CAIRO: Dubai-based mortgage lender Amlak Finance said Tuesday its mortgage disbursements in Egypt exceeded LE 130 million in the first quarter of this year.
“Amlak Egypt has gained significant market share and continues to fortify its position in the local market, said Ahmed Haggag, CEO of Amlak Finance and Real Estate Investment, a wholly owned subsidiary of Amlak Finance.
“This LE 130 million figure is very hefty compared to other figures in Egypt’s mortgage finance market. But our expectations of the Egyptian market are much higher than this.
He explained that the company expects to finance more than LE 500 million worth of mortgages by the end of fiscal year 2008. According to company data, Egypt’s real estate sector is estimated to grow 15 percent annually, while the market witnesses a shortfall of around 450,000 units per year. Furthermore, more than one million apartments remain uninhabited in Egypt, partially due to lack of financing schemes.
“The Egyptian real estate market is witnessing a boom, as a growing number of local and Arab developers are working on major real estate projects in order to address shortages in housing units which have resulted from remarkable growth in the Egyptian population, topped by the great demand generated by customers, Haggag added.
Investments in Egypt’s real estate market have reached $51.8 billion in more than 16 mega projects. Several Gulf investors have recently eyed Egypt’s promising real estate market, developing several mega projects in parallel.
Dubai’s heavyweight Emaar Properties revealed investments of around $5.8 billion in four projects nationwide. Market rival Damac is pouring in $22.9 billion in four luxury residential projects in Egypt. Similarly, Dubai Holding Company revealed intentions to invest some $4 billion in real estate projects in Egypt. Al-Futtaim Group also plans to bring Dubai Festival City to Cairo with investments totaling $3.4 billion.
As dwellings average price per square meter in Egypt reach levels as high as LE8,000, demand for mortgages is surging in the most populous Arab country.
“With such rapidly escalating property prices in Egypt, mortgage finance has become the cornerstone that allows clients to own housing units, said Haggag. “Mortgage finance schemes offer a helping hand that enables clients to afford price upsurges by paying value of a property over some 20 years.
A rapid boom in real estate investments, he continued, has to be coupled with an increase in mortgage finance operations.
Currently, the total size of mortgage finance in Egypt hovers at more than LE 2 billion. It is available through six companies that have begun operations in the past two years, besides some 12 banks.
“The more mortgage lenders we have, the better pricing schemes they offer because more competition necessitates better services, stated Haggag.
Amlak Finance – an affiliate of Emaar Properties – officially began operations in Egypt last October. It was the first company to provide shariah-compliant mortgage finance products in Egypt.
The company’s mortgage finance strategy offers the highest available schemes in Egypt. It finances up to 90 percent of a property s value, with a maximum value of LE 5 million, payable over 20 years. In accordance with Islamic finance, the mortgage lender’s finance profit rate fluctuates annually. Its current rate is set at 13 percent.
Islamic mortgages comply with Islamic law banning interest because the religion equates it with usury. Unlike conventional mortgage providers, which lend to the homebuyers, Islamic companies generally buy the property and then rent it back to the homeowner in installments that include their profit, Haggag explained.
Under Islamic finance, because the lender is also an investor, the lender remains an active participant through the life of the transaction and is in a position to rectify mistakes before the situation worsens.
This appeal has added to the growth in Islamic finance. According to a recent report published by Thomson Financial, Egypt is among three countries that delivered the highest returns for investors in companies compliant with shariah during the first quarter of 2008.
According to Standard & Poor’s ratings service, shariah-compliant equity markets in Morocco, Egypt and Nigeria have respectively returned 34.45 percent, 18.93 percent and 13.42 percent on a total return basis.
Within its first quarter of operations, Alamk Finance has sealed agreements to exclusively provide mortgage finance schemes with some 30 real estate developers in Egypt, including Emaar Egypt, SODIC, Mountain View, El Dyar, Dorra, Degla Group, among others.
Headquartered in Dubai, the company has launched operations in Saudi Arabia, Qatar, Jordan, and Bahrain, besides Egypt.
