if disruption drags into 2027.
Even in a fuller pass-through scenario, the report estimates construction costs would rise by only 1.5 to 2 percentage points annually – with a matching hit to gross margins – assuming cost pressure affects around half of all projects, reflecting uneven exposure across near-completion and early-stage developments.
