Housing regulations amplify costs for Kuwait real estate

• Better worker housing needed
• Higher rental costs
• Shipping challenges persist

Kuwait’s real estate industry is grappling with increased construction and labour costs as a result of stricter housing regulations.

Authorities have clamped down on basements and ground floor areas being used for worker accommodation, leading to a shortage of affordable housing for low-paid expatriate construction workers in central areas.

The change has led to an increase in rental rates and demands by construction workers for an increase in salary levels, the Arab Times newspaper reported.

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The Al-Mangaf fire, which killed 50 workers in June, has further emphasised the regulatory shortcomings and the need for more high-quality affordable housing for workers in the Gulf state.

These issues have exacerbated the sluggishness of the Kuwaiti real estate market, even as large transactions and logistics deals in the first six months of this year mask underlying challenges.

Total real estate sales hit a two-year high in the second quarter of 2024, largely because of sizeable individual deals in the commercial, investment and residential sectors.

Excluding a significant land sale, the National Bank of Kuwait reported a nearly 14 percent fall in residential sales, caused by high financing costs and the prospect of prolonged global interest rates.

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• Supply logjams force Gulf builders to get creative

The rising labour construction costs are compounded by shipping challenges as a result of the Red Sea crisis and attacks on container ships, pressuring Gulf builders to overhaul their supply chains and pricing strategies of essential raw materials essential to the construction sector. 

Nevertheless, a contract for 24,508 smart housing units in the South Saad Al-Abdullah City, announced late last week, suggests a potential shift.

This project aims to spearhead the integration of cost-saving technologies such as the internet of things, artificial intelligence and green building practices, aimed at promoting efficiency and sustainability in Kuwait’s real estate sector.