As a workaround, could you try to create the failover group using PowerShell?
$subscriptionId = "<SubscriptionID>"
$resourceGroupName = "<Resource-Group-Name>"
$location = "<Region>"
$adminLogin = "<Admin-Login>"
$password = "<Complex-Password>"
$serverName = "<Primary-Server-Name>"
$databaseName = "<Database-Name>"
$drLocation = "<DR-Region>"
$drServerName = "<Secondary-Server-Name>"
$failoverGroupName = "<Failover-Group-Name>"
# Create a secondary server in the failover region
Write-host "Creating a secondary server in the failover region..."
$drServer = New-AzSqlServer -ResourceGroupName $resourceGroupName `
-ServerName $drServerName `
-Location $drLocation `
-SqlAdministratorCredentials $(New-Object -TypeName System.Management.Automation.PSCredential `
-ArgumentList $adminlogin, $(ConvertTo-SecureString -String $password -AsPlainText -Force))
$drServer
# Create a failover group between the servers
$failovergroup = Write-host "Creating a failover group between the primary and secondary server..."
New-AzSqlDatabaseFailoverGroup `
ResourceGroupName $resourceGroupName `
-ServerName $serverName `
-PartnerServerName $drServerName `
FailoverGroupName $failoverGroupName `
FailoverPolicy Automatic `
-GracePeriodWithDataLossHours 2
$failovergroup
# Add the database to the failover group
Write-host "Adding the database to the failover group..."
Get-AzSqlDatabase `
-ResourceGroupName $resourceGroupName `
-ServerName $serverName `
-DatabaseName $databaseName | `
Add-AzSqlDatabaseToFailoverGroup `
-ResourceGroupName $resourceGroupName `
-ServerName $serverName `
-FailoverGroupName $failoverGroupName
Write-host "Successfully added the database to the failover group..."