CAIRO: Not even the thorniest of holdups – slogging markets in America and Europe, say, civil strife at home, or mounting oil, cement and steel prices across the globe – appear able to tarnish the Egyptian real estate sector’s rose-tinted worldview.
This much was clear as the four-day Next Move conference, a warehouse-sized convention complete with glistening model homes and a troupe of actors dressed as shrubbery, drew a host of the largest regional housing players to Egypt last week. The convention, the largest of its kind ever staged in Egypt, ends today.
As widespread foreclosures rattle the United States and Europe, the contrast between developed and developing housing markets could hardly be sharper. Howls of long-term economic torpor across the Atlantic seem like background echo against the roar of cranes, cement trucks and bulldozers sweeping through satellite neighborhoods like Sixth of October City and New Cairo, which were announced on Thursday as new governorates, independent from Greater Cairo.
“It’s a different environment, Maher Maksoud, managing director of Sixth of October Development Company (SODIC) told Daily News Egypt. “I think this is a fundamental transformation of Egypt.
And it is a lucrative time to have a hand in it. Last week, SODIC posted a 48.4 percent jump in bottom-line revenue over last year. It is hard to miss the gaudy rows of billboards lauding the gated communities, tourist villas and city center projects from companies like Orascom, DAMAC and Emaar.
The current boom has been widely credited to a half-decade of economic liberalization, a budding mortgage system and a flood of foreign, largely petroleum-linked, dollars.
“Egypt has had significant obstacles to growth over the last 15-20 years, said Maksoud. “Once these obstacles were removed, it became an automatic adjustment.
Maksoud said the boom has been a long time coming. Lack of housing in Egypt has lately had “crazy social implications, he said. “Marriage age increasing, people living in their parents’ house with their wives and kids and so on because they couldn’t afford homes. There’s a massive pent-up demand.
And it shows no hint of slowing. Current research shows a dearth of 2.5 million units here and 350,000 more needed annually to house the growing population.
Not that this demand is exclusive to the still relatively small – if growing – segment that can afford a flat in these generally posh developments.
“We don’t do projects whimsically and then hope that they get sold. We identify demand and then create products to meet that demand, Maksoud said. “We sell some villas for LE 20 million. Is that targeted to the average Egyptian? Of course not.
Low-income housing projects, defined as units for less than LE 75,000, are hard to profit from because of high material costs and a lack of fixed-rate financing schemes, Maksoud said. “It’s a little difficult to work in the low-income housing markets, but going forward I think that will change.
As rows of high-rises continue to sprout along Cairo’s outskirts, the inevitable expansion of the mortgage sector has caused some analysts to urge caution, particularly as the extent of the American subprime debacle unfolds.
“The lessons are obvious, Maksoud said. “Don’t force people to borrow more than what they can pay. Don’t lend people more than the value of their home.
There is not a significant debtor culture here yet. Mortgage debt in Egypt makes up only 0.5 percent of gross domestic product, as opposed to nearly 76 percent in the US in 2006.
“There are lessons to be learned for the very far distant future, Maksoud said. “Right now the mortgage market in Egypt is nascent. It is still targeting the very prime. We’re not at subprime and we’re certainly not at sub-subprime.
