UAE homebuilders are likely to prioritise cash conservation following the regional conflict, with immediate property viewings already falling, Fitch Ratings warned in a note on March 10.

The ratings agency said the contractual backlog of pre-sales and purchasers' escrowed cash should provide near-term stability for its rated portfolio, which is clustered around the 'B+' and 'BB-' range, but flagged rising concern over the viability of future projects.

Fitch said booming housing construction had already been reliant on overseas demand before the conflict, which it expected to be subdued.

In Dubai, local resident demand accounts for an estimated 40% of end-users, according to Property Monitor, leaving the market heavily exposed to the withdrawal of foreign buyers.

The agency noted that homebuilders in its rated portfolio typically secure pre-sales before breaking ground, with purchasers contributing agreed prices to escrow accounts that are released upon construction milestones.

This structure means near-term projects that are substantially pre-sold are likely to be completed, and Fitch said more agile construction companies would mostly finish projects on time and on budget despite likely supply disruptions.

However, Fitch said future rating actions would focus on builders' ability to conserve liquidity and their visibility before committing to the next stage of debt-funded investment.

The main cash outflow risk centres on land purchases, which typically represent 20% of end-value, and initial infrastructure spend, with a pre-sale threshold of 60% to 65% required before construction proceeds.

The agency said UAE authorities were likely to look at support measures for the real estate sector, including deferred land payments, flexibility with escrow mechanisms or purchaser financing incentives. It warned, however, that past measures of this kind had increased builders' own debt burdens.

Regional diversification across Dubai, Saudi Arabia, Oman and Kuwait was unlikely to mitigate pressures given the conflict's broad spillover effects, with overseas projects funded on a non-recourse basis likely to be scaled back if cash conservation became necessary, Fitch added.