Kuwait is on the verge of a significant legislative shift that promises to reshape its housing finance landscape. Reports indicate that the Council of Ministers is poised to pass a groundbreaking mortgage law, which could unleash a potential market valued at $65 billion. This development is expected to enhance lenders’ credit portfolios by 40%, a much-needed boost for the nation’s economy.

The Need for Change in Housing Policy

Historically, the mortgage sector in Kuwait has faced restrictions, largely due to concerns about the political fallout from home foreclosures. Instead, the government has offered a public housing program, providing married citizens with subsidized homes or low-interest loans for land purchases. However, with a staggering backlog of 103,000 applications and long wait times that can extend for a decade, a reform is urgently needed.

• Current Housing Program Issues:
  • 103,000 pending applications
  • Long wait times of nearly ten years
  • Limited access to traditional mortgage options

A Transformative Step Forward

Abdulla Al Sumait, the acting group CEO of Al Ahli Bank of Kuwait, emphasizes that this new mortgage law could create a “structured framework” that improves home financing access for eligible citizens. Describing it as a “transformative step,” he highlights the law’s potential to stimulate the housing market significantly.

This legislation comes on the heels of Kuwait’s emir suspending parliament for up to four years, allowing the ruling Al-Sabah family to expedite the passage of crucial bills. In a related move, the cabinet recently approved a draft decree permitting Kuwait to issue international debt for the first time in eight years, further boosting market optimism.

Rising Market Confidence

The anticipation surrounding these legislative changes has fueled optimism in the financial markets. Kuwaiti stocks are outperforming their Gulf counterparts this year, with banks like Boubyan Bank KSCP, Burgan Bank SAK, and Warba Bank KSCP each experiencing increases of 17% or more.

According to Justin Alexander, a director at Khalij Economics, the introduction of mortgages—even with regulatory constraints—could significantly enhance the profitability of Kuwaiti lenders. There is also a growing foreign interest in the banking sector, with approximately 4.7 billion Kuwaiti dinars (about $15.3 billion) in foreign investments currently representing 15% of the banking market.

Expanding Infrastructure and Economic Growth

The mortgage law is expected to catalyze an extensive real estate boom in the coming years. Jaap Meijer, head of research at Arqaam Capital, asserts that it will lead to increased project awards aimed at developing infrastructure and new urban areas.

• Potential Benefits of the Mortgage Law:
  • Growth in infrastructure projects
  • Boost in housing construction starts
  • Increased domestic credit growth projected in high single digits over the medium term

Moreover, the government is actively pursuing additional reforms, including a new urban development law, while the Public Authority for Housing Welfare has signed contracts for three residential sites that will provide over 5,000 housing units.

Conclusion

Kuwait’s mortgage law represents a significant opportunity for economic revitalization and infrastructure development. Bader Al-Saif, an assistant professor at Kuwait University, describes the nation as an untapped market compared to its neighbors, suggesting that these changes could unlock substantial growth potential. As the legislation proceeds, the future of Kuwait’s housing finance system looks promising, heralding a new era for citizens seeking homeownership.