'Real Estate Financing': A partnership between the state, banks, and developers redraws the residential map

The Cabinet has forwarded the decree-law to His Highness the Amir... with its details to be issued within six months of its publication.

The housing care file in Kuwait is no longer linked solely to the number of plots distributed by the state or the volume of liquidity available at the Credit Bank. Instead, the mortgage financing project opens a different pathway to deliver housing to citizens, based on expanding the financing circle and involving banks and real estate developers within a unified system subject to state regulation and oversight by the Central Bank of Kuwait.

With the Cabinet’s approval on September 22 of the draft decree-law regarding mortgage financing for housing care beneficiaries and its submission to His Highness the Amir, one of the most important components of the new housing system has entered an advanced stage, after years during which direct government financing remained the primary channel for meeting citizens’ housing needs.

The project, consisting of 15 articles, does not merely introduce a new conventional housing loan; rather, it establishes a mechanism through which the banking sector becomes a party in financing housing care, while the state continues to provide support and regulate the relationship between beneficiaries and financing entities.

The project outlines two pathways for accessing mortgage financing: the first is purchasing a residential unit from a real estate developer in accordance with applicable regulations, and the second is constructing the government plot allocated by the Public Authority for Housing Welfare within its projects.

This financing is linked to the real estate developer system, whereby the private sector provides residential units, while the financing mechanism enables beneficiaries to access these units or construct their allocated government plots.

The project divides financing into subsidized and non-subsidized categories, allowing for a combination of both in accordance with Central Bank of Kuwait regulations. In subsidized financing, the beneficiary bears the principal amount, while the state covers the interest or returns. Beneficiaries may also obtain additional non-subsidized financing, bearing its costs according to the terms set by the financing entity.

To qualify for subsidized financing, beneficiaries must meet the conditions of the Credit Bank’s mortgage loan regulations and must not have previously received housing care from the state.

The project sets the repayment period at no more than 25 years from the disbursement date, through equal monthly installments.

Regarding financing for constructing government plots, funds are disbursed in stages linked to construction milestones as specified in the executive regulations. In case of default, the financing entity notifies the beneficiary, and the financing may be rescheduled for a period not exceeding five years, in accordance with Central Bank of Kuwait instructions, with the beneficiary bearing the interest or returns accrued during the rescheduling period.

The Credit Bank retains a pivotal role in the new system, albeit differently from its traditional role as a direct financier. The project authorizes it, on behalf of the state, to sign contracts with financing entities.

The Ministry of Finance is responsible for paying the interest or returns due on subsidized financing to the Credit Bank. In the event of a beneficiary’s default, the bank, acting on behalf of the state, is obligated to settle the remaining balance of the subsidized financing with the financing entity, against an official mortgage on the residential unit.

The outlines of the project began in January 2025, through meetings that brought together relevant government, regulatory, and banking authorities. These meetings were based on restricting the system to eligible recipients of housing care, involving the private sector and real estate developers, while preserving the citizen’s choice and the role of the Credit Bank.

With the approval of the Real Estate Developer Law, the equation is completed by distributing roles: the developer constructs the units, the banking sector provides financing, and the state supports and regulates, while the citizen chooses the most suitable housing path. Following the Cabinet’s approval and the submission of the project to His Highness the Amir, the operational details remain linked to completing the legislative stages and issuing the executive regulations within six months from the date of publication of the Law Decree in the Official Gazette.

"Real Estate Developer": Three Paths to "Expand" Housing Choices and "Narrow" Price Margins

Consumer protection and commercial transactions expert Mansour Al-Nuzhan stated on the social media platform "X": Concerns are being raised regarding the prices of residential units to be offered by the "Real Estate Developer," and the possibility of their value increasing, which would reflect on the size of monthly installments, especially for middle-income earners, amid fears that housing commitments will consume a high percentage of family income.

Despite the legitimacy of these concerns, the Real Estate Developer system does not restrict the citizen to a single housing option. The laws and housing plans provide the applicant with more than one alternative, allowing him to choose the path that suits his needs and financial capacity.

Three Paths

The housing options available to citizens are based on three main paths. The first is purchasing one of the Real Estate Developer’s products, whether a housing plot, a ready-built house, or a unit under construction. This allows obtaining a housing product without going through the construction stages, contracting with builders, or supervising implementation.

The second path involves traditional self-construction, through the Public Institution for Housing Care allocating a plot to the citizen and utilizing the housing loan of 70,000 dinars via the Credit Bank, enabling the beneficiary to build and supervise his own home.

The third path consists of ready-made government houses implemented by "Housing Care" and distributed to eligible recipients according to request priority and applicable regulations.

Price and Installment

The Law on the Establishment of Residential Cities and Areas reinforces the state’s trend toward diversifying the products offered by the Real Estate Developer, including plots, houses, and ready-made apartments. However, the success of this experiment depends on the developer’s ability to offer a product that combines quality with an appropriate price, particularly for middle-income earners. In this context, it is important to reduce the cost of land and construction inputs for the developer, and to study the availability of subsidized construction materials under specific regulations. This would help offer units at lower prices and reduce the volume of financing and installments for citizens.

Developers can also be encouraged to offer flexible housing models that can be expanded in the future, thereby lowering the initial cost and allowing families to develop their homes as their needs change.

"Housing Care" is already moving to involve the private sector in projects in Matali, and in the east and west of Saad Al-Abdullah. Meanwhile, citizen acceptance of the product remains linked to price, installment, area, design, and services, while keeping alternative housing options available for him to choose the most suitable one for his circumstances.