UNDER CONSTRUCTION

Kuwait 2017 | RETAIL & REAL ESTATE | FOCUS: MID-MARKET HOUSING SEGMENT

In light of Kuwait's housing shortage, the construction of new cities and mixed-use real estate development offers vast opportunities for international investors to cater to the country's burgeoning middle-income housing sector.

With an annual population growth rate of approximately 4%, Kuwait has been under immense pressure to provide more than 100,000 housing units. In addition to welfare perks such as free education and healthcare or employment in the public sector, married Kuwaiti couples are, in fact, entitled to a 400sqm residence in the form of either a mansion or an apartment. This right to a house is further complemented by an interest-free KWD70,000 housing loan from the state. Notably, 80% of married couples in their 20s apply for government housing, according to a 2013 study from the London School of Economics. In the past years, however, demand for housing has by far exceeded the number of houses under construction. In this regard, the Public Authority for Housing Welfare (PAHW) currently receives more than 8,000 housing applications per year, which require an additional 75,000 units to be built by 2020. Kuwait's housing shortage further instigated the formation of Nater Beit, a civil society group pressuring the government to quickly resolve the issue, which stood out as a central theme in the November 2016 parliamentary elections as well. The importance that Kuwaitis place on this issue was further reflected in a recent Bayt.com survey in which 72% of respondents in Kuwait noted that affordable housing is the most important factor that makes a city worth living in.

Aside from the housing shortage, real estate prices in Kuwait have also skyrocketed as a consequence of many Kuwaitis, who already own property, making use of their “right to a house” and selling it at a higher price. All the same, the mid-market and affordable housing segment promises stability in view of the rising demand in housing. In this regard, Khaled Al-Mashaan, Vice-Chairman and CEO of ALARGAN International Real Estate, told TBY: “We invest in secure properties that generate consistent revenues. The mid-market has been underserved for a long time, and it is the largest. After the crash, many companies realized the focus should not be solely on the high-end market. The Middle East has the highest growth per capita in the world, so there will continue to be an influx of buyers.”

As a consequence, the planned construction of new cities in the vicinity of Kuwait City has attracted contractors, real estate developers, and consultancy firms from around the world. Announced as Kuwait's largest housing project with nearly 30,000 units, South Al-Mutlaa City, for example, is set to accommodate 400,000 residents. Turkish construction giant Limak and Italian industrial group Salini Impreglio won the KWD288 million bid for developing the mixed-use project's infrastructure, which will also include leisure and sports areas, parks, mosques, and healthcare centers. In fact, more than 60 tenders for construction will continue to be offered by the Central Tenders Committee in the course of the project. Furthermore, the Minister of State for Housing Affairs, HE Yasser Hasan Abul, recently inked an MoU with the South Korean Ministry of Land, Infrastructure, and Transport to develop Kuwait's first “smart” city of South Saad Al-Abdullah. Similar to South Al-Mutlaa, eco-friendly South Saad Al-Abdullah will also encompass 30,000 housing units and is expected to accommodate up to 400,000 people.

Less of a city and more of a district, the Kuwait Projects Company's (KIPCO) Hessah Al Mubarak project stands out as one of the private sector's flagship projects for both high and low-income residents. Developed by Al Mutawir Real Estate Company and located outside of Kuwait City, the 38ha project will be Kuwait's very first mixed-use development project. In this regard, Omran Hayat, CEO of Al Mutawir Real Estate Company & Chairman of SSH Design, told TBY: “We successfully participated in Hessah Al Mubarak—a mixed-use project that is 70% residential. We are in the infrastructure stage now. I think multi-family, vertical residential developments are the future of housing in Kuwait and I hope this project will be a trend setter.”