CAIRO: How will the global economic crisis affect Egypt’s booming real estate market? This is the question panelist of the Real Estate workshop on Tuesday tried to answer.
Over the past couple of years, the real estate market in Egypt has seen growth rates of around 30-40 percent, making it one of the main drivers of GDP growth. But with the recent economic developments globally, higher risk aversion and shorter credit is predicted to slow down foreign investment in Egyptian real estate.
Ahmed Badrawi, director of business development at SODIC, said that the local market needs to step in to compensate for a decline in FDI.
Panel moderator Richard Banks, director of Euromoney Middle East, said that stimulating domestic demand to compensate for shrinking FDI is a predictable ternd which is already occurring in emerging markets such as China.
Hesham Shoukri, executive president and CEO of Rooya Group, was more optimistic, saying that the slowdown in FDI would be less than expected. We have been a high profit market with high risk. We continue to be a high profit market, while risk is high everywhere. Now is an opportunity to attract investment from the GCC.
The demand for real estate in Egypt is real and will remain. According to Shoukri, over the next 20 or 30 years, there will be a demand for 1 million new housing units annually. And 97 percent of houses are self-financed, less than 3 percent are on mortgage – this is a very safe market! Shoukri said.
While demand certainly exists, Maha El Kelish, general manager of business information provider Dun & Bradstreet, said that supply has not been adequate. Housing units were often out of the price range for middle-class families, the main drivers of real estate demand.
Badrawi hoped that falling interest rates, possible in the context of stable currency and declining inflation, would allow more people to access credit for housing. El Kelish proposed lowering interest rates on mortgage credit by 1.2 percent to 1.3 percent in comparison to other lending as is practiced in the US.
Shoukri added that real estate developers need to diversity from the shrinking A-B class segment and foray into the vast potential of C-class or even lower classes. On the other hand, he sees lower profit margins standing in the way this progression in the market.
The government might have to subsidize these housings, he suggested. He also proposed that government impose fewer restrictions on real estate refinancing schemes and fewer restrictions on land development.
Concerning the future of commercial real estate, the panelists offered different scenarios. Khaled Rasekh, president and CEO of ERA Real Estate, saw it slowing down along with the global economy, just as economic growth had propelled demand in the past.
Badrawi was once again optimistic, saying this underlined the need for more reforms to foster economic growth, which would then propel commercial real estate demand and feed back into GDP.
As for how to make low-end housing affordable, Badrawi spoke for all the panelists when he said, We haven t found a formula yet.
