Developers Eye Sukuk Amid Dubai Property Dynamics

Sobha Realty and Omniyat are exploring dollar-denominated sukuk issuances to bolster their financial strategies in Dubai's evolving real estate landscape. Sobha Realty, a prominent luxury developer, has already made significant strides by issuing a $300 million sukuk in July 2023, which was later expanded by an additional $230 million in September 2024, bringing the total to $500 million. This sukuk, notable for its inclusion of a call feature-a first for a sub-investment grade issuer in the GCC-offers a five-year tenor with an annual profit rate of 8.75%, payable semi-annually. The issuance attracted a diverse investor base, with approximately 25% of interest stemming from international investors, reflecting strong global confidence in Sobha Realty's financial instruments. The sukuk is listed on both Nasdaq Dubai and the London Stock Exchange.

Omniyat, another key player in Dubai's luxury real estate sector, is reportedly planning its debut dollar sukuk to finance upcoming projects, potentially launching as early as this quarter. While specific details about Omniyat's sukuk are yet to be disclosed, the move underscores the company's intent to leverage Islamic finance instruments to support its growth ambitions amidst the dynamic property market.

Dubai's real estate market has experienced a significant surge, driven by increased demand and substantial foreign investment. However, developers face challenges such as rising construction costs and global economic uncertainties. In this context, sukuk issuances provide an alternative financing avenue, enabling companies to diversify their funding sources and mitigate risks associated with traditional debt instruments.

Sobha Realty's successful sukuk issuance and subsequent tap have not only enhanced its financial flexibility but also earned industry recognition. The initial $300 million sukuk was awarded the“Best Islamic Real Estate Deal – Global” by Euromoney in May 2024, highlighting its innovative structure and strong market reception. The transaction was oversubscribed, indicating robust investor appetite for well-structured Islamic finance products in the region.

The involvement of major financial institutions, including Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, Sharjah Islamic Bank, and Standard Chartered Bank, as joint global coordinators and lead managers, played a crucial role in the success of Sobha Realty's sukuk transactions. Legal counsel was provided by Clifford Chance and Dentons, while Grant Thornton served as the auditing firm, ensuring compliance and transparency throughout the process.

As Dubai continues to position itself as a global hub for Islamic finance, the strategic use of sukuk by leading developers like Sobha Realty and Omniyat reflects a broader trend of integrating Sharia-compliant financial instruments into corporate funding strategies. This approach not only aligns with the region's financial ethos but also caters to a growing base of investors seeking ethical investment opportunities.

MENAFN18042025000152002308ID1109446522