Kuwait to Allow Real Estate Mortgages for First Time

Kuwait is preparing to allow banks to offer mortgage loans for the first time. 

This legislative shift, which is expected to be approved by the Cabinet soon, is expected to unlock a market valued at approximately $65 billion, potentially expanding lenders' credit portfolios by 40%, according to Bloomberg.

Historically, Kuwait has refrained from allowing or regulating mortgages due to concerns about the political repercussions of repossessing citizens' homes for defaulting on mortgage payments.

Instead, the government has run a public housing program that provides married citizens with heavily subsidized homes or land along with low-interest loans.

However, this system has faced significant pressure, with a backlog of 103,000 applications, resulting in waiting periods of up to a decade for citizens to obtain their homes. The urgent need to address this problem has prompted the government to consider major reforms to the housing program.

The proposed mortgage law aims to provide a structured framework to enhance access to housing finance.

Details from local media reports indicate that the new law will allow commercial banks to lend up to $750,000 for terms of 25 or 30 years, a significant increase from the current maximum of 15 years. Additionally, the required debt-to-income ratio is expected to increase, providing borrowers with greater flexibility.

This anticipated reform is expected to meet the overwhelming demand, with over 100,000 housing loan applications pending, representing a significant growth opportunity for the banking sector in Kuwait.

The enactment of this law follows the Amir's suspension of the National Assembly, enabling the government to move forward with substantial legislative changes.

This includes a draft decree to sell international debt, the first of its kind in eight years, which has already generated optimism in financial markets.