Kuwait Real Estate Report

2022 Outlook
Kuwait Financial Centre k.p.s.c. and Subsidiaries

Table of Contents
Executive Summary ........................................................................ 3

Kuwait: Macroeconomic Update .................................................... 5

a. High Oil prices to put Kuwait economy back on track ................................. 5

b. Inflation picks up after the reopening of the economy ................................ 7

c. Credit growth remains steady despite COVID-19 disruptions ..................... 8

d. P
 opulation growth & demographic structure bode well
for future Real Estate demand....................................................................... 10

Real Estate Performance................................................................. 13

Kuwait Real Estate – Major News/Laws ......................................... 20

Markaz Real Estate Macro Index .................................................... 23

Conclusion ...................................................................................... 26

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 Kuwait Real Estate Report 2022 Outlook

1. Executive Summary
ƒ Kuwait’s Real Estate market is recovering and gathering pace following supportive
governmental measures and the rebound in oil prices. Disruptions from the
COVID-19 pandemic is expected to smoothen in the near term owing to rapid
vaccination.

ƒ Overall transaction value in real estate has reached pre-pandemic levels. There
has been a significant surge in the number of transactions driven by the Private
housing sector with the demand in the sector coming from Kuwaiti nationals with
mostly stable government jobs. Though Istithmari sector (Residential Apartment)
has underperformed in recent years its outlook remains positive for 2022 and
beyond.

ƒ The new mortgage law being proposed in Kuwait for the private housing sector
will allow Kuwaiti banks and financing companies to extend mortgage loans to
citizens. Despite the expected increase in liquidity due to the new mortgage law, it
is likely that there will not be a real increase in the percentage of home ownership
by citizens.

ƒ Markaz Real Estate Macro Index indicates that Kuwait’s Real Estate market is
at the stage of recovery & gathering pace. Kuwait scores 3.4 out of 5.0, which is
close to the upper range of the current market phase, indicating that the recovery
is well underway and the market is expected to accelerate soon.

Kuwait Real Estate Market Outlook

Market is at Peak,
Slow down ahead

Market is
falling
Market is
accelerating

Market is recovering
& gathering pace

Current Outlook

Source: Marmore research

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Kuwait Macro-Economic Views

Economic Factors Our take Economic Factors

Oil GDP growth is expected to witness strong

Oil (Real)
Strong rebound on back of increasing production following
GDP Growth
strong recovery in global oil demand.

The recovery in non-oil sector during 2022 is

Non-Oil (Real)
Moderate expected to be gradual, in line with the levels of
GDP Growth
2021.

Fiscal Balance, High oil prices are expected to reduce the pressure
Moderate
% of GDP from the revenue side.

Government spending is highly skewed towards

current expenditure in the form of wages and
salaries to the public sector. Despite the recovery
Investments
Neutral in oil prices, it is unsure how much of it will be
(as % of GDP)
allocated towards capital expenditure. Considering
these factors, investment on infrastructure projects
is expected to stay muted.

As Kuwait economy is in the path of recovery,

Money Supply,
Neutral monetary policy is expected to be expansionary in
M2 (YoY)
the near term.

Inflation has picked up as the effect of rise in global

inflation and global supply chain imbalances have
trickled down to Kuwait due to high import of goods.
Inflation, % Neutral
The effect has been more pronounced in terms of
Food items. Inflation in labour cost has led to a
tremendous increase in development costs.

Population growth is expected to be affected by the

Yearly
government’s drive to reduce expats and employ
Population Neutral
nationals in private sector jobs to reduce the budget
Growth
deficit caused by high current expenditure.

Labor market contracted in 2020 following expat

Job creation exodus due to economic lockdowns. In 2022, the
Neutral
(‘000) situation is expected to ease and start of various
infrastructure projects portends a positive picture.

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 Kuwait Real Estate Report 2022 Outlook

2. Kuwait: Macroeconomic Update

a. High Oil prices to put Kuwait economy back on track
Kuwait economy is expected to rebound in 2022, supported by the vaccination
drive for COVID-19 and the rise in oil prices. Real GDP growth estimates from the
IMF for 2022 has been revised to 4.3% as per October 2021 projections, higher
than the 3.2% projected during April 2021.
Economic Growth – Annual Real GDP Growth (percentage change)
12%

8%
4.3%
4% 2.4%
0.9%
0%
-0.6%
-4%

-4.7%
-8%

-8.9%
-12%

2017 2018 2019 2020 2021e 2022f

Source: IMF

Kuwait’s GDP growth is highly correlated with oil prices due to the high reliance on
crude for exports, much more than other GCC economies. Kuwait’s non-oil GDP
growth bottomed out in Q2 2020 and is expected to rebound in 2022 due to higher oil
prices, stimulus measures and the reopening of economies worldwide.
Kuwait Oil and Non-Oil Quarterly Real GDP growth (y/y)
10%
5%
0%
-5%
-10%
-15%
-20%
Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Real GDP (Overall) Oil GDP Non-oil GDP

Source: IMF, Central Statistics Bureau

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Oil prices have recovered from the lows seen during the height of the COVID-19 crisis
and have surpassed pre-pandemic levels in the second half of 2021. With demand
recovering and supply being tightened by OPEC+ countries, oil prices are expected
to stay at elevated levels in 2022.
Brent Crude Oil Prices (Dec 2014 – Dec 2021)
100
90
80 78.94
70
60
In USD/barrel

50
40
30
20
10
0
May-15

May-16
Jan-15

Sep-15

May-17
Jan-16

Sep-16

May-18
Jan-17

Sep-17

May-19
Jan-18

Sep-18

May-20
Jan-19

Sep-19

May-21
Jan-20

Sep-20

Jan-21

Sep-21
Source: Refinitiv

Consumer spending in Kuwait, as represented by the spending on POS/ATM/Online

transactions rebounded after bottoming out in May 2020. According to data from
Knet, the aggregate of POS, ATM and Online transaction value has grown steadily in
the second half of 2021. The spike in y/y growth between March 2021 and June 2021
has been due to the low base effect, as transaction levels were very low during the
same period in 2020 due to lockdown restrictions.
Consumer spending (y/y growth in percentage)

140 137
Consumer spending (y/y growth in percentage)

100 90

59
60 49
27 30 26
22 19 24 20 22 23 24
17 16 15 18
20 5 9
-6

-20 -33
-47

-60
Jan-20
Dec-19

May-20
Feb-20

Apr-20

Aug-20

Sep-20
Jul-20

Jan-21
Mar-20

Dec-20

May-21
Jun-20

Feb-21

Apr-21

Aug-21

Sep-21
Nov-20

Jul-21
Oct-20

Mar-21

Jun-21

Oct-21

Source: Knet, NBK; Note: Consumer spending denotes spending on POS/ATM/Online transactions, Data available only from Dec 2019

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 Kuwait Real Estate Report 2022 Outlook

The adoption of cashless payments has been on the uptrend in the past few years, as
evidenced by the increase in Point of Sales (PoS) transaction sales values since 2015.
Transaction values began to recover since Q3 2020 and stood at KD 3.6 billion at the
end of Q3 2021, which is higher than the pre-pandemic highs at KD 2.6 billion in Q3
2019. This augurs well for the Real Estate market as it indicates consumer confidence
has returned to pre-pandemic levels.
Point of Sales Transactions in Kuwait (y/y growth)

150% 131%

100%

50%
31%
13% 18% 13% 16% 14% 28%
11% 7% 8%
-1% 9%
0% -14%

-50%
-58%

-100%
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Source: Central Bank of Kuwait

b. Inflation picks up after the reopening of the economy

Consumer Price Index (CPI) inflation in Kuwait has been on the uptrend during
the third quarter of 2021. As most goods are imported, the impact of increase in
global inflation has trickled down to Kuwait. Imbalances in global supply chain
has caused the rise in prices of certain commodities, especially in the food and
beverages category. Higher food prices have driven the overall inflation upwards
since the start of the pandemic due to a combination of higher global food prices,
supply chain shocks and price increase by local retailers who are passing on the
higher cost price to the end customer. Continuing global supply chain shocks have
put upward pressure on overall inflation in Kuwait while the effect of decline in
residential rents has not kicked in yet.

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Consumer Price Index Inflation and Sub components (Jan 2015 - Sep 2021) in %

14
12
10
8
6
4
2
0
-2
-4
Jan-15

Jan-16

Jan-17
Apr-15

Jul-15

Jan-18
Apr-16

Jul-16

Jan-19
Apr-17

Jul-17

Jan-20
Apr-18

Jul-18

Jan-21
Apr-19

Jul-19

Apr-20

Jul-20
Oct-15

Apr-21

Jul-21
Oct-16

Oct-17

Oct-18

Oct-19

Oct-20
Overall Inflation (CPI) House Rents Food and Beverages
Source: Refinitiv

c. Credit growth remains steady despite COVID-19 disruptions

Overall credit growth in Kuwait has been steady in the second half of 2021, primarily
driven by the retail side. Consumer loans and Installments loans grew by 13.4% and
12.9% respectively at the end of November 2021 compared to the same period last
year. Overall credit growth during the same period (Nov 2021 vs. Nov 2020) stood at
5.2%, which was higher than the past five-year average.
Total Credit to Private Sector

50,000 10%

40,000 8%

30,000 6%

20,000 4%

10,000 2%

0 0%

2015 2016 2017 2018 2019 2020 Nov-21

Credit to Private sector (KD Mn.) YoY growth (%)

Source: Central Bank of Kuwait; Values are as of end of period

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 Kuwait Real Estate Report 2022 Outlook

Loans to Real Estate Sector

10,000 15%

8,000 10%

6,000 5%

4,000 0%

2,000 -5%

0 -10%

2015 2016 2017 2018 2019 2020 Nov-21

Loans to Real Estate (KD Mn.) YoY growth (%)

Source: Central Bank of Kuwait; Values are as of end of period

Consumer Loans

2,000 40%

30%
1,500

20%
1,000
10%

500
0%

0 -10%

2015 2016 2017 2018 2019 2020 Nov-21

Consumer loans (KD Mn.) YoY growth (%)

Source: Central Bank of Kuwait; Values are as of end of period

Installment Loans

15,000 20%

15%
10,000

10%

5,000
5%

0 0%

2015 2016 2017 2018 2019 2020 Nov-21

Installment Loans (KD Mn.) YoY growth (%)

Source: Central Bank of Kuwait; Values are as of end of period

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

d. Population growth & demographic structure bode well for future

Real Estate demand
Expat population growth has declined sharply during 2020 due to COVID-19.
Closure of airports, non-issuance of visa and restricted mobility were some of the
main reasons for the fall. In addition, labor-intensive segments such as construction
and retail faced major disruptions due to lockdown restrictions. In spite of the
above factors, the growth in expats during 2020 was not negative, indicating that
there was no mass exodus of expats from the country due to the pandemic.
Kuwait Population Growth in percentage (2013-2020)
8%

6%

4%

2%

0%

2015 2016 2017 2018 2019 2020

Total Population Expatriates Nationals

Source: Central Bureau of Statistics

Nearly 55% belong to age group between 20-49 years. This large portion also
represents the highest demand for residential space particularly those in their 30s.
Kuwaiti Nationals - Population Pyramid 2020
80+
Male Female
70-74

60-64

50-54

40-44

30-34

20-24

10-14

0-4

1,00,000 80,000 60,000 40,000 20,000 0 20,000 40,000 60,000 80,000 1,00,000

Source: Central Statistics Bureau

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 Kuwait Real Estate Report 2022 Outlook

Average Monthly Salary of in Kuwait (in KD)

1,800

1,600 1,533

1,400
1,239
1,200

1,000

800 728

600

400 306

200

Private Sector Government Sector

Kuwaiti Non-Kuwaiti

Source: Labour Market Information System - Kuwait, PACI; Note: Data as of Q3 2021

The average wage in the private sector is skewed by the presence of a large number of
unskilled expatriates. Expatriates could be classified as skilled, laborers and domestic
workers. Skilled Expatriates are predominantly employed by the private sector, with
their pay at par with Kuwaiti nationals in the sector. Laborers are employed both in
the private and public sectors projects, with their pay being much lower than skilled
employees. Their contribution to the economy is low due to low disposable income,
with most of income being repatriated. Domestic workers are employed by Kuwaiti
households. Their contribution to the economy is negligible due to low disposable
income, the fact that they are provided accommodation inclusive of all expenses and
most of income is repatriated.

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Break-up of Kuwaitis and Non-Kuwaitis by education level

100

90

80

70 54.3

60
85.9
50
in %

40

30

20 45.7

10
14.1
0

Kuwaitis Non-Kuwaitis

With University education or Above Without University education

Source: Labour Market Information System – Kuwait; Note: As of Q3 2021

Only 14.1% of the total expat population in Kuwait’s workforce have completed
University education and above while nearly 45.7% of the nationals in the workforce
have completed University education and above. There is a very low presence of
expatriates in the government sector, where nationals occupy 79% of the jobs and
expatriates occupying the rest. Private sector is the largest employer of expatriates,
absorbing 66% of them, while 30% of expats are employed as domestic workers.

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 Kuwait Real Estate Report 2022 Outlook

3. Real Estate Performance

a. Kuwait Real Estate Transactions
Kuwait’s Real estate market has rebounded in 2021 following a dip in 2020 due to
the pandemic. Overall transaction value has reached pre-pandemic levels while
there has been a significant surge in the number of transactions driven by the
Private housing sector.
Overall Real Estate Transactions (2015-2021)

6,000 9,780 10,000

5,000
7,085 8,000

4,000 5,953 5,845 5,666

5,271 6,000
4,610
3,000
4,000
2,000

2,000
1,000
3,436

2,550

3,403

3,720

3,689

2,511

3,775
0 0

2015 2016 2017 2018 2019 2020 2021

Sales in KD million (LHS) No. of Transactions (RHS)

Source: Ministry of Justice; Note: 2021 values as of Nov 2021

Private Residential housing Real Estate Sales have rebounded sharply in 2021 after a
resilient 2020 amidst the pandemic. The sector’s resilience could be attributed to the
source of demand, which comes from Kuwaiti nationals with mostly stable jobs in the
public sector.
Private Housing Real Estate Transactions (2015-2021)
4,000 10,000
8,583
8,000
3,000

6,000
2,000 4,311 4,734
4,190 4,737
3,076 3,909 4,000

1,000
2,000
1,354
2,177
1,475

1,571

1,447

2,756
1,022

- -

2015 2016 2017 2018 2019 2020 2021

Sales in KD million (LHS) No. of Transactions (RHS)

Source: Ministry of Justice; Note: 2021 values as of Nov 2021

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Istithmari sector (Residential Apartment) Real Estate transactions have partially

recovered in 2021 from the lows witnessed in 2020. However, they are not back to
pre-pandemic levels. The sector in general has underperformed since 2015 following
years of outperformance between 2010 and 2014. Falling rents even prior to the
pandemic and the additional pressure of dwindling expat demand has weakened
Investment real estate. The COVID-19 pandemic has further dampened the sentiment
in the Investment segment, as rents were put under pressure due to restricted mobility
of expats arising out of the lack of issuance of new visa and the closure of borders.
The resulting weakness in demand from expats for residential apartments has led to
the softening of apartment rents.
Istithmari sector (Residential Apartment) Real Estate Transactions (2015-2021)

2,000 2,000
1,770
1,577
1,500 1,337 1,500
1,296
1,000 1,141 1,020 1,000

695
500 500
1,360

1,676

1,218
862

702

487

709
- -

2015 2016 2017 2018 2019 2020 2021

Sales in KD million (LHS) No. of Transactions (RHS)

Source: Ministry of Justice; Note: 2021 values as of Nov 2021

Sales of commercial real estate have continued to weaken, even below the levels
witnessed in 2020. COVID-19 has had a heavy impact on the sale of commercial
buildings, with uncertainty continuing into 2021 as well.
Commercial Real Estate Sales (2015-2021)

1,000 472 500

800 400

600 300

400 200
136
100 105 118
200 71 81 100
455

600

541

619

448
363

157

- -

2015 2016 2017 2018 2019 2020 2021

Sales in KD million (LHS) No. of Transactions (RHS)

Source: Ministry of Justice; Note: 2021 values as of Nov 2021

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 Kuwait Real Estate Report 2022 Outlook

b. Land Prices, Rental Values and Cap rate

Land Prices
Average land value for residential apartments in Q3 2021 has registered an average
decline of 0.8% compared to Q1 2021 with only Bneid Al Gar (Sea Front) registering a
2.8% increase. While land value has remained stable in commercial segment, industrial
segment has seen an increase of about 5.8% in average land value.

Average Land Value/Sq.M. for Residential Apartments (KD)

Residential Apartments
Residential Apartments
Q3 2021 Q1 2021

Dasman Gulf Rd 4,115 4,125

Dasman Inside Rd 2,313 2,325

Bneid Al Gar (Non-Sea Front) 1,400 1,410

Bneid Al Gar (Sea Front) 2,980 2,900

Shaab (Non-Sea Front) 1,480 1,483

Shaab (Sea Front) 2,960 2,965

Salmiya (Non-Sea Front) 1,480 1,485

Salmiya (Sea Front) 2,890 2,900

Hawalli 1,363 1,370

Farwaniya 1,375 1,387

Khaitan 1,282 1,290

Mahboula 1,168 1,260

Source: KFH Report

Average Land Value/Sq.M. for Commercial Real Estate (KD)

Average land value/Sq. M. (KD)
Commercial
Q3 2021 Q1 2021

Kuwait City 5,750-7,625 5,750-7,625

Salmiya 2,825-3,125 2,825-3,125

Hawalli 2,850-3,600 2,875-3,625

Farwaniya 3,950-4,425 3,950-4,475

Khaitan 3,700 3,700

Fahaheel 3,025-4,200 3,025-4,200

Source: KFH Report

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Average Land Value/Sq.M. for Industrial Real Estate (KD)

Average land value/Sq. M. (KD)
Industrial
Q3 2021 Q1 2021

Shuwakh Industrial 1,372 1,292

Al Rai Industrial 1,160 1,100

Source: KFH Report

Rental Rates
Rents on Residential apartments (Istithmari sector) softened further in Q3 2021 due
to weak demand from expats. Compared to Q1 2021, residential apartments in some
areas such as Salmiya (sea front) and Farwaniya have seen some decline in their
average rental value range. Rents in commercial real estate have mostly remained
stable with some pockets seeing slight downside shift.

Average rent value of apartment with 3 bedroom, hall and maid room (KD)
Average rent value – 3-bedroom, hall and maid room (KD)
Residential Apartments
Q3 2021 Q1 2021

Dasman (Gulf Rd) 850-1600* 850-1600*

Dasman (Inside Rd) 400-420 405-430

Bneid Al Gar (Non-Sea Front) 400-420 400-420

Bneid Al Gar (Sea Front) 850-1300* 850-1300*

Shaab (Non-Sea Front) 400-410 400-420

Shaab (Sea Front) 900-1300* 900-1300*

Salmiya (Non-Sea Front) 380-395 380-410

Salmiya (Sea Front) 900-1000* 900-1300*

Hawalli 365-375 365-380

Farwaniya 370-380 375-390

Khaitan 370-375 375-390

Mahboula 330-340 330-350

Source: KFH Report, Markaz

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 Kuwait Real Estate Report 2022 Outlook

Average rent value for retail segment in commercial real estate (KD)
Rental value/Sq. M. (KD)
Commercial - Retail
Basement Ground Floor Mezzanine

Q3 2021 Q1 2021 Q3 2021 Q1 2021 Q3 2021 Q1 2021

Kuwait City 10-12 10 - 12 20-40 20 - 40 12-14 12-14

Salmiya 9-11 10-11 18-40 18 - 40 11-13 12-14

Hawalli 9-10 9-10 17-38 17 - 38 10-12 11-13

Farwaniya 10-12 11-12 20-42 20 - 42 11-14 12-15

Khaitan 9-11 10-11 18-39 18 - 40 11-13 12-14

Fahaheel 9-12 10-12 18-40 18 - 40 11-14 12-14

Source: KFH Report

Average rent value for office segment in Commercial Real Estate (KD)
Rental value/Sq. M.
Commercial - Office
Q3 2021 Q1 2021

Kuwait City 8.5-11 8.5-11

Salmiya 8-9 8-9

Hawalli 7-8 7-8

Farwaniya 8-9 8-9

Khaitan 7-8.5 7-8.5

Fahaheel 8-9 8-9

Source: KFH Report

Average rental value in Industrial Real Estate (KD)

Rental value/Sq. M. (KD)

Industrial Ground Floor
Basement (Storage) Mezzanine (Offices)
(Showrooms)

Q3 2021 Q1 2021 Q3 2021 Q1 2021 Q3 2021 Q1 2021

Kuwait City 2.5-4 2.5 - 3.5 6-30 7-25 3-4 3 - 3.5

Salmiya 3-4 3-4 7-32 7-25 3-4.5 3-4

Source: KFH Report

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

Cap Rate
Cap Rates have remained broadly stable for both apartments and commercial real
estate segments. In Kuwait City, cap rates range for commercial real estate has
widened.

Residential Apartments Capitalization Rate

Gross Capitalization Rate
(Gross Annual rental /Value of Property)
Residential Apartments
Q3 2021 Q1 2021

Dasman (Gulf Rd) 7.00% 7.00%

Dasman (Inside Rd) 7.25% 7.25%

Bneid Al Gar (Non-Sea Front) 7.63% 7.63%

Bneid Al Gar (Sea Front) 7.13% 7.00%

Shaab (Non-Sea Front) 7.90% 7.90%

Shaab (Sea Front) 7.0% 7.00%

Salmiya (Non-Sea Front) 7.63% 7.75%

Salmiya (Sea Front) 7.13% 7.00%

Hawalli 8.13% 8.13%

Farwaniya 7.9-8.1% 7.9-8.1%

Khaitan 7.9-8.3% 7.9-8.3%

Mahboula 7.5-8.5% 7.5-8.5%

Source: KFH Report

Commercial Real Estate Capitalization Rate

Commercial - Gross Capitalization Rate (Gross Annual rental /Value of Property)

Office Q3 2021 Q1 2021

Kuwait City 6.75%-7.5% 7.0% - 7.38%

Salmiya 7.75%-8% 7.75% - 8%

Hawalli 8%-8.25% 8% - 8.25%

Farwaniya 7.75% 7.75%

Khaitan 8%-8.25% 8% - 8.25%

Fahaheel 7.75%-8.5% 7.75% - 8.25%

Source: KFH Report

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 Kuwait Real Estate Report 2022 Outlook

Invest in Markaz Real Estate Fund

Fund Performance
Total Return (Jan 03-Dec 03) 17.80%

6.37%
Total Return (Jan 03-Dec 05) 40.02%
Total return
Total Return (Jan 06-Dec 08) 32.10%
annualized: Total Return (Jan 09-Dec 11) 4.60%
Total Return (Jan 12-Dec 14) 21.10%
Total Return (Jan 15-Dec 17) 2.10%
Total Return (Jan 18-Dec 20) 2.70%
Total Return (Jan 03 – Dec 21) 151.49%

5.06%
Average annual Capital Gain since Inception 23.83%
distribution since Income Distribution since Inception 127.66%
inception: Total Return Annualized 6.37%
Average Annual Yield (Cash) 4.77%
Volatility (3 year) 2.21%

The Markaz Real Estate fund, established in 2003, is considered the first open-ended real-estate
investment fund in Kuwait, and stands as a testament to Markaz’s innovation in the financial ser-
vices field. This is reflected through the ongoing development of unique investment tools that cater
to investors’ needs. Markaz Real Estate Fund is Sharia compliant and aims to achieve stable and
recurring returns, through investing in income generation properties in Kuwait.
Important info:
Fund manager: Kuwait Financial Centre K.P.S.C. Universal Tower, Ahmad Al-Jaber Street, Sharq, Kuwait, Tel: +965 2224
8000, P.O. Box 23444, Safat 13095, State of Kuwait
Fund Executive Committee Members: Bassam Al-Othman, Milad Elia, Khaled Al-Mubaraki, Abdullatif Al-Nusif
To get a copy of the Fund’s Articles of Association, the subscription form, and the financial statement of the fund, please
visit our website: www.markaz.com
The Total Return consists of the Capital Gain and the Dividend Yield after deducting all fees and expenses
Disclaimer: This announcement has been prepared for promotional purposes and has been approved by Markaz. Investments
in funds are subject to market risks. There can be no assurance or guarantee that the investment will produce any returns.
Prospective Investors must therefore be aware of and understand that such investment carries a significant degree of risk of
loss of their capital; and the dividend rate cannot be predicted or guaranteed. Past performance is not a reliable indicator of
future performance. Before investing, prospective investors must carefully examine the Articles of Association and all Fund’s
related documents to be aware of the investment methods, including the merits and risks involved.

19
markaz.com
+965 2224 8000
Kuwait Financial Centre k.p.s.c. and Subsidiaries

4. Kuwait Real Estate –

Major News/Laws
Kuwait Draft mortgage law approved
by the government

ƒ A new mortgage law is being

proposed in Kuwait for the private
housing sector that will allow Kuwaiti
banks and financing companies to
extend mortgage loans to citizens.
Currently, mortgage lending to
citizens by local banks is subject
to conditions such as availability
of other income for the borrower in
addition to salary, mortgage availed
for second house/property etc. For
the time being, only the government
backed Kuwait Credit Bank (KCB)
can issue subsidized mortgage
loans to Kuwaiti citizens to buy the
first house.

ƒ Some of the proposed features in

the new mortgage law are:

» In addition to KCB, mortgages

can be provided by local banks
and financing companies that
operates under the umbrella of
Kuwait Central Bank.

» The government pays the

interest on behalf of the borrower
within the limits of loan amounts
provided by Credit Bank.

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 Kuwait Real Estate Report 2022 Outlook

» The beneficiary must not have previously obtained a mortgage loan from Credit
Bank.

» Banks and financing companies have the right to dispose of the properties.

» The Public Authority for Housing Welfare (PAHW) must implement a housing
program to provide an alternative accommodation to beneficiaries who get
evicted.

Current mortgage scheme vs Draft law

Current Scheme Draft Law - Local Banks and

Parameters
Kuwait Credit Bank financing companies

Maximum Loan
KD 70,000 + KD 30,000 KD 70,000 + KD 30,000
(mortgage for first house)

Maximum Loan Without

KD 70,000 KD 70,000
Interest

Maximum Period for

58 Years Not stated yet
Repayment

Minimum Monthly KD 100 or 10% of

Not stated yet
Installment Salary which is higher

Possibility of Foreclosure No Yes

Government Initial Payment KD 70,000 + KD 30,000 KD 30,000

Government receives
Government recurrent cash Government pays interest on
monthly repayments at
payments/receipt KD 70,000 to Banks
zero interest rate

PAHW must provide alternative

Risk Default risk from borrower accommodation to beneficiaries
who get evicted.

Source: Various

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

ƒ House buyers can have the opportunity to avail a larger loan with the maximum
amount increased to KD 170,000 (KD 70,000 at zero interest + KD 30,000 worth
of buildings material at a subsidized price + KD 70,000 with interest). However,
the current house prices in Kuwait are so high that KD 170,000 is not enough to
buy a land plot, let alone a house. The sole beneficiaries of the new mortgage law
are likely to be the ones who received land plots from the government. The loan
amount is likely to be used for construction purposes and will have a domino effect
on building material prices and labour.

ƒ Despite the increase in liquidity due to the new mortgage law, it is likely that there
will not be a real increase in the percentage of home ownership by citizens due to
the following factors:

» Citizens already have access to mortgage loan from KCB.

» The House prices are already high due to various reason.

» House prices could continue to increase not because of more liquidity,

but more of psychological reasons.

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Kuwait Financial Centre k.p.s.c. and Subsidiaries Kuwait Real Estate Report 2022 Outlook

5. Markaz Real Estate Macro Index

‘Markaz Real Estate Macro Index’ helps investors in identifying the current state of real
estate market using a list of economic indicators such as Oil and non-Oil GDP growth,
inflation, new jobs generated etc. The past seven years data along with forecasts for
2022 were considered and a qualitative rating (strong, moderate, neutral, weak & poor)
was assigned considering the historical information and the current environment.

Macro-Economic factors that matter

Weight
Economic Factors Rationale
Assigned

Strong economic activity bodes well for real estate. Higher

GDP Growth economic growth usually leads to demand for commercial
20%
(Oil & Non-Oil) real estate and growing incomes would spur activity on
the residential segment.

Real estate acts as a natural hedge against inflation, as

Inflation 15% rents typically increase during times of inflation. Strong,
stable inflation is generally positive for real estate.

Money (M2) Higher growth in money supply is a leading indicator of

15%
Supply Growth economic activity.

Number of jobs created serves as a useful indicator for

Jobs created 15%
real estate demand.

Increasing population is directly related to real estate

Population Growth 15%
growth and residential demand

Investment serves as a proxy for project activity and

infrastructure development that shall directly stand to
Investments 10%
influence the real estate markets through job creation and
increased economic activity.

Expansionary fiscal policy signifies active role of

government to support the economy through increased
Fiscal Balance 10% investments. A positive for real estate and government
spending entails improvement to physical & social
infrastructure and unlocks the value of nearby lands.

Source: Marmore research

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Kuwait Financial Centre k.p.s.c. and Subsidiaries

For each of the qualitative score, a quantitative score was assigned with ‘Strong’
being assigned a top score of ‘5’ and ‘Poor’ assigned a value of ‘1’. A weighted
average score was computed based on the weights as provided in the below table.

Kuwait Macro-Economic Factor Assessment

Economic Qualitative Quantitative

2016 2017 2018 2019 2020 2021e 2022f
Factors Take Score

Oil (Real)
3.9% -9.0% 2.1% -0.1% -9.8% -0.6% 5.0% Strong 5
GDP Growth

Non-Oil (Real)
1.4% 2.1% 2.9% -1.1% -7.5% 3.0% 3.5% Moderate 4
GDP Growth

Fiscal Balance,
0.3% 6.3% 9.2% 5.0% -8.3% -1.5% 1.0% Moderate 4
% of GDP

Investments
30.0% 27.7% 25.2% 25.0% 29.6% 28.4% 29.3% Neutral 3
(as % of GDP)

Money Supply,
3.4% 3.5% 4.1% -1.5% 3.9% 4.5% 6.1% Neutral 3
M2 (YoY)

Inflation 3.5% 1.5% 0.6% 1.1% 2.1% 3.2% 3.0% Neutral 3

Yearly
Population 4.9% 4.0% 3.5% 4.6% 1.0% 1.4% 1.7% Neutral 3
Growth

Jobs created
112 69 70 29 -140 -63 29 Neutral 3
(in '000s)

Overall
3.4
Score

Source: IMF, CSB Kuwait, Marmore research

The state of real estate market was categorized into four distinct phases as shown
below.

24
 Kuwait Real Estate Report 2022 Outlook

Market Phases

From To Market Phase

4.3 5.0 Market is at peak, slowdown ahead

3.5 4.3 Market is accelerating

2.8 3.5 Market is recovering & gathering pace

Less than 2.8 Market is Falling

Source: Marmore research

Markaz Real Estate Outlook based on Macro Economic Indicators

Market is at Peak,
Slow down ahead

Market is
falling
Market is
accelerating

Market is recovering
& gathering pace

Current Outlook

Source: Marmore research

25
Kuwait Financial Centre k.p.s.c. and Subsidiaries

Conclusion
Kuwait’s economic recovery in 2022 is expected to be supported by the ongoing
vaccination drive and high oil prices. In line with the broader economy, Kuwait’s Real
Estate market is also gradually recovering, with overall sales starting to reach pre-
pandemic levels. Real Estate sales in the first eleven months of 2021 have surpassed
the levels witnessed in 2020. Private housing segment continues to remain resilient
and drive overall real estate activity, with demand driven by Kuwaitis whose income
has largely remained stable throughout the pandemic as most of them are employed
in the public sector. With several residential projects underway if the new mortgage
law is approved, sales are expected to grow in the coming quarters. Istithmari sector
(Residential Apartment) has witnessed a reduction in demand due to the negative
consequences of the pandemic. The outlook for private housing sector is expected
to stay positive in the future due to stable demand from Kuwaiti Nationals. The
Istithmari sector is expected to recover once the negative effects of the pandemic
on the economy gradually subsides. Improvement in the sector is expected after the
government’s COVID-19 measures and restrictions are gradually lifted. Finally, the
recovery of oil prices will drive economic growth, which in essence will have a positive
impact on all the segments within the Real estate sector.

Summary – Kuwait Markaz Real Estate Macro Index

Future Outlook Quantitative

Macro indicators
(2022 & beyond) Score

Oil Real GDP Growth Strong 5

Non-Oil Real GDP Growth Moderate 4

Fiscal Balance Moderate 4

Investments Neutral 3

Money Supply, M2 (YoY) Neutral 3

26
 Kuwait Real Estate Report 2022 Outlook

Future Outlook Quantitative

Macro indicators
(2022 & beyond) Score

Inflation Neutral 3

Population growth Neutral 3

Jobs created Neutral 3

Market is recovering
Overall Score (consolidating) and 3.4
gathering pace

Source: Marmore Research

27
Kuwait Financial Centre k.p.s.c. and Subsidiaries

What reports to expect soon?

KSA Real Estate Outlook 2022 UAE Real Estate Outlook 2022

Markaz Real Estate Capabilities: Management Team

With a team of 27 professionals, Markaz MENA Real Estate provides a fully integrated insights
and services to managing real estate funds

Team of 27 Kuwait HQ
ƒ Investment ƒ Riyadh KSA - 2006
As ƒ Project Management ƒ Khobar KSA - 2006
se
tM ƒ Financial Management ƒ Abu Dhabi - 2010
an
ry

ag ƒ Administration ƒ Dubai - 2014

so

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vi

Markaz provides great value through:

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t ƒ Governance
MENA ƒ Experience
t Real Estate ƒ On the ground presence
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28
Disclaimer
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