War, Property and Risk: What Gulf Developers and Investors Should Be Doing Right Now

After the first month of this war we need to acknowledge we (and by we I mean the real estate industry) have a problem. When speaking to clients now comparing conversations this week to the start of the campaign the shift in mood has been impossible to miss. Sales have pretty much ground to a halt in many segments, and there’s a real loss of buyer confidence on the ground right now. My clients phones have gone quiet, off-plan deals are stalling, and people are nervous – and with good reason.

One large developer put it to me bluntly over coffee this week:

“Sales aren’t slow – they’ve basically stopped. Cash flow and getting the contractors to deliver on time are the immediate headaches. If the project slips any further, everything slips.”

This isn’t the full 2008-style collapse we saw before. It’s a sudden freeze driven by geopolitics and uncertainty. Right now it feels like an immediate crisis for cash flow and sentiment, but having watched Gulf cycles for 18 years, I reckon there’s a decent chance things start to thaw after the summer once the broader picture stabilises and buyers get their nerve back. In the meantime, the smart operators are moving fast into proper risk management – and from a lawyer’s perspective, that means getting contracts, structures and protections locked down immediately.

In this article:

• The Market Has Hit the Brakes – Hard
• Time, Cash Flow and Legal Exposure Are the Real Threats
• What Developers Should Be Doing Right Now
• What Investors Should Be Doing

The Market Has Hit the Brakes – Hard

Brokers are reporting a sharp drop in enquiries and transactions. Even the overseas buyers who usually provide a buffer during global wobbles are holding fire, asking far tougher questions about escrow, completion dates, developer balance sheets and exit strategies. Developer credibility and on-time delivery have suddenly become the only things that matter.

Developers who can still prove strong finances, reliable contractors and realistic timelines might salvage a few deals. Everyone else is facing a very quiet period.

Time, Cash Flow and Legal Exposure Are the Real Threats

Developers aren’t losing sleep over modest price softening as much as they are over delays piling on top of zero sales momentum.

One developer running several large projects told me:

“If I hit my deadlines and sales pick up after the summer, I can ride this out. If I end up substantially late with no sales coming in now? That’s a proper crisis.”

Delays in this environment trigger a nasty chain reaction: contractor claims, buyer termination requests, escrow pressure, spiraling interest, refinancing risk and serious reputational damage.

What Developers Should Be Doing Right Now

Full Contract Review – Start Today

Pull every construction contract, supply agreement, off-plan sales contract and JV document.

• Force majeure clauses: Do they actually cover regional conflict, airspace closures or supply chain disruption caused by war? Most older clauses are too vague – get them broadened via a deed of variation where possible.
• Extension of Time (EOT) provisions: Ensure clear notice periods, evidence requirements and links to force majeure.
• Price escalation and variation clauses: Strengthen protection against material cost spikes.
• Delay penalties and liquidated damages: Review caps and triggers carefully.

Renegotiate Contractor and Supplier Terms

Don’t wait for claims to land. Initiate formal variation discussions now for revised programmes, shared cost risk on materials, rights to alternative suppliers, and stepped contingency budgets. Every change must be documented and signed – informal handshake deals will not stand up later.

Financing Documents – Stress Test and Amend

Go through all facility agreements with a fine-tooth comb:

• Check financial covenants (LTV, debt service cover, interest cover) against realistic lower-sales scenarios.
• Review material adverse change (MAC) clauses and events of default – negotiate waivers or cure periods while banks are still approachable.
• Push for extensions on refinancing windows and build in equity cure rights if they’re not already there.

Off-Plan Sales and Escrow Management

Tighten buyer default and termination clauses to protect cash already held in escrow. Review release triggers to ensure they reflect actual on-site progress, not hopeful forecasts. Consider structured incentives (such as limited extensions or upgrades) in exchange for buyers agreeing to waive or limit termination rights. Document everything properly to avoid issues with regulators.

Insurance Overhaul

This is non-negotiable. Pull every policy and have a specialist review it. Standard cover often excludes war, terrorism, political violence, drone or missile damage, and business interruption linked to regional events. Add endorsements now, even if the premium stings.

Corporate and Land Structuring

Ring-fence assets into clean SPVs where possible. Review land payment schedules with the relevant authorities and seek phased payments or deferrals where regulations permit. If you hold prime land and aren’t under pressure to sell, hold tight. History shows that time usually rewards patience here.

What Investors Should Be Doing

Lease Portfolio Audit

• Termination/break options
• Rent suspension or abatement clauses (especially any force majeure links)
• Service charge recovery and maintenance obligations

Pay particular attention to tenant concentration risk – too many eggs in one basket (sector or nationality) is dangerous now in the current environment.

Debt Review and Renegotiation

Stress-test facilities against higher rates or lower rental income. Negotiate fixed-rate conversions, LTV resets, or short-term waivers. Ensure any changes are recorded formally.

Liquidity and Exit Planning

Update JV and shareholder agreements with clearer exit mechanisms, drag and tag rights. Consider selective sales of non-core assets to free up cash, but never fire-sale prime holdings.

Dispute Preparation

Map potential flashpoints with tenants, contractors, banks or joint venture partners. Ensure notice provisions are followed to the letter and that your dispute resolution clauses (arbitration seat, governing law, DIFC versus onshore) work in your favour. Start preserving evidence now.

Right now it’s tough: sales have dried up and confidence has taken a proper hit. But this isn’t the death of the Gulf property market. With any luck, once the summer heat passes and the geopolitical noise settles, buyer sentiment should start to return – maybe not at full throttle, but enough to get momentum going again.

The next 12–18 months will sort the field. They’ll separate the strong balance sheets from the over-leveraged, the projects that actually finish from those that don’t, the disciplined low-leverage investors from the highly geared, and the patient land bankers from the forced sellers.

One broker summed it up dryly:

“The next year won’t destroy Dubai. But it might decide who owns half of it going forward.”

Gulf real estate has always been shaped more by solid balance sheets, tight contracts and patience than by external headlines.

Developers and investors who use this quieter period to get their legal affairs in order – auditing contracts, strengthening protections, securing financing, reviewing insurance and ring-fencing assets – will be the ones still standing when confidence returns after the summer.

Those who just sit and hope for sales to magically reappear on their own may learn the hard way: in this market, survival is decided in the good drafting of existing contracts and the boardroom long before it’s ever decided on the sales floor.