CAIRO: Egypt is one of the “most attractive destinations for real estate investors in 2009, said experts at a real estate conference last week.
At the first annual Global Trade Matters Real Estate Egypt Conference on Nov. 19, expert panelist from the top ranks of government, the private sector and academia discussed the reasons for the country’s continued real estate growth and future market possibilities.
While turbulence in the real estate market in the US – mainly the subprime mortgage crisis – and many other countries is considered largely to blame for the global economic downturn, it seems that there is still plenty of opportunity for expansion in Egypt as GDP and demographic growth continues. At least that was the general consensus at the real estate conference Thursday, sponsored by CI Capital.
According to one panelist, Iman Ismail, board member and managing director of EMRC, one of the key reasons for the collapse of the American real estate market was the lift on the level of maximum mortgage loans from “70 percent of the property value to 110 percent.
Banks and corporations that invested in these complex, over-collateralized “AA rated mortgages later found out that they were worth nothing, she continued.
Since Egypt’s small mortgage market only started to really develop “over the past six years, Egypt was “shielded from the global real estate crisis because it still maintains far more conservative lending practices, Ismail explained.
Several panelists discussed Egypt’s comparative economic and demographic advantages. Egypt has maintained its growth rate “above 4 percent over the past year in spite of the crisis, said Zaki El-Guiziri, a vice president in at Talaat Moustafa Group Holding.
“If this growth continues, as is expected, there will be many benefits for the real estate industry, he added, “A large part of the population is marriageable age or below. This will ensure demand for years to come.
Adding to this, real estate companies also benefit from local cultural norms where investing in property is seen as lucrative and housing is also crucial to starting a family.
“People buy houses to save for when their children get married, or for investment, said Ismail, “As a result, there are 6 million closed houses in Cairo right now.
“Egypt has a culture that loves fixed assets, Hala Bassiouni, managing director of the Egyptian Finance Housing Company explained.
“People feel it is very important for young couples to have a house purchased before even getting married, she added.
At the same time though, this works against the development of mortgage finance because “families don’t consider a house for marriage acceptable if it comes with 20 years worth of debt, she continued. “The cultural idea of young couples finding a lifelong family house with no debt must change.
The event had several organizational problems, the worst of which was a large number of cancellations, including the Minister of Housing Ahmed El-Maghrabi, who was supposed to open the conference with a keynote address.
From there on panelists were missing from every panel of the day, several panelists were brought in as substitutes, and the order of several speakers were changed. The moderators, perhaps because they were expecting different speakers, did not always push speakers to answer challenging questions about the short-term issues in the real estate market, such as the growing number of cancellations on prepaid developments or the dwindling number of buyers over the past fiscal year.
The two major hurdles addressed in the conference were affordable housing and bureaucracy. Ashraf Farag, chairman of El-Arabia Real Estate, complained that he needed to wait for “a year and a half before the government provided electricity to his developments outside of Cairo.
Bassiouni described a “big improvement in housing registration since the registration time went down from a year and a half to three or four months, but complained that many people were “still hesitant to register with the government, and pay the LE 2,000 fee.
Most companies have not focused much on affordable housing because of the ample demand from the more profitable middle and upper middle income segments. Besides the developments in the mortgage market, few workable solutions were put forth besides from Basil Kamel, professor of architecture and urban theory at Cairo University and the American University in Cairo. He suggested building a city similar to the development of the El Gouna resort in the Sinai, which has become, albeit over 20 years, a nearly self-sufficient city catering “not only to A level clients, but also B and some C levels.
Panelists also talked about the future of green housing in Egypt. Medhat Dorra, CEO of Space Design, discussed his company’s success in Asia and their first expansion into the Middle East five years ago.
Space Design started its green building projects in Egypt last year. Dorra said, “There is a lot of room for potential growth of demand for green buildings coming from consumers and developers because green building saved 30 percent on energy bills. Green design also “adds excellent value to a home, he added.
By the days end, the general consensus was an optimistic outlook on the real estate industry.
“The overall mortgage market is about 1 percent of GDP, Ismail explained, “It has nowhere to go but up.
