(Bloomberg) — Kuwait is preparing to allow banks to offer mortgages for the first time, a move that could reshape the oil-rich nation’s financial landscape.
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The legislation is expected to be passed soon by the Council of Ministers, according to people familiar with the matter. The move would unlock a market that could eventually reach a value of $65 billion, implying a 40% expansion in lenders’ credit portfolios, according to the people, who declined to be identified as the information is private.
Traditionally, mortgages were neither allowed nor regulated, as policymakers feared the political repercussions of foreclosures on citizen-owned homes. Instead, the government has a public housing program for married citizens to receive a highly-subsidized house or a plot with a low-interest loan.
But the system has been buckling under a backlog of 103,000 requests and handover rates suggesting a decade-long wait, prompting the government to plan significant changes to the system.
Government officials couldn’t be reached for comment on Friday, a public holiday in the country.
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Kuwait’s oil wealth has propelled it into the ranks of the world’s richest countries, but years of policy paralysis have meant the nation has lagged its more ambitious peers in the Middle East.
The long-awaited law could provide a “structured framework that enhances home financing accessibility for eligible citizens,” said Abdulla Al Sumait, acting group chief executive officer at Al Ahli Bank of Kuwait. “We see this as a transformative step.”
The introduction of the mortgage law would come 10 months after Kuwait’s emir suspended parliament for up to four years, effectively clearing the way for the government — headed and appointed by the ruling Al-Sabah family — to pass key bills. Just days earlier, the cabinet approved a draft decree that paves the way for the OPEC-member state to sell international debt for the first time in eight years.
Those moves have already led to optimism in markets.
Kuwaiti stocks are outpacing their Gulf peers this year, with banks driving the rally — Boubyan Bank KSCP, Burgan Bank SAK and Warba Bank KSCP are all up 17% or more.
