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Housing Problem in Kuwait and the Way Forward

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Executive Summary

A significant challenge that has persisted in Kuwait’s Residential Real Estate segment is the supply-demand gap in the state housing program, which has spiraled into a pressing housing problem. A delay in the allocation of housing units and diminishing affordability are major pain points that require immediate attention. The supply of housing units does not keep pace with the demand, with the number of waitlisted housing applications at the Public Authority for Housing Welfare (PAHW) remaining high. This has led to stretching waiting times between application and allocation almost 10 years. The restricted supply of housing units has also pushed up the prices of private housing, reducing the affordability of owning private residences. The residential price-to-income ratio in Kuwait is higher than that of cities such as London or New York and approximately three times that of Dubai and Abu Dhabi.

Finding a solution to the housing problem would involve addressing some of the key bottlenecks. The decision to prevent private companies from buying and trading residential property has led to the supply shortfall, which has in turn led to the sharp rise in land prices. Funding has also become a major hindrance, due to the capital shortfall in Kuwait Credit Bank combined with prudent lending from private commercial banks. The maximum available borrowing for a median house in Kuwait is much lower than in western countries. Other key challenges such as restrictive zoning, high capital costs involved in infrastructure development, and high urbanization levels have also exacerbated the housing problem.

As the demand for housing is set to increase steadily due to youthful demographics in Kuwait, an efficient housing program that addresses key issues from multiple facets needs to be implemented. Relaxation of zoning requirements, land reforms pertaining to the involvement of the private sector, revising the floor area ratio (FAR), involving commercial banks and finance companies in mortgage financing, and a differentiated housing program are some solutions that could address the pressing issues in the private housing sector. A swift and targeted action by regulatory authorities in similar cases in countries such as Singapore has helped resolve such housing issues in the past. A holistic approach, with the collaboration of multiple stakeholders, is a prerequisite for addressing the housing problem in Kuwait in the coming years.

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