Category: UAE Business Setup

Most people outside real estate finance have heard the term capital stack without really knowing what sits inside it, so it is worth laying it out plainly, because each of the four common pieces solves a different problem.

Senior debt is the core layer, typically a bank loan secured directly against the project’s land and asset value, and it is the cheapest capital available because the lender’s risk is lowest, it gets paid back first if anything goes wrong. The trade-off is that banks are conservative about how much of total project cost they will cover, and they usually want meaningful presales already achieved and a clean, de-risked land position before they commit real money.

Bridge finance is short term, usually six to eighteen months, used to cover a specific gap rather than fund the whole build. A developer might use it to complete a land acquisition quickly, ahead of longer-term financing being arranged, or to cover a cash gap between one financial event and the next. It costs more than senior debt because it is faster to arrange and carries more risk, but it is priced for speed, not for the life of the project.

Mezzanine finance sits between senior debt and equity, and it is the layer that usually closes the gap described above, the money needed before presale and mortgage cash starts arriving in meaningful volume. It carries higher leverage than a bank will offer and more flexible repayment terms, in exchange for a higher cost of capital and sometimes a share of the project’s upside. For a developer who does not want to give up equity or bring in a full partner, mezzanine finance is often the more attractive route, provided the numbers still work once its higher cost is properly factored into the model.

Preferred equity behaves more like equity in how it is structured, there is no fixed repayment schedule the way debt has, but it sits ahead of ordinary equity in getting paid out, and it gives the investor stronger protection and a defined return target rather than open ended upside. It suits a developer who wants to keep control of the project and share less of the eventual profit than a full joint venture partner would take, while still bringing in capital that a bank’s own criteria will not stretch to cover.

None of these four exist to replace the others. A well-structured deal usually blends two or three of them, senior debt covering the base, mezzanine finance or preferred equity covering the gap, sometimes a short bridge facility solving one specific timing problem at the start. Getting that blend wrong, too much expensive capital, or too little flexible capital at the point it is needed, is what turns a fundable project into one that stalls halfway through construction.

To make this concrete, take an illustrative mid-size residential development in Dubai. This is not a real project, it is built here purely to show how the numbers typically sit together. Say total project cost is AED 120 million, split roughly between AED 30 million for the land and AED 90 million for construction and soft costs. A developer bringing 25 percent of that in as their own equity puts in AED 30 million. A bank, once satisfied with presales and the land position, might cover senior debt at around 55 percent of total cost, AED 66 million. That leaves a gap of roughly AED 24 million, 20 percent of the total, which is exactly where mezzanine finance or preferred equity typically sits, priced higher than the senior debt but still considerably cheaper than the developer giving up an equivalent slice of the project to a full equity partner instead. Structured well, that AED 24 million is the difference between a project that breaks ground on schedule and one that sits waiting for presales to catch up with the construction bill.

Companies that were already conducting mainland business informally, before the resolution existed, were given one year to regularize. That gave a deadline of March 3, 2026. The resolution allows DET to grant a one-time extension, but the application for that extension had to go in before the original deadline, not after.

That means there are now three categories of business, and they are in very different positions. If you regularized before March 3, 2026, you are compliant and this article is background reading. If you applied for an extension before the deadline, you should have a defined new date from DET and a live application on file. If neither happened, and you are still trading in the mainland on a free zone license, you are currently unauthorized, and the resolution states that non-compliance can lead to fines, penalties, or revocation of your authorization to operate outside the free zone.

We have not found confirmed public reporting of a blanket, sector wide extension issued after the deadline. Treat any claim that “everyone automatically got more time” with caution unless it points to an actual DET notices and check directly with DET or your free zone authority rather than relying on secondhand blog posts, this one included, for your specific standing.

The practical takeaway is simple. If you are unsure which of the three categories your business falls into, that uncertainty is itself the risk. Five months past a compliance deadline is long enough that “we were going to get to it” stops being a reasonable answer if DET asks.