Introducing laws for restructuring demographics including limiting visa transfers and halting visa renewals for expats above 60 years would likely negatively impact the real estate sector, said sources to Al Anba daily. They warned that such decisions can cause serious damage to countries’ economies, particularly in the real estate sector.
Expats above 60 without graduation degrees are currently merchants, partners in major companies and work in administrative positions, and enforcing a decision where they are forced to leave will hurt the residential and commercial sectors in the real estate market. The real estate sector is strongly linked to the banking and financial sector, thus playing an integral part of the economy. If these hasty decisions are implemented in Kuwait without a complete study, it will possibly hamper the country’s development and expansion plans.
Real estate investment sector largely depends on the expat population of the country, so will suffer from a mass exodus of them leading to a widening of the gap between supply and demand, in turn forcing the rents to drop in the real estate sector to cope.
Damage to the real estate sector will have a snowball effect on many other sectors especially on the financial sector for it functions largely on loans and interests, hence banks may feel threatened, and a recession may be a looming possibility. The government must be aware of this matter as while various sectors of the country are struggling to recuperate from the economic fallout of the coronavirus crisis and with this decision to alter demographics, further effort will have to be extended to ease the wounds of real estate.
Some of the real estate sectors in other Gulf countries due to the coronavirus crisis where there have been an exodus of expats have initiated plans to reduce the impact by working on mergers to provide a lifeline to this sector. Some Gulf real estate companies, especially those facing great challenges, may resort to merging with each other in addition to reducing the prices of their properties, due to a decrease in demand and limited cash flow as a consequence of the pandemic that has led to delayed payments and installments from buyers.
Some Gulf countries, especially those with real estate developers, in which real estate prices have fallen dramatically, have resulted in the developers facing difficulties in paying their financial dues or debts, which will compel them to attempt merger as a last resort. This is not necessarily negative as its future implications will perhaps be positive, as it will enable these companies to reformulate the capital and schedule their debts, in addition to preserving the rights of shareholders and their years of experience that have made their career.
The daily said, quoting sources that mergers in Kuwait is usually an inadmissible option as a large proportion of Kuwaiti companies, banks and financial institutes buy shares in companies that default in paying their debts, thus it saves them from bankruptcy or forces them into mergers.
Such a viewpoint was mentioned back in August, the Parliament’s Human Resources panel, tasked with examining ways to redress the demographic imbalance and limit the number of expatriates working in the country, in its report earlier this month noted that any sudden and large-scale reduction in the number of foreigners would have serious negative repercussions for the economy.
According to the panel, any large and rapid trimming of expat numbers could result in a severe impact on various sectors of the economy, including in commerce, real estate, education, health, and other services. In its observations, the panel noted that the retail and travel sectors could witness an appreciable slump in sales, while real estate would have to cope with a large number of vacant flats and unsold apartments.
They point out that even under present circumstances brought on by the coronavirus pandemic and which has led to reduced salaries and loss of income in the private sector, many expatriates are preferring to leave the country. This enmasse departure could see the price of investment properties fall by as much as 25 percent, and occupancy rates drop by nearly 50 percent in some areas. They warned that any attempt to throw out even more expatriates would further aggravate the present situation.
The government is reportedly discussing a proposal to cut as many as 360,000 expats almost immediately, most of them illegals and senior expats above 60 years of age. According to the latest population figures, there are more than 3.4 million foreigners in Kuwait in comparison to 1.4 million Kuwaitis.