Kuwait moves toward bank-issued mortgages in landmark decision

• Kuwait’s mortgage law is expected to drive long-term real estate growth and attract foreign investment, which currently stands at KD 4.7 billion, or 15% of the banking sector.

Kuwait is set to approve bank-issued mortgages for the first time, a move that could transform its financial sector. The cabinet is expected to pass the legislation soon, Al Anba newspaper reported, citing confidential sources.

This move could unlock a market potentially worth $65 billion, increasing banks’ loan portfolios by 40%. Mortgages were previously neither permitted nor legally regulated in Kuwait due to concerns over the political repercussions of foreclosures. Instead, the country provided a public housing program, allowing married citizens to acquire a heavily subsidized home or plot of land with a low-interest loan. The long-awaited law aims to expand home financing access for eligible citizens.

The Public Authority for Housing Welfare has approximately 103,000 pending housing applications, with wait times of up to ten years, prompting the government to consider major reforms.

Shaikha Al Bahar, Deputy Group CEO of the National Bank of Kuwait, stated, “This opportunity extends beyond housing financing, given the scale of infrastructure investments needed to develop new residential areas to meet growing demand.”

Abdullah Al-Sumait, Acting CEO of the National Bank of Kuwait, said, “The long-awaited law could establish a regulatory framework that enhances housing finance access for eligible citizens, marking a significant step.”

Justin Alexander, Director of Gulf Economics and Analyst at Global Source Partners, believes that accumulated housing demand means mortgages, even with regulatory constraints, could significantly boost Kuwaiti banks’ profitability. This move may also attract foreign investor interest in banking stocks, with current foreign investments in Kuwait’s banking sector estimated at KD 4.7 billion ($15.3 billion), or 15% of the total sector.

“Potential legislative changes could include mortgage term limits, government support, interest rate caps, and regulatory restrictions such as debt service ratios,” said Salome Skhirtladze, a financial sector analyst for Europe, the Middle East, and Africa. “A growing mortgage market could also stimulate the construction sector, driving domestic credit growth to single-digit levels in the medium term.”

The mortgage law is expected to contribute to the long-term expansion of Kuwait’s real estate sector.

“This should lead to increased project awards for infrastructure and new cities, as well as a rise in housing project starts,” said Jaap Meyer, head of research at Arqaam Capital in Dubai.