Gulf tensions rattle Dubai real estate sector

Fifteen to 20 years ago, when the going was tough, officials and agents of Dubai-based real-estate companies would visit Mumbai and other key cities in India. They showcased and aggressively marketed their projects, highlighting comparative advantages in pricing and rental income. The aim was to persuade Indians to invest in property or buy a second home.

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The impact was swift: within two weeks of the war, the Dubai Financial Market Real Estate Index (DFMREI) had fallen 21 per cent, while property transaction volumes reportedly declined 38 per cent year-on-year in the first 13 days .

The sales pitch focused largely on price. A Dubai apartment was typically priced at about one-third the cost of a south Mumbai apartment. It also promised rental yields of 6%–8%, compared with just 1%-2% in Mumbai.

But that situation changed dramatically with the introduction of the UAE Golden Visa programme in 2019, and Dubai emerged as a dependable global business destination and a haven in the post-COVID era.

Due to the local government’s ability to handle the pandemic, citizens from many countries across Asia and Europe flocked to the city and made it their primary home. This, in turn, fuelled unprecedented demand for luxury real-estate, as well as high-quality office and retail space.

DUBAI, UNITED ARAB EMIRATES – SEPTEMBER 14: Cranes are used at a construction site on September 14, 2016 in Dubai, United Arab Emirates. (Photo by Tom Dulat/Getty Images)
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Tom Dulat

In 2025, the Dubai real-estate market witnessed transactions worth AED 917 billion ($250 billion), making it one of the largest markets globally. Over the past few years, it has gained strength as more corporate offices from across Asia, Europe and Africa have chosen the city as their regional headquarters.

Tables turned

That confidence was shaken on February 28, 2026, when the city became collateral damage in the U.S.–Israel strikes on Iran. Iran retaliated by firing missiles and drones at the U.S. assets and allies across the Gulf, including the UAE.

The continuation of hostilities in West Asia and the constant threat of a missile or a drone flying in has raised a question mark on its “haven” status and rattled investors, fuelling speculations about an imminent downturn of Dubai’s real-estate market.

“We are seeing more enquiries from Dubai-based NRIs, and they are evaluating to buy a property back home and have a foot in India. Dubai is an extraordinary city; it will bounce back from this unprecedented situation. But people are now scared”Ashish PuravankaraManaging director of Puravankara Projects Ltd, Bengaluru

The company has many offices in West Asia, and earlier it used to get 150 to 200 enquiries every week, and this has gone up by 50%-60%, he says, adding that people who had made Dubai their primary home are now thinking of buying a home in India after the war broke out. How long this situation will continue is anyone’s guess.

“It’s too early to assess the situation, and no real-estate transaction might have happened since the war started in the region,” says Samir Jasuja, managing director and CEO of PropEquity, a real-estate data and analytics platform.

“But I believe it is a temporary blip. They [the local government] have been caught off guard; they have all the money and power to make their city safe and vibrant again,” he says.

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The luxury segment is witnessing discounts of up to 15 per cent, while mid-income housing remains stable and mass housing in oversupplied areas has seen price softening of up to 6 per cent, according to analyst observations.

It is an existential issue for Dubai or the UAE. They would spend billions of dollars to secure their city, may have an Iron Dome system like that of Israel to safeguard their assets and residents.

For Dubai, wholesale and retail trade, transportation and logistics and financial services are its main contributors to GDP, followed by real-estate and tourism.

If the citizens, expatriates and businesses do not feel safe, all will go, and the monarchies of the UAE would do everything at their command to regain that trust Dubai is known for and attract more people to make the emirates their primary home.

Dubai has a population of about four million (40 lakh), of whom 92% are expatriates. Its rapid economic growth has been attracting businesspeople and professionals in tens of thousands. Besides being a major tourist destination and air-transport hub, it has a thriving economy.

The country will not survive if the local government cannot guarantee peace, security, stability and continuous economic reforms. According to analysts, it could spend trillions of dollars to achieve this, and money is no issue for such cash-rich jurisdictions. If the need be and for their own survival, they may even show the Americans the door and have plenty of money to buy security.

Real estate agent showing a house for sale to a couple and looking at images on a tablet -home ownership concepts
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ToucanStudios

Role for investors

Anshuman Magazine, chairman and CEO of India, South-East Asia, Middle East & Africa, CBRE, believes that Dubai and India represent two of the most dynamic investment corridors globally, each serving a distinct strategic role for investors. He notes that “while current geopolitical developments in the wider region have temporarily led to a more observational stance by some investors, the underlying fundamentals of the hub remain structurally sound.”

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“In 2025, we saw residential transactions in Dubai rising 31 per cent year-on-year to AED 395 billion ($107.5 billion), supported by robust infrastructure and a world-class regulatory framework that continues to attract international capital,” he says, adding, “So far in 2026, the residential sales are already ahead as compared to the same period in 2025, AED125 billion (US$34 billion) versus AED110 billion (US$30 billion).”

Indian market

At the same time, the Indian market is demonstrating immense depth. With institutional equity inflows in India reaching a record $14 billion in 2025, a trend of portfolio diversification is being seen rather than a shift away from any single region.

“Investors are thinking about India as a long-term strategic base, not just an alternative to somewhere else. The depth of its talent pool and a maturing regulatory environment now offer institutional investors genuine transparency and liquidity,” Magazine says.

For the global investors, these markets are being viewed as complementary: one offering a high-yield, international lifestyle gateway, and the other providing a high-growth, domestic consumption-led hedge.

Dubai-based developer Rizwan Sajan, founder and chairman of Danube Group, believes that the city will soon overcome this crisis. “,” he says.

“We have overcome crises before — from the 2008 financial downturn to COVID — and have emerged stronger each time. Resilience is embedded in Dubai’s DNA, and I am confident that our economy will continue to grow and thrive”Rizwan SajanFounder and chairman of Danube Group

According to him, as for the real-estate market, at this stage the impact appears to be driven more by sentiment than by any fundamental structural shift. It would be premature to draw any long-term conclusions at this point.

Delay in purchases

Commenting on the current situation, Aakash Patel, director of Atul Projects, a Mumbai-based real-estate firm, says investor sentiment is cautious, with some buyers delaying purchases. With transaction volumes declining, developers are offering incentives such as flexible payment plans.

However, prices still remain firm, and with high-value transactions happening, it suggests a period of temporary pause and a wait-and-watch situation.

According to analysts, the ongoing situation might prompt global investors to consider alternative assets, which might be a great opportunity for the Indian real estate market, especially in cities with high demand for property, such as Mumbai and Gurugram.

Mumbai-based real-estate company Dhuleva Group’s director, Anuj Mehta, feels that due to the current global geopolitical climate, capital movement from Dubai will happen as investors would seek to balance risk versus return.

“Both India and specific micro-markets such as south Mumbai will be considered more stable, offering both capital appreciation and protection of wealth over the long term”Anuj MehtaDhuleva Group’s director

Analysts expect a mild correction, with prices likely to fall by about 7 per cent on average, and the downturn projected to continue until 2028.

Shekhar G. Patel, national president of real estate body Confederation of Real Estate Developers’ Association of India (CREDAI), believes that High Networth Individuals (HNIs) will now think twice before investing in Dubai.

“After the recent attacks, Dubai is not as before. Some people will take away capital. The incident will impact that market for the next two to three years. With the possibility of the proxy war to continue, many investors are likely to consider India as their investment destination, and this is for India’s advantage,” says Patel.