Economic Policy and Performance Development †MyAssignmenthelp.com

Question: Discuss about the Economic Policy and Performance Development. Answer: Introduction The Gulf Cooperation Councils (GCC) is facing immense crisis after the financial disaster of 2008 which has its impact severely on the real estate sector(Freeman, 2012). This has led to surge in housing loans throughout the entire of Saudi Arabia along with Madinat Jumeriah city of UAE. Thus, though the housing sector is suffering there is a positive sentiments, as GCC investors are attracted towards real estate sector. Kuwait amongst the GCC is gradually recovering since 2012. The key segment of growth in the GCC has been residential segment which has been the biggest contributor of growth. The commercial sector is suffering from imbalance of financial crisis of demand and supply. The scope of this report analyses the housing situation prevailing in Kuwait along with the rental market. Kuwaits economy is gradually progressing towards development and growth prospects contributing to the growth of real estate sector. CSR proposed that Kuwaits real estate sector is cyclical in nature and is affected by interest rate changes, population growth and availability of credit facility(Al-Nakib, 2014). The real estate industry of Kuwait is highly leveraged where the average net debt to equity ratio is almost 93.05%. The authority has made several positive progress for growth of real estate market as Kuwait Investment Authority (KIA) setting up of Real Estate Investment Authority and assigning KWD 1.05 billion in fund to be set up Kuwait Finance House (KFH). There has also been signing of contract with Markaz for managing real estate investment portfolion of KWD 255.00 million. Housing loans has been projected to increase by KWD 0.04 million from Saving and Credit Bank (SCB). Along with these there are several more initiatives undertaken for attempting to revive the housing se ctor. Factors that affect demand and supply for housing in Kuwait Demand for housing in Kuwait is relatively elastic demand that is impacted by various factors. The demand for housing is dependent on incomes of individuals, growth prospects of the country, availability of loans and so on(Alshalfan, 2013). The following are some factors influencing housing sector of Kuwait as; Kuwait Economy: While the demand of residential housing sector in the real estate has picked up but there is a gradually slow increase in commercial housing. There remains abundant supply of housing with immense investment in the country but the demands are yet to pick up. Changes in interest rates: The governmental constraints post the financial crisis have affected demand and supply of housing with imposition of new regulations(Alissa, 2009). There has been impact on supply of housing post the crisis period due to modification in the Built-Operate-Transfer (BOT). Credit facility availability: Laws in Kuwait prohibit foreign companies from owning lands or homes in Kuwait, due to which companys role in real estate development has been prohibited. There are a number of banks that are offering loan facility to housing sector growth though in the past growth has been sluggish in nature. Population Growth: There is a positive correlation between population growth and rise in demand of housing in Kuwait(Burton, 2015). The population growth in the country has been estimated to be at 2.35% in the recent years which has influenced steady investment from indigenous as well as expatriate population of Kuwait. Rent-Control policy implemented in Kuwait Steady growing population in Kuwait in past years has forced government to increase housing availability in the country. It has been estimated that approximately 29,000 housing units for 39,500 people are getting built in South Muthlaa, but there is a growing complaint regarding the housing availability in the country(AlMatar). The current situation persisting in regards to rent is terrible that has caused hiking of rents without prior information or renewal of contract and no dispute settling procedures. The rent control policy in the country is very bleak and with unavailability of housing landlords is pushing up rents and reviewing contracts without any notices. Tenants face immense number of issues in their tenancy agreement that has hampered the overall growth and development of housing in the country. There is minimum implication from rent control policy which has led to shortage of housing in the country. Rental contracts are not treated seriously by landlords which results in advocacy of such agreements. National Development Plan has aimed to restructure the State of Kuwait for settling 2.5 million people from the urban area till 2030(El-Katiri, 2011). The government along with the Public Authority for Housing Care aims to provide residential towns and cities outside of Kuwait for betterment of communities in the region. There is a limited number of houses that offers housing, further the rents are very high compared to that of ordinary rents. Apartment rent rates are determined on ad-hoc basis that is based on location, demand for that specific housing and so on(Auty, 2007). The dwelling of tenancy by tenure has been separated and analyzed but to find no links that can establish the connection between rental rates and housing availability. At current rates the rental situation of the country is not at all sustainable that has led to serious issues amongst the general population. Thus, there has been an upsurge in government intervention leading to formation of steady contracts in rent that can be established. Though there are number of let out apartments but they often hesitate to provide them at rents creating an imbalance between demand and supply. With housing for all the demand in rental apartments will steady attain a balance creating steady growth for the rental markets. With the housing marke ts further stabilizing the rental situation in the country is expected to benefit and emerge as a suitable avenue for earning for many individuals residing in the country. Conclusion There is a high amount of positivism expected from the Kuwait housing sector with stabilization of political aspects. Total of 91% unused space in Kuwait remains unoccupied that can be used for tourists development and add to growth of real estate business. The bank interests rate have also been marginalized to a great extent that has revitalized performance in the sector and lead to improvement of KIA portfolio. The housing sector is expected to increase at a rate of 11% annually at an average rate provided the levels of investment and growth. This will help increase and impact the overall economic development of the country. Reference Lists Alissa, R. 2009. Modernizing Kuwait: Nation-building and Unplanned Spatial Practices. Berkeley Planning Journal. AlMatar, F. (n.d.). THE INTERNATIONAL PROBLEM OF SKYROCKETING RENT: WHY INCREASED RENT CAN HURT THE ECONOMY. Al-Nakib, F. 2014. REVISITING ?A?AR AND BAD? IN KUWAIT: CITIZENSHIP, HOUSING, AND THE CONSTRUCTION OF A DICHOTOMY. . International Journal of Middle East Studies, 5-30. Alshalfan, S. 2013. The right to housing in Kuwait: An urban injustice in a socially just system. Auty, R. 2007. Patterns of rent-extraction and deployment in developing countries: implications for governance, economic policy and performance. . Advancing Development: Core Themes in Global Economics, 555-577. Burton, D. 2015. Citizenship, Super-inclusion and Consumer Credit Policy in Kuwait. Journal of Social Policy, 25-42. El-Katiri, L. F. 2011. Anatomy of an oil-based welfare state: Rent distribution in Kuwait. Freeman, G. . 2012. Impact of the financial crisis on the housing finance system of Kuwait. Housing Finance International, 44-50. www.economicshelp.org. (Retrieved on 29th April 2017). Demand and Supply of Kuwait Housing. https://www.economicshelp.org/blog/1811/markets/diagrams-for-supply-and-demand/. www.infomercatiesteri.it. (Retrieved on 29th April 2017). Kuwait Housing Sector. https://www.infomercatiesteri.it/public/images/paesi/107/files/Kuwait%20Real%20Estate%20Sector%20Report_pdf%2012_12%20Capitalstandards.pdf.