3 listed companies on EGX to launch mortgage finance company

CAIRO - 18 April 2019: Three listed Companies on the Egyptian Exchange (EGX) announced entering into an agreement to create a mortgage finance joint venture.
The three partners are TMG, GB Capital (the NBFI arm of GB Auto) and EFG Hermes Finance (the NBFI arm of EFG Hermes Holding).

The companies clarified in a statement that each of them will hold one third of the joint venture’s equity.

Group CEO of EFG Hermes Holding Karim Awad said that this joint venture is the natural evolutionary step to help grow the mortgage business in Egypt and expand our non-bank financial services platform, which today includes leasing, microfinance, fintech-enabled consumer finance and factoring.

"The joint venture will have an initial paid-in capital of LE 150 million and is expected to be increased to LE 250 million as the business grows. It will offer mortgage finance to all consumers looking to buy move-in homes across TMG’s existing projects and potential developments," Awad clarified.

He added that the partners will appoint a chief executive officer to lead the new venture, which will be staffed by an independent management team.

According to Awad, the joint venture is targeting to fund a portfolio of units worth LE 450 million in its first 12 months of operations, adding that it will offer unrivalled mortgage solutions with the fastest turnaround time over 10-year tenures available for Egyptian clients at competitive interest rates.

EFG Hermes Investment Banking is acting as the sole financial advisor on the transaction, which is subject to the approvals of the Financial Regulatory Authority (FRA) and other regulatory approvals.

The joint venture will take place at the level of an existing mortgage finance company that is currently owned by TMG, where the parties will increase the company’s capital to allow each to have one-third ownership.

“The new joint venture will capitalize on TMG’s four decades of experience in real estate development and over 100,000 units across the group’s multiple projects. Our aim is to bring to the market real estate units with long-term and competitive financing solutions that would increase affordability and better align housing supply with Egypt’s large, growing population of homebuyers," Chief Executive Officer and Managing Director of TMG Holding Hesham Talaat Mostafa said.

Mostafa added that the joint venture will be offering financial solutions for move-in homes in the existing projects as well as potential developments in TMG’s pipeline. "EFG Hermes and GB Capital are longstanding partners with whom we look forward to doing business for years to come.”

For his part,Chairman and CEO of GB Auto Raouf Ghabbour commented, “We know that several years of high inflation have eroded consumer purchasing power. And as Egyptians, we also know home ownership remains a cornerstone of a society that sees more than 900,000 couples marry and start new lives each year.We are bringing to the market a portfolio of easy-to-access financing solutions that will feature the fastest decision-making time in the industry."

The statement pointed out that Egypt is slated to become the world’s fastest growing mortgages market, according to a 2017 report from Euromonitor International. This is due to attractive fundamentals such as the magnitude of its population growth and number of marriages, which were expected to drive an 18.9 percent increase in home mortgages.

"In anticipation of this uptick in demand, the FRA has homed in on non-bank financial service operations in the country, setting a four-year strategy that would see the body take an active role in growing the volume of the country’s mortgage financing market."