The real estate booms of Dubai and Abu Dhabi have helped drive a world-beating rally in sukuks of the United Arab Emirates since the inauguration of US President Donald Trump.
The UAE’s Islamic securities have given investors an average return of 2.5 per cent since Jan. 20, replacing the US as the top sukuk performer in the Bloomberg benchmark for the asset class. The sukuks of Emaar Properties PJSC and Aldar Properties PJSC are among the leading performers in that time.
The UAE has become a favourite destination for global money managers searching for investment opportunities that are untouched by Trump’s tariff threats, geopolitical conflicts and economic slowdowns. Asset managers including Cheyne Capital and Ninety One Plc have made the country a key holding in their equity portfolios.
At the core of this appeal is the property markets of Dubai and Abu Dhabi where an expat-led growth is fueling demand for residential, commercial and office spaces. House prices in the two cities posted a 17.5 per cent and 12.3 per cent increase in the past 12 months, according to real estate data provider Reidin. High rental yields and developers backed by the government are giving investors confidence in the sector, even though the heady growth rates of the past years has moderated.
The global sukuk index is heading for its third monthly advance, making its second-best start to a year on record.
Emaar’s sukuk maturing in 2029 is trading near the highest level since Nov. 5, following the company’s better-than-expected results last month and a credit-rating upgrade by S&P Global.
“Emaar is a prime beneficiary of the real estate boom in Dubai owing its incumbent status and No. 1 market share,” said Fady Gendy, a fixed-income manager at Arqaam Capital. “The rally in the Emaar sukuk is underpinned by stellar results with record sales and robust liquidity.”
The company, with nearly a third of Dubai’s property sales, is a bellwether for the health of the real estate sector in the Middle East’s business hub. Last year, Emaar’s development arm had record sales and profit as demand for homes built ahead of construction and paid for in cash installments by buyers surged due to both strong demand from residents and foreign investors.
Emaar Development PJSC’s property sales surged 75% from the previous year hitting 65.4 billion dirhams ($17.8 billion) while its backlog climbed 59% in December from a year earlier reaching 91 billion dirhams, assuring investors of revenue over the coming years.
Both Emaar and Aldar didn’t respond to request for comments.
Expat demand
Aldar reported a 51 per cent increase in 2024 earnings before interest, taxes, depreciation and amortization, even as sales jumped 20 per cent. The company said it now derives 78 per cent of its sales from overseas and expat customers. That’s an increase from less than 20 per cent in the years before the UAE introduced its Golden Visa program and is a sign that property demand is underpinned by end users rather than speculators, according to Cheyne Capital.
Earlier in March, Aldar sold a $500 million 10-year green sukuk, receiving demand that was six times the amount offered. Meanwhile, Aldar’s 2033 and 2034 securities have given returns of more than 3 per cent since Jan. 20.
“Aldar benefits from its leading market position in Abu Dhabi and its strong ownership structure,” Gendy said. “The company announced a strong set of results for 2024 and is guiding for a doubling in its EBITDA over the coming three years.”
