The Housing and Development Bank of Egypt (HDBEG) and the National Bank of Egypt (NBE) have given the largest share of mortgage loans that have been spent to finance housing for limited and middle-income individuals, as part of the Central Bank of Egypt (CBE) initiative.
According to May Abd El Hamid, head of the Mortgage Support Fund, banks operating in Egypt have injected EGP 9bn into the CBE initiative to finance low and middle-income mortgages since it first launched in February 2014.
Abd El Hamid pointed out that the share of HDBEG’s share alone was approximately EGP 3.9bn, making it the highest financier among the 17 participating banks.
According to Sahar El-Damati, vice president of Banque Misr, her bank lent a share of 22.5% of the CBE initiative’s total for financing real estate for low and middle income groups, making it the second largest real estate financing portfolio for this type of housing in the Egyptian market.
El-Damati added that Banque Misr is expanding its funds as part of the CBE effort, noting that the bank has financed EGP 160m for 1,500 clients during the month of September 2017 alone.
“The CBE’s initiative has faced many challenges, most notably the non-standardisation of credit conditions, and rapid implementation, but the CBE has successfully cooperated with [other] banks to overcome these challenges,” according to El-Damati.
She pointed out that the tumbling rates in this financing are very limited and do not exceed 0.02%, which is very low as compared to other types of financing.
According to Karim Sous, head of the retail credit risk sector at the NBE, his bank has financed 21,000 low and middle-income customers, worth EGP 2bn under the CBE initiative, amounting to a 22% share of it.
He added that there are about 4,000 newly approved loans now ready at the bank, and it is scheduled to inject a further EGP 400m to the low and middle-income housing initiative immediately, raising their contributions to these funds to EGP 2.4bn.
Sous explained that the rate of disbursement of these loans rose from 80 loans in the first month to currently 2,000 loans per month, and the NBE aims to reach 5,000 loans per month in the near future.
When the CBE launched the initiative in 2014, it aimed to raise EGP 10bn in 20 years at low interest rates for banks, and in turn, re-lend them at a reduced yield rate of 7% per annum for low-income and a declining rate of return of 8% per annum for medium income groups. These loans, meant for the purchasing of housing units in new urban communities, also carried a long repayment period of up to 20 years.
The CBE decided, earlier this month, to raise the target amount of this initiative to EGP 20bn, a move they say is indicative of its success, and also a result of recent demand from various limited, medium and above-average-income segments of society, which resulted in the depletion of the majority of existing funds.
On 22 June, the CBE decided to raise the maximum monthly income for low-income people, which has a 5% interest rate, from EGP 1,400 to EGP 2,100. The monthly income cieling for the middle income bracket was raised to EGP 10,000 for individuals and EGP 14,000 for families, compared to the previous EGP 8,000 and EGP 10,000 respectively.
The maximum unit price for the average income was raised to EGP 700,000 instead of the previous EGP 500,000, and the maximum monthly income permitted to obtain a loan from the Mortgage Finance Fund was raised to EGP 3,500 for individuals and EGP 4,750 for families.
The CBE stressed that these amendments were made to achieve better results for the initiative in the coming years and to allow for a larger number of beneficiaries.
Sous pointed out that banks were refusing about 50 percent of applications that were submitted to them for funding under the initiative, and these amendments helped increase the approval rate to between 75 and 80 percent.
According to Ashraf Al-Qadi, chairperson of the United Bank, the size of the real estate finance portfolio within the CBE’s initiative amounted to about EGP 100m, adding that the bank aims to increase it to EGP 200m next year.
He also said that his bank is currently considering new applications within the initiative, worth EGP 30m. He pointed out that the bank will soon launch new mortgage programs to suit the needs of all their clients. The bank is also investing in mortgage programs that end in clients’ ownership of the property, as well as completing the interior of the units.
According to Hussein El-Rifai, head of the Suez Canal Bank, the bank has completed the formation of a mortgage finance team, in preparation for the bank’s entry into the real estate finance sphere, as it looks to benef from the CBE initiative for limited and middle-income citizens.
He added that the bank aims to expand geographically in newly established cities, such as El-Alamein and Ismailia, in order to provide financing for those wishing to obtain housing units in these cities.
He praised the CBE’s real estate-financing initiative as important for promoting financial inclusion and the entry of new segments of society into the banking sector.