Mohamed El Husseiny, CEO of Ethmar Group for marketing and programming, said that what is being said about real estate companies achieving large profits is unreal and a misconception pervasive among customers.
He explained that the large number of real estate ads in the media has helped falsely spread the idea of “large profits” achieved by companies.
El Husseiny described the belief that some have about the fact that companies obtain the land price and construction cost from down payments with the remaining amount representing the net profit of the unit for the company as “unrealistic,” especially with the large surge of costs, which is a great challenge now for real estate companies.
An example is the cost of constructing a building in Fifth Settlement. It includes the price of the land, which ranges from EGP 4m to EGP 5m, with the construction cost being EGP 2m. The rest of the costs are distributed as such: 50% for the mix concrete—especially after the increased cost of cement and steel—and 50% for the finishing of construction works of entrances, fronts, and driveways. Moreover, there is an average cost of EGP 200,000 allocated for the marketing and management of such a project.
Assuming the average number of flats in the buildings is nine, with an average price of EGP 1m for each apartment and a 30% average down payment—given the nature of down payments in the area—we will find that real estate companies actually can construct a building and cover administrative and marketing needs; however, the cost of the land is paid for through installments.
El Husseiny pointed out that profits are estimated at EGP 1m; however, this number is a literal translation of investments worth EGP 7m for the land price and construction costs, making profits represent 20% after an average of two years since the start of investment. This is a natural percentage for any commercial work. The same example can be applied to large projects, with the only difference being the value of investment.
The mentioned numbers are based on information provided by managers of real estate companies who are also clients of Ethmar, as it intervenes in the marketing process and some marketing and price consultations.
Ethmar is a company specialised in marketing campaigns on the internet, especially in the field of real estate. It has worked with more than 40 real estate companies, whether developers, marketers, consultants, or contractors.