Most projects scheduled for delivery in the UAE this year and 2027 continue to progress largely as planned despite supply chains being impacted by the closure of the Strait of Hormuz, according to a new report by Moody’s.

Construction is continuing largely as planned, inventory levels are adequate, contractors are, so far, absorbing most of the cost inflation, and developers are taking steps to preserve liquidity, the rating agency said based on feedback from rated companies in the Gulf state. 

“The disruption to shipping through the Strait of Hormuz has tested the resilience of the UAE’s homebuilding sector, but rated developers have so far adapted effectively,” said Lisa Jaeger, VP-Senior Analyst, Moody’s Ratings.

The US and Iran signed a memorandum of understanding on 17 June for a 60-day ceasefire and freer passage of shipping, while talks on longer-term arrangements continue amid temporary flare-ups.

However, costs for imported building materials have increased by around 20-25 percent compared with pre-conflict levels, the report said, citing developers.

Developers are supporting contractors in maintaining project momentum where needed, but to date, there has been no evidence of widespread contract renegotiation, the report said.

According to Moody’s, some developers are taking prudent financial measures to preserve liquidity, including reducing or deferring dividend payouts. New launches have declined and land acquisitions are generally on hold. 

Strong building material inventory positions going into the conflict, fixed-price contracts and contractors’ absorption of higher costs are limiting the credit impact on developers for now,” Jaeger said.

(Writing by P Deol; Editing by Anoop Menon)

(anoop.menon@lseg.com)

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