Reviving Real Estate: An Economic Necessity
THE TIMES KUWAIT REPORT
During its recent weekly cabinet meeting, presided over by His Highness the Prime Minister Sheikh Ahmad Abdullah Al-Ahmad Al-Sabah, the Cabinet directed relevant state bodies to speed up the removal of all encroachments on state properties. The instructions were issued following a review of the report submitted by Ministry of Finance on the significant encroachments on state properties in 2024.
The government owns nearly 95 percent of Kuwait’s total land area of 17,820sq km, and the decision to retake possession of its usurped property, aims to curb the propensity of individuals and entities to often encroach on state land. While the government’s keenness to protect state land is commendable, the frequent encroachments are also a reflection of the acute shortage of land to meet the needs of a rising population and a growing economy.
Adequate land for residential, commercial and investment purposes and effective land governance, as well as enforceable legal rights, and protection for all aspects of real estate, are a prerequisite for the sustainable social, economic, and environmental growth of a nation. Land is also crucial to the realization of human rights of citizens.
Real estate plays an integral role in a national economy by contributing to GDP growth, generating employment, and acting as a catalyst for stimulating economic activity through its strong linkages with other industries like construction, manufacturing, and finance. Real estate development is also closely linked to urbanization and infrastructure development. As population and cities grow, the demand for housing and other real estate increases.
Latest population figures from the Public Authority for Civil Information peg the country‘s population at 5.1 million, This figure, along with data from the World Bank showing an average population growth of 3.1 percent over the past decade, underscores the urgent need for strategic land provisioning and efficient urban development.
The growth in population to over five million today. has also led to the country having a population density of 286 people per square kilometer, ranking Kuwait 50th in terms of most densely populated nations in the world. But even this relatively high density does not reflect the ground reality, as only a fraction of total land is accessible and covered by urban development. Limited accessible land raises the real population density far higher than what statistical figures indicate.
According to data from the Arab Land initiative—a project established under the UN-Habitat’s Global Land Tool Network—approximately 75 percent of land in Kuwait is desert, primarily used for grazing and recreational activities. Oil fields cover about seven percent of the land, while military zones account for a further four percent, both of which lie dispersed across various regions of the country.
Other significant land uses include agricultural land (3%), and areas for quarries, borrow pits, construction debris disposal, communication infrastructure, cemeteries, parks, encampments, power plants, and vacant land, which together account for 7.5 percent of the total land area. This leaves only around 3.5 percent of land in Kuwait City and its urban agglomerations for real estate development.
Considering the limited urban development space it is not surprising that compared to neighboring Gulf markets, the price of housing in Kuwait is steep. A report by Markaz, a leading asset management and investment banking firm in Kuwait, shows the country’s residential affordability index—the ratio of residential price to income expressed in years—is high at 15.8. This is over three times that of Abu Dhabi (4.5), and significantly higher than Riyadh (2.8), and even London (14.5).
What the affordability index number implies is that it takes approximately 15.8 years to repay the financing procured to purchase a residential apartment—of 90 sqm in Kuwait— from the disposable income of an average Kuwaiti national through monthly installment payments. Land price makes up about 80 percent of the value of a house in Kuwait, far higher than the international standard of 30 percent, making Kuwait one of the least affordable places to own a residence in the region.
The Fourth Master Plan, unveiled by the government in 2023, outlines the country’s urban policies for land use until 2040. The Master Plan creates a balanced approach to urban development, with a focus on economic, social and environmental development of urban areas, so as to ensure accommodation for the expected population growth over the plan period.
Implementation of previous Master Plans have not materialized as planned. Reports indicate that from 2014 to 2021 the Public Authority for Housing Welfare (PAHW)–the agency responsible for implementing government housing policies —distributed a total of 67,102 housing units to citizens, which is an average of around 8,300 units per annum. However, as of mid-July this year, the total number of government housing applicants stood at 103,110. The waiting time for housing allocation of around 10–15 years, is indicative of the huge demand-supply gap.
Realizing the limitations of PAHW in providing housing for citizens amid rising demand, the government passed Law No 118 in 2023. The law aims to engage the private sector and attract foreign and local investment in forming companies to develop cities, residential areas, and related infrastructure. PAHW was tasked with establishing and overseeing these public joint-stock companies.
Since taking office last year, the new government has been accelerating the pace of implementing long-needed reforms and policies in various sectors, In line with this drive, the authorities have been introducing several new laws to reenergize the real estate sector.In February this year the Cabinet issued Decree Law No. 7/2025 regulating the ownership of real estate properties by non-Kuwaitis. Property ownership in Kuwait has traditionally been restricted to citizens, nationals of other Gulf Cooperation Council (GCC) member states, and diplomatic entities.
Through the new law property ownership has been widened to companies listed on the Kuwaiti stock exchange, firms licensed by the Kuwait Direct Investment Promotion Authority (KDIPA),, and licensed real estate funds and investment companies. However, the law limits newly eligible entities to use the property for only operational purposes or for housing employees.
Additionally, a proposed Mortgage Law, which Finance Minister Noora Al-Fassam said in May was about to be introduced, would enable commercial banks to offer mortgages up to KD200,000, with repayment periods extending to 25 years. When implemented, the law will introduce alternate revenue pools, and positively impact the realty market, directly influencing demand as well as prices for real estate.
Lending for residential real estate through avenues such as securitization, will also boost operations of local banks and promote financial market development. Moreover, it will benefit individual home owners through long-term capital appreciation and as a secure collateral against inflation and market fluctuations.
The current low-interest-rate environment also encourages investors to purchase real estate as a lucrative alternative.
Additionally, the persistent backlog in government housing has prompted the government to direct PAHW to fast-track its development agenda by initiating tenders for the design and planning of three new residential cities— Al-Khiran, Nawaf Al-Ahmad, and Al- Sabriyah. Meanwhile, ongoing projects of Al-Mutlaa City, South Saad Al-Abdullah City, and South Sabah Al-Ahmad City are in various stages of progress. On completion, these projects could ease Kuwait’s housing pressures.
Faster implementation of projects through private sector participation could reduce housing supply constraints and price pressures, while the proposed mortgage law, and related measures when implemented, could boost the financial market. Furthermore, the favourable demography, attractive investment yields, state housing program, and new residential developments, could stimulate market activity. However, crucial to all this will be ensuring the development of a robust real estate sector.
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