Expert warns of negative effect of visa restrictions on real estate

By Majd Othman

KUWAIT: Since the onset of the COVID-19 pandemic in 2020, Kuwait has implemented stringent visa regulations for expatriates as a precautionary measure to curb the spread of the disease. These regulations include restrictions on expatriates sponsoring family visas for their first-degree relatives and impediments for small businesses in recruiting foreign workers from specific countries due to visa restrictions. These laws have adversely affected various business sectors in the country, particularly the real estate investment sector.

Sulaiman Al-Dilaijan

Real estate expert Sulaiman Al-Dilaijan, in an interview with Kuwait Times, explained that there has been a recent 12 to 15 percent decrease in demand for rented apartments in the investment real estate sector by expatriate families. Additionally, the value of rented apartments has declined by 10 to 15 percent. The most impacted segment within this sector is single housing apartments, primarily housing laborers without families who have come to Kuwait to work for companies that do not provide housing (apart from governmental projects).

These laborers’ presence has affected demand in specific areas due to the strict visa regulations, leading to the deportation of many existing single laborers and discouraging others from working in the country due to the stringent laws. Dilaijan warned that if current visa laws persist, they will significantly impact the real estate investment sector. The impact could increase to 10 percent if these laws remain unchanged for the next year and could reach 25 percent based on the current trend.

Regarding the risks associated with the rented apartment sector in Kuwait, the expert emphasized that the first casualties of this decline will be Kuwaiti investors, who will see a substantial reduction in their profits. This situation may lead to complications with lenders, such as banks. He further explained that most Kuwaiti investors in the investment real estate sector rely on loans from banks or financial institutions. These lenders may demand repayment, sell the real estate, or increase interest rates, which would force investors to sell their investments at a lower price or provide bank guarantees.

On another note, Dilaijan mentioned that the real estate market in specific districts in Kuwait, specifically government projects needing rental buildings for their workers, has been impacted by the lack of new government projects. In conclusion, Al-Dilaijan highlighted that Kuwait’s current expatriate population stands at 3.8 million, including 700,000 domestic laborers who do not require housing.

The remaining 2.8 million expatriates are the most significant contributors to the real estate investment sector, particularly rented apartments. Recent data from the Real Estate Union indicates an occupancy rate of approximately 85 to 89 percent of the total supply, representing a 10 to 15 percent decrease, which he noted is a typical international rate decrease given the prevailing high interest rates and business stagnation.

The post Expert warns of negative effect of visa restrictions on real estate appeared first on Kuwait Times.

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