CAIRO: The People s Assembly Housing Committee has approved a LE 214 million loan from the World Bank to be pumped into the country s relatively infant mortgage financing industry.
According to the Ministry of Finance, the government will make the funds available to primary lending institutions represented in the four established mortgage finance companies. MOF Finance Division Advisor Abdel Magid Mohamed said the government will also provide the funds at the same terms agreed upon with the World Bank, though those terms were not immediately announced.
Last month, Mortgage Finance Authority (MFA) Chairman Osama Saleh reported lending had reached LE 1 billion at the end of 2006, on the back of the efforts of MFA and the Ministry of Investment to activate the 2001 law regulating the industry. The 2006 end-of-year figure is up from LE 650 million in September, 2006, and LE 15.8 million in June 2005.
Saleh said he expects the lending volume to reach LE 4 billion by the end of 2007 as more banks and other lending institutions enter the market and as the Egyptian Company for Mortgage Refinancing (ECMR) begins operations.
Also expected to contribute to a rise in mortgage financing are the Ministry of Investment s plans to restrict lending activities by real estate developers, as is commonly practiced now, in order to allow banks to play a more active role. Minister of Investment Mahmoud Moheiddin said studies are now underway to draft a legislation outlawing lending by developers, but has not set a timetable for its finalization.
The launch of ECMR in H1 2007 is expected to help lower interest rates, one of the biggest obstacles facing borrowers under the current system, Saleh said. Lending rates in the 12-14 percent range have limited the participation of limited income groups targeted by MFA. In addition to high interest rates, the 2001 Mortgage Finance Law limits the maximum monthly payment of a low-income borrower to 25 percent of total monthly income. This, in turn limits the total amount that person can borrow.
Mortgage rates are critically high but with the entrance of more companies and [ECMR], competition is increasing and lenders will find a cheaper way to provide financing, HC Brokerage Housing Analyst Nemat Allah Choucri said.
