Property developers see no ‘bubble’ as demand keeps growing

CAIRO – 14 August 2017: The Egyptian real estate market will maintain stability because it is driven by a strong demand from consumers, real estate developers said.

A “real demand” from the consumers’ side will keep the sector away from a “bubble,” Head of the real estate developers’ chamber at the Federation of Egyptian Industries Tarek Shoukry said.

The sales of residential units were affected by the price increase, not by a low demand, Shoukry told Egypt Today, explaining that this has prompted real estate developers to support clients through offering them flexible installment system, Shoukry noted.

“This, however, has created a financial burden for real estate companies,” Shoukry, who is also chairman of al-Arabia Group, added.

To ease pressure on both developers and consumers, Shoukry called on banks to expand their loan portfolio for real estate companies.

He also requested from the Central Bank of Egypt (CBE) to expand their mortgage finance initiative to include more tranches at low interest rates, to help customers, Shoukry said.

Investments in the sector is expected to witness a breakthrough as the New Urban Communities Authority (NUCA) launched new land plots, to be developed in partnership with the private sector, Saudi Egyptian Construction Company (Secon) Darwish Hassanin said.

Investors will also be encouraged as the government agreed to pay a compensation for real estate contractors, to make up for the difference in costs that happened after the flotation of the Egyptian pound, Hassanin told Egypt Today.

Real estate units should be offered at more diversified spaces and prices to expand the target market, Hassanin added.

But other developers voiced concerns about profitability and financing terms.
Managing director ARDIC for Real Estate Development Ashraf Dwidar said that despite the new investment law is positive for investors, developers will still be challenged by increased building costs, “while at the same time clients are not able to cope with increases,” he said.

CEO of Capital Group Properties Amgad Hassanin said the consumers’ demand will be affected, “so the CBE has to allow financing purchasing units that are still under construction,” he requested.

Egyptian pound’s flotation has sent mixed signals to the real estate market, as the money injected in the sector is still relatively stable, keeping a sustainable supply, a result of soaring profits. However, the ability of the population to purchase units might pose a new challenge for developers.