Kingdom Hearts 3 Director Tetsuya Nomura said in a recent interview with Famitsu that the the team has decided to switch game engines for the next installment in the franchise. The team was using the Luminous engine, but do to issues with the engine, they are now using Unreal Engine 4.
When Nomura was asked about the development status of the game he had this to say…
“The [development] is going steadily and according to the schedule. Due to having switched to Unreal Engine 4 for various reasons, we’re having trouble on some parts as far as rendering goes, but with help from the folks at Epic Games, progress is going safely.”
Nomura also added that development on the game is still on schedule and going smoothly.