Experts optimistic about Egypt’s real estate market at Euromoney

CAIRO – 19 September 2017: Prominent real estate experts and officials from financing companies are optimistic about the Egyptian real estate market. Experts claimed in the Euromoney conference on Monday that several ambitious projects such as the new Administrative Capital City will pave the way to market success if certain challenges are tackled.

An ongoing discussion led by Richard Banks, consulting editor of Euromoney Conference, about the current performance of Egyptian real estate market and predictions in 2018, has taken place in the two-day annual conference held in Cairo.

“We see great potential in Egypt as an emerging market for development; however certain challenges wait to be tackled,” said John Davis, CEO of Colliers International MENA, a real estate consultancy group.

He added that in order to be able to fully assess the market, one needs to overlook where Egypt stands on the development curve, confirming the Egypt’s commercial market is at the lowest of the curve.

CEO of SODIC, Magued Sherif, has a different approach when assessing the current market performance, stating that Egypt has strong fundamentals in the residential sector where the housing gap has reached a shortage of 3.5 million units and about 300,000 citizens demand homes annually.

“Overall we are in a very challenging period, but the real estate sector has been one of the few sectors performing well in the past period based on high demand. We are still optimistic about further government efforts to provide relaxed payment plans for developers and buyers,” said Sherif.

When assessing the market, Davis points out that certain factors need to be considered including finances provided by government, a proper exit strategy for international investors, and sectors that lack development.

“There are 2.7 million square meters in Egypt that need to be developed into healthcare and educational facilities, and half a million square meters in Cairo alone that needs to be developed in the upcoming 10 years,” he explained.

He also spoke about international investments entering Egypt, emphasizing that current law and strategies need to be revised and made feasible to attract international businesses. He further highlighted the importance of providing end-users a mix-development concept that should be applied in future projects, saying that a metro for example tends to add 25 percent value increase of property if found near.

The concept of mixed-use developments accompanied with a full transportation scheme comes as part of the government’s vision when developing a mega project, such as the new Administrative Capital City. CEO of Admin Capital Company, Ayman Ismail, spoke about the benefits of building a mixed-use development to serve the growing population of Egyptians.
“We needed to expand urbanization and land was the main source of accommodating the growing population of Cairo that contains over 20 million citizens,” said Ismail.
He added that Cairo has previously won the first fastest growing city in the world last year in terms of growing population, claiming that this is a positive intake where the capital city will play a major role in accommodating this increase.

He also pointed out that the new Admin Capital is not a replacement of Cairo, but rather an expansion to the city. The project will also not operate the same as recent developments of New Cairo and 6th of October City.

“Cairo is facing the challenge of concentration of government institutions and offices in downtown, and the plan here is to relocate these offices to the project in the ‘government district’ while also serving an economic purpose of acquiring revenues worth of $10 billion by 2030, and being in proximity to Cairo and SCZone,” Ismail explained.

Ismail added that the government district will be finalized by 2018 and state institutions will be relocating in 2019.

The project is also meant to tackle the housing gap found in the middle-income socioeconomic class which Ismail has stated is a challenge due to the current economic conditions resulting from inflation; however, he mentioned that there are several land offerings in the upcoming period that will be provided through feasible agreements with end-users.

“The last few land offerings were completely satisfactory due to not only economic conditions but also the obstacles presented by current laws that don’t allow anyone to maneuver much and the only solution here is to revise these laws and adjust them to become suitable for investors buying lands,” Ismail emphasized.

Ismail also spoke about the strategies carried out to finance the mega project including creating a shareholder company that owns assets of the project including lands. The capital also comes from the New Urban Communities Authority (NUCA) and the Egyptian military force.

Participants of the panel discussion tackling the Egyptian real estate market continued to speak about their predictions in the market in the upcoming period, claiming that there has been a boom in the market despite fears following the devaluation of the Egyptian pound that occurred last November.

CEO of Rooya Group for Contracting and Real Estate Development Company, Hisham Shoukri, stated that 2017 has been a good year in terms of company sales.

“The devaluation has opened a new market for Egyptian expats who will be able to invest in more units in the real estate market, purchasing several real estate products due to the liquidity and the availability of foreign currency,” said Shoukri.

He also spoke about the challenges of developing more real estate projects, mentioning that there are several land opportunities, however, the mentality of dealing with land as a product with exaggerated prices should be changed and instead should be dealt with on the value certain projects will add to the land.

Shoukri pointed out that having only one entity responsible for land distribution will be a better solution to developers, encouraging them to build more projects and decrease current bureaucracy found in land acquisition, thus meeting the development vision of 2050.

Amid fast growing demand, for real estate projects and rise in ambitious projects constructed by both government and developers, the demand for an efficient real estate finance market continues to increase.

CEO of Al Oula- El Taamir for Mortgage Finance, Hassan Hussein, spoke about the current performance of the real estate finance market, stating that the mortgage market has grown more than the real estate finance market recording revenues of EGP 6 billion ($339 million) while leasing companies achieved revenues worth EGP 16 billion, and leasing real estate companies alone have achieved EGP 10 billion.

“The market needs more companies operating in real estate finance and more funds. The funds law itself needs to be reviewed and adjusted to serve real estate properties and be able to invest/finance a number of projects not just certain few projects,” Hussein said.

He also added that several companies have been registered in the stock market including SODIC while Rooya Group will be joining in the upcoming period.

One of the challenges that remain vivid in the real estate market due to the lack of a functional real estate mortgage plan is selling secondary homes. Hussein explained that buyers would prefer to buy homes from a developer rather than an individual re-selling his/her home and this is where mortgage plays a major role.

Ismail also agrees that the mortgage and real estate funds need to be more available to accommodate the demands of customers calling on longer payment plans and boosting the commercial sector in specific.

Euromoney is a global platform that provides the higher ranks of many financial markets, tackling top key developments and presenting innovative market trends through an authoritative round up of banking, capital markets, investments, foreign exchange and treasury in several markets in Asia, Latin America, and EMEA.