Kuwait is preparing for a significant development in its housing finance landscape with the introduction of a new real estate mortgage finance law. The draft law aims to support beneficiaries of state housing care while reducing the fiscal burden on the State and the Kuwait Credit Bank (KCB) by bringing local banks and licensed finance companies into the housing finance ecosystem.
Under the draft law, eligible beneficiaries would have access to two types of mortgage finance:
- Supported mortgage finance: Offered by local banks and finance companies to help beneficiaries purchase residential units from approved developers or build on government-allocated plots. The State would bear the cost of interest or profit on these supported facilities.
- Non-supported mortgage finance: Additional, market-based financing without State support, subject to parameters to be issued by the Central Bank of Kuwait (CBK).
Other key features include:
- Repayment through equal monthly instalments over a term of up to 25 years, with the possibility of a grace period of up to three years and a waiver of interest/profit for early settlement.
- The ability to reschedule facilities for up to five years in cases of payment difficulty.
- Enabling debt securitization and monetization, by allowing KCB to purchase mortgage portfolios from the funders for securitization or other structured sales to investors.
In parallel, the CBK is developing the credit framework and regulations to govern implementation of the real estate mortgage finance law, including financing limits, eligibility criteria, collateral standards.
ASAR’s banking & finance team is monitoring these developments and can assist banks, finance companies, developers and investors in assessing the implications of this new law once it comes into effect.
