Real estate status in Kuwait
January 23, 2008
Kuwait (pop. 3,071,000; GDP/cap US$21,472) is one of the richest countries in the Middle East. It has a small population of approximately 2.5 million, almost half of which are non-Kuwaiti.
Kuwait has 96 billion barrels of oil reserves-roughly 10 percent of the world's oil supply.
Foreigners, except from Bahrain, Oman, Qatar, Saudi Arabia and UAE, are not allowed to own real estate in Kuwait.
Residential property
There is an undersupply of residential property in Kuwait. The most sought-after locations for expats are Salmiya, Hawalli, Salwa, and Jabriya. As you get closer to the city and the sea, properties become more expensive. Apartments tend to be concentrated outside the city, and directly on the coastal strip; villas are more popular in the city.
The country's 4 or 5 real estate websites are mostly in Arabic or of poor quality. Most expats advise the "driving around at night method" of finding property for rent, rather than consulting a realtor. The latter will charge a month's rental commission, adding little value.
Choose an area you like, and then drive around at night, looking for buildings with no curtains, and the lights on. Stop and ask for the "Harris". Say "Where Harris?" The Harris will show you around. The Harris is the caretaker of the property.
Landord and Tenant Law
A landlord may increase the rent during the lease period by a maximum of 100%. The tenant has two choices; to accept the increase or move out.
A landlord can evict tenants after a rental period of 5 years on production of a court notice prior to termination of the contract. Failure to produce the court notice means automatic renewal of the lease for another five years.
Within the five-year rental period a landlord is permitted to ask the tenant to vacate with a nine-month notice period. Should the landlord sell the premises during the period of the lease, the tenant is not affected.
Will expats be able to buy in Kuwait?
Many industry players have called for expatriates to be permitted to own real estate, thus increasing the flow of investment. The absence of such a law has prevented Kuwait from retaining a higher percentage of the annual earnings of resident expatriates, now mostly remitted outside the country.
The authorities are cautious, partly due to Kuwait's invasion during the 1st Iraq War, yet a year ago the government indicated that foreign ownership regulations would be redrawn allowing limited foreign ownership in designated areas.
Discussions have centred on a proposal to restrict the amount of property available for sale to expatriates to 1000 square meters, with no right of resale, and a requirement that the Prime Ministry approve the deal. Even then, a Kuwaiti national would still need to hold a stake, according to some versions of the proposal.
The government has set up the Real Estate Clearing Company (RECC) to pinpoint real estate market problems, to improve regulatory clarity, and spread quality market information.
The mechanism currently being used is the Build-Operate-Transfer (B.O.T) route, which encourages private companies to develop plots owned by the government and operate them for 20+ years, after which the project is returned to the government.
Mortgages
In Kuwait, taking security over real property, including by way of mortgage, is permitted under Article 7 of Law 5 of 1959, Real Estate Registration. Mortgages are treated as contracts and so the contracts chapter from the Kuwait Civil Code, Decree 67 of 1980, also applies.
There is a common perception that foreign lenders may not take a mortgage over Kuwaiti real property because foreigners are generally prohibited from owning real estate in Kuwait under Decree 74 of 1979, Restrictions on Foreign Ownership of Real Estate. While it is true that foreigners are prohibited from owning real estate generally, these restrictions do not apply to holding mortgages. Foreigners can and do enter into valid and registered mortgages as mortgagees in Kuwait.
Despite the fact that foreigners can act as mortgagees under Kuwaiti law, the security holder or mortgagee must be a Kuwaiti citizen.