Dubai bets $1.4 billion on a new financial district after Gulf war slowdown

Dubai is pressing ahead with a $1.4 billion real estate development that will add a new cluster of hotels, residences and Grade A office space to its financial district, even as the war in West Asia weighs on property transactions and construction costs, according to a Bloomberg report.

Construction has begun on Water Gardens, a four-building development led by H&H Development, with 30,000 workers already on site. The project, which includes two hotels, residential properties and office towers, is scheduled for completion before the end of 2028, Bloomberg reported.

The investment comes as Dubai's property market adjusts to weaker demand from foreign investors following Iranian attacks on the United Arab Emirates at the start of the Gulf war. Although transaction volumes have declined, property prices and rents have largely remained resilient, with values recording only marginal declines.


Also read: Dubai’s big-ticket property market cools, but offices tell a different story

Shahab Lutfi, chairman of H&H Development, said property sales were continuing despite the slowdown. Last week, the developer sold two Four Seasons-branded residences in the new district for 35 million dirhams ($9.5 million) and 45 million dirhams, respectively, he told Bloomberg in an interview.

“There are cycles in every industry and Dubai always comes out of these cycles much stronger,” Lutfi said, as quoted by Bloomberg. “We don’t look at it on a short terms basis and we’ve managed our financials pretty well.”

Lutfi co-founded H&H with Mohamed bin Hadi Al Hussaini, the UAE's Minister of State for Financial Affairs.

Dubai property sales face a correction

The slowdown has been significant for developers. H&H's sales transactions between March and September were down at least 50% from the corresponding period a year earlier, Lutfi told Bloomberg, citing the company's internal assessment.

“I’d comfortably say there is a 50% drop at least, if not more, but that’s expected,” the chairman said.

“We had an overheating market, but even a 50% drop of whatever we used to sell before is still comfortable,” Lutfi added.

Despite the weaker market, about 85% of the branded residences in the new development have been sold, with prices exceeding 8,000 dirhams per square foot, among the highest rates in the area, according to Lutfi.

The development also includes another hotel with 154 rooms and 40 residences. Eden House, a residential building comprising 132 apartments, is under construction and will be retained as a rental-income asset.

A 12-storey office tower will add 246,737 square feet of Grade A office space, alongside a members' club, Miltos Bossinis, chief executive officer of H&H, told Bloomberg. Most of the development will be leased and operated rather than sold, Lutfi said.

Financial hub expands amid uncertainty

The project comes as Dubai seeks to deepen its position as an international financial and business centre, building on the established Dubai International Financial Centre (DIFC).

DIFC, the leading financial centre serving the Middle East, Africa and South Asia (MEASA), has spent more than 22 years facilitating trade and investment flows across a region comprising more than 77 countries, with a population of about 3.8 billion and estimated gross domestic product of $11.2 trillion. It connects these markets with economies in Asia, Europe and the Americas.

DIFC recorded 8,844 active companies and a workforce of 50,200 professionals in 2025, while its artificial intelligence, fintech and innovation community grew to 1,677 companies.

The centre's expansion accelerated in 2026 with the launch of DIFC Zabeel District, described by DIFC as the region's most extensive demand-led expansion of a financial centre. Dubai also climbed to seventh place globally in the Global Financial Centres Index, its highest-ever ranking.

By the end of June, DIFC had crossed the 10,000-company milestone for the first time, reaching 10,018 active registered companies. Its AI, fintech and innovation community had expanded to 1,933 companies.

The growing financial ecosystem provides a backdrop for new commercial real estate investment, even as developers contend with a more cautious market.

ET Bureau reported in August that lingering geopolitical tensions had slowed big-ticket commercial property transactions in Dubai, while demand for office space remained firm amid limited supply.

According to property consultancy Anarock's data, Dubai recorded 2,844 commercial property transactions in the April-June quarter, compared with 2,875 a year earlier. The value of these deals fell 21% year-on-year to 24.49 billion dirhams from 31.15 billion dirhams, indicating that the slowdown was more pronounced in transaction value than in deal volumes.

Construction costs rise

Developers are also facing higher building expenses as the war pushes up prices for contractors and construction materials in the region and elsewhere.

Lutfi told Bloomberg that construction material costs had risen by about 15%. However, the chairman said the market had not seen widespread selling pressure or steep reductions in asking prices.

“it's not like people are running away or reducing the sales price drastically,” Lutfi said. “If you’re lucky, you might get 4% or 5% discount on some projects, not in ours, but around the city.”