Kuwaiti, foreign banks brace for fierce competition in real estate financing as new law looms
While Kuwaiti banks are expected to retain a dominant position, foreign branches and finance companies have clear incentives to compete aggressively, creating a dynamic environment for sustainable growth in the real estate sector.
As Kuwaiti banks anticipate the approval of the real estate finance law, foreign bank branches operating locally are preparing to enter what promises to be an unprecedented wave of competition in the mortgage and real estate lending market.
Behind the scenes, officials are actively coordinating with parent companies to secure liquidity, while also engaging with existing and prospective clients to position themselves ahead of the expected surge in lending.
The excitement in the market is driven not just by regulatory changes but by the enormous potential growth in mortgage portfolios, projected to unlock billions of dinars in financing in the coming years.
For foreign banks, even a small share of this emerging market is considered highly attractive, particularly given their historically limited presence in Kuwait’s retail finance sector since 2004, when they first received local licenses. Some branches have even exited the personal lending segment entirely due to intense competition.
Currently, the Kuwaiti banking sector comprises nine local banks and roughly ten foreign bank branches, which traditionally focus on corporate lending and high-net-worth clients.
However, officials at foreign banks revealed that several branches are preparing for a significant expansion in loans targeting individuals and real estate developers, anticipating high returns aligned with the sector’s risks.
Industry sources indicate that the coming real estate finance boom will create a vast competitive landscape open to Kuwaiti banks, foreign branches, and specialized finance companies alike.
However, Kuwaiti banks hold a substantial advantage due to their strong capital base, extensive branch networks, and longstanding customer relationships, which position them to dominate retail lending portfolios. Foreign branches will need to carefully strategize to gain meaningful market share.
Preparations are already underway. Foreign branches are exploring ways to compete for clients in the “real estate finance” and “developer” sectors, recognizing these as the main drivers of sustainable growth.
From a banking perspective, loans in these sectors are high-quality assets, offering attractive returns while strengthening liquidity and profitability on the books.
Sources outline three strategies foreign banks are likely to adopt: leveraging advanced digital platforms to offset limited branch presence; competing on pricing through lower interest rates; and forging partnerships with developers to offer bundled packages for clients and their properties, creating mutual benefits.
Yet foreign branches face inherent challenges. Competing on interest rates against Kuwaiti banks—who enjoy abundant liquidity, low-cost funding, and the ability to offer lower-priced housing loans—is difficult.
Kuwaiti banks’ vast deposits provide them with a significant cost advantage, allowing them to offer competitive financing without compromising profitability.
Despite these hurdles, the market’s potential remains highly attractive. Loans of up to 210,000 dinars, triple the current housing loan cap of 70,000 dinars, and terms extending to 25 years, compared to the existing 15-year limit, will fuel demand.
Coupled with hundreds of millions in expected financing for developers and their construction networks, the sector presents substantial growth opportunities for both local and foreign institutions.
Hypothetically, a foreign branch serving just 100 clients at the maximum loan limit could create a portfolio worth 2.1 billion dinars, excluding additional developer loans, guarantees, and assignments. Such figures illustrate the immense potential for portfolio growth and revenue generation in real estate finance.
In conclusion, the approval of the real estate finance law is set to transform Kuwait’s mortgage market, driving competition between well-capitalized Kuwaiti banks and agile foreign branches.
While Kuwaiti banks are expected to retain a dominant position, foreign branches and finance companies have clear incentives to compete aggressively, creating a dynamic environment for sustainable growth in the real estate sector.
