Kuwait Advances Mortgage Reform to Stabilise Market

KUWAIT CITY: Kuwait is advancing a long-awaited mortgage and real estate finance law, aiming to introduce practical, sustainable solutions to the country’s housing challenges while revitalising the broader property market.

The proposed legislation (currently in draft form) has become a central focus of Kuwait’s legislative agenda. According to Head of the Real Estate Union, Ibrahim Al-Awadhi, the circulating version remains “only a preliminary draft,” with key provisions still under development.

A New Financing Framework to Ease Pressure on Kuwait Credit Bank

The mortgage proposal seeks to reduce reliance on the Kuwait Credit Bank’s traditional financing model by introducing alternative funding channels that support the Public Authority for Housing Welfare (PAHW). Under the draft, mortgage benefits would apply to citizens eligible for housing assistance and buyers purchasing units directly from real estate developers.

Crucially, the law is designed to avoid disrupting prices in Kuwait’s traditional residential sector or investment property market. Legislators aim to accelerate access to housing while ensuring price stability and preventing market distortions.

The Central Bank of Kuwait is expected to issue the executive regulations, which will define loan mechanisms, repayment terms, and borrower eligibility.

Al-Awadhi noted that Kuwait’s banking sector is well-positioned to support this transition: strong liquidity and high solvency levels enable banks to offer competitive financing solutions while ensuring profitable returns, benefiting “the state, citizens, and banks alike.”

Borrower Protection at the Core of the Draft Law

The initial draft outlines several consumer-protection measures, including interest-free borrowing capped according to financial capacity, with repayment of principal over periods of up to 25 years.

The draft also sets out options for cases of default, such as rescheduling payments or state intervention. In certain situations, the government may purchase the debt and transfer it to Kuwait Credit Bank, providing a safety net to preserve household stability.

However, Al-Awadhi emphasized that Kuwait cannot directly replicate mortgage systems used in other GCC countries due to the country’s unique housing welfare model. The success of any Kuwaiti mortgage law, he said, depends on balancing the rights of lenders with strong protections for borrowers and safeguarding the social fabric of Kuwaiti families.

Call for a Comprehensive Housing System

Head of the Real Estate Brokers Union Emad Haidar supports mortgage reform but cautions against viewing it as a standalone solution. He stressed the need for a wider strategy that strengthens the role of developers, increases land supply, and expands essential infrastructure such as electricity and public services.

Haidar warned that injecting liquidity into the market without complementary reforms could trigger price increases or renewed speculation, especially as the sector recovers from the inflation wave and price spikes observed in 2022.

He also emphasised that a clear government guarantee is essential to ensure fairness between banks and citizens, adding that re-engaging private developers, banks, and financing institutions would help stimulate transactions and market liquidity, provided safeguards for families are properly defined.

Legal Framework Expected to Strengthen Investor Confidence

According to Lawyer Dalal Al-Mulla, the mortgage and real estate finance law represents “a pivotal legislative step” aligned with the country’s current economic and social needs. She noted that the law fills a long-standing legal gap, as Kuwait has lacked a comprehensive framework governing mortgages.

She highlighted the importance of:

• a modern, efficient real estate registration system,
• clear judicial enforcement procedures,
• accurate valuation standards, and
• robust protections for private property.

Al-Mulla stated that the law’s impact would extend beyond improved financing options, helping strengthen trust in real estate transactions and boosting market activity through enhanced purchasing power.

The executive regulations, she said, must clearly define rules on loan-to-value ratios, interest and fee limits, enforcement safeguards, and borrowers’ rights—including the right to reschedule payments before any punitive measures.