Kuwait has introduced a new framework for real estate financing for individuals entitled to housing welfare under Decree Law No. 114 of 2026 (the Decree Law).
Gazetted on 18 October 2026, the Decree Law allows local banks, finance companies and investment companies supervised by the Central Bank of Kuwait (CBK), whose objects include real estate financing, to provide financing to individuals entitled to housing welfare who satisfy the conditions and controls prescribed by Kuwait Credit Bank (KCB).
The framework covers both State-subsidised and unsubsidised financing and introduces provisions governing repayment, State support and security arrangements. It also includes provisions supporting a secondary market for financing provided under the new regime, including through securitisation and the issuance of sukuk.
The Decree Law will come into force and will apply to eligible individuals, when its Executive Regulations are published in the Official Gazette. The Executive Regulations are to be issued by Decree, on the proposal of the competent minister, within six months from the date of publication of the Decree Law.
What can be financed?
Under the new framework, eligible individuals may obtain real estate financing for:
- the purchase of an existing or off-plan residential unit from a real estate developer accredited by the Public Authority for Housing Welfare; or
- construction on a government plot allocated by the Public Authority for Housing Welfare in a housing project, whether implemented or under implementation, as well as other plots determined by the Council of Ministers.
Real estate financing may be granted once to each eligible individual.
Subsidised and unsubsidised financing
The Decree Law provides for two forms of financing, which may be combined subject to the controls and procedures established by the CBK.
Subsidised financing may be used to purchase a residential unit from a real estate developer or to build on an allocated government plot. The State will bear the cost of the interest or returns. The maximum amount available, together with applicable interest or returns, will be determined by the Executive Regulations in accordance with Law No. 47 of 1993 Concerning Housing Welfare.
Unsubsidised financing may be used for the purchase of a residential unit from a real estate developer, with the individual responsible for the interest or returns. The applicable rate will be determined by the CBK.
Eligible individuals remain responsible for repaying the principal of both forms of financing.
To qualify for subsidised financing, individuals must satisfy the general conditions prescribed under KCB’s Real Estate Loans Regulations for purchase or building. In all cases, the individual must not have previously received housing welfare from the State.
Repayment and default
Financing is to be repaid in equal monthly instalments over a period that, when financing is granted, may not exceed 25 years from the start of disbursement.
The Executive Regulations may provide a grace period within the total repayment period. During any grace period, the individual will bear the interest or returns on both subsidised and unsubsidised financing.
Where financing is repaid early, in whole or in part, the interest or returns relating to the remaining term of the amount repaid will fall away.
If an individual defaults, the financing provider must first issue formal notice. The financing may then be rescheduled for up to five years in accordance with CBK requirements, with the individual bearing the resulting interest or returns, or the financing provider may pursue legal action.
The role of the State and KCB
KCB will play a central role in implementing the new framework. Acting on behalf of the State, it will enter into the necessary agreements with participating financing providers.
For subsidised financing, the Ministry of Finance will fund the applicable interest or returns through the General Reserve Account, with KCB transferring those amounts to the financing providers.
The framework also provides protection for financing providers where an individual fails to repay. KCB, acting on behalf of the State, is required to repay the outstanding balance of the subsidised financing, either by paying the interest or returns due together with the remaining instalments, or by paying the remaining instalments on their due dates. If the entire outstanding balance is repaid, any future interest or returns will lapse from the date of repayment. KCB may subsequently seek to recover all or part of the amounts paid from the individual.
In return for this undertaking, KCB will hold an official mortgage over the property. Restrictions apply to disposing of the mortgaged property, or creating rights in rem over it, without the prior approval of KCB and the financing provider. Any transferee must also be entitled to housing welfare, must not have previously obtained real estate financing and must assume the existing obligations under the financing contract.
Potential for a secondary market
The Decree Law also establishes a framework through which financing provided under the regime may be transferred into the secondary market.
KCB, or another entity designated by the competent minister, may agree with financing providers to purchase all or part of the real estate financing provided. It may issue sukuk against the financing and securitise it, sell it to investors and repurchase it, subject to the Executive Regulations and the requirements of the CBK and the Capital Markets Authority.
What happens next?
While the Decree Law establishes the overall framework, a number of key parameters of the regime remain to be determined through the Executive Regulations and CBK requirements.
These include the maximum amount of subsidised financing, the rate of interest or returns applicable to unsubsidised financing, the length of any grace period and the circumstances and procedures relating to default.
The publication of the Executive Regulations will therefore be an important next step in determining how the new financing framework will operate in practice.
For further information, please contact: asar@asarlegal.com.
