Egypt’s real estate sector has been the most fortunate in terms of recovery from the repercussions of the coronavirus outbreak since the beginning of 2020, and this may be due to a number of economic decisions taken by the Egyptian government and the Central Bank of Egypt (CBE) to support this sector, which contributes about 20% of the GDP.
Additionally, despite the challenges of the COVID-19 pandemic, Egypt’s real estate sector has grown by 8% since the beginning of the year.
The government has issued some key decisions which will change the entire market in the new year, most notably President Abdel Fattah Al-Sisi’s decision to not market any projects until it has reached 30% completion, as well as his directives to launch a mortgage finance initiative with an interest rate of 3% and instalments up to 30 years.
Conditioning marketing projects
President Abdel Fattah Al-Sisi directed that no developer can announce or market any real estate projects until 30% of the project’s construction is complete to guarantee developers’ commitment.
Al-Sisi explained that it has been noticed that some developers sell units before even commencing construction and assured that the state’s role is an organisational one to preserve citizens’ rights and provide a safe investment climate.
Following the president’s decision, the Administrative Capital for Urban Development (ACUD) company — the owner and developer of the New Administrative Capital project — has obligated all developers to ban offering any units for sale until 30% of the project has been completed, starting from the first of September 2021. The decision applies to existing companies and new contracts.
Accordingly, the ACUD advised potential real estate buyers to do their research on their projects of interest before signing any contracts.
Customers need to verify that the project has ministerial approval, building licenses, and schedule compliance, and also follow up on the development process.
Moreover, many real estate companies and real estate developers in New Alamein and the North Coast also decided to postpone the marketing campaigns for their projects until they have reached the 30% completion minimum.
CBE’s mortgage finance initiative
The CBE has launched a EGP 100bn mortgage finance initiative targeting low and middle-income homebuyers with payment plans that can span up to 30 years with a low interest rate of no more than 3%. The EGP 100bn finance could be increased in the event of a high turnout among citizens.
This was done following directives by President Abdel Fattah Al-Sisi to help low and middle-income brackets get suitable housing at subsidised prices over a long period. The initiative stipulates that beneficiaries should be Egyptians no older than 75 years of age by the end of the instalments period.
Moreover, the CBE amended some of the conditions of the mortgage finance initiative it issued in December 2019 for middle-income people. The initiative allocated EGP 50bn for mortgage finance for single individuals with a monthly income of EGP 40,000 and families with a monthly income of EGP 50,000 with an interest rate of 8%. The amendments increased the repayment period to 25 years, instead of 20 years.
The CBE also abolished the maximum net area unit requirement and increased the maximum unit price to EGP 2.5m. Additionally, the CBE allowed banks to accept alternative guarantees for finance in the event that the unit cannot be registered.
Amending real estate finance rules
The third decision issued by the CBE to support real estate companies came in early February of 2021 to support the liquidity of real estate development companies and to help them overcome the repercussions of the COVID-19 pandemic.
The CBE made an amendment to the rules for granting funds to real estate development companies, the most prominent of which was allowing banks — for the first time — to finance land instalments owed by their clients from real estate development companies obtaining credit facilities, provided that the owner of the land should be a governmental agency. The banks then must ensure the cash flows for the project and that the company has already received down-payments from clients and began construction.
The amendments also allowed financing partnership projects between real estate development companies and government agencies, obligating companies to submit a detailed timetable for all phases of construction and review them periodically.
This decision, along with a significant cut in interest rates, helped real estate developers to obtain billions of pounds of bank financing to accelerate construction plans in existing projects without affecting the growth of their land bank.
Return of Arab investments to local market
The past year witnessed a series of acquisitions that took place in the Egyptian real estate market, including the acquisition of SODIC by the UAE consortium of Aldar Properties and ADQ.
Moreover, Pioneers Properties for Urban Development acquired Pioneer Holding’s entire stake of 76.45% in the Cairo Housing and Development Company (ELKA) in a transaction valued at a total of EGP 1.085bn or EGP 15.77 per share.
Furthermore, Madinet Nasr Housing and Development (MNHD) is looking to acquire real estate firm Minka Development for EGP 200-220m.
The UAE consortium of Aldar Properties and ADQ has requested the acquisition of a majority stake in SODIC with no intention to delist the company from the Egyptian Exchange, and that its name will remain unchanged.
In December, SODIC announced that the majority of its shareholders agreed to sell their shares. The company said that after the successful closing of the binding offer of purchase, the consortium will acquire 304.628 million of SODIC’s shares at a price of EGP 20 per share, with the company being valued at more than EGP 7.1bn, as the value of the deal reached EGP 6.1bn.
Additionally, Qatari Diar Group resumed its work in the Egyptian market and obtained the approval of the Ministry of Housing to resume work on the ‘CityGate’ project in New Cairo after a four-year dispute over failing to commit to the project’s construction target.
Similarly, the entry of Arab companies into the Egyptian real estate market was one of the most prominent features of the real estate sector, whether in the New Administrative Capital or the North Coast, including Reportage Properties, SKY AD. Developments, and Jumeirah Egypt, all of which are companies that entered the Egyptian market for the first time in 2021.
National ID for each property
President Al-Sisi also directed the establishment of a system for inventory and management of real estate wealth and allocating a national number for each property.
Online applications to connect buyers with sellers
The real estate search engine, Aqarmap, launched the ‘Aqarmap Matcher’ service to increase the efficiency of interaction between sellers and buyers and to benefit from lost marketing opportunities in supply and demand.
The American company Platform Leaders is gearing up to launch its new platform’s strategy in the market, which depends primarily on providing accurate and documented information and specialised analyses through a professional research team in favour of facilitating investment decisions and serving real estate stakeholders.
Lizas, a prop-tech start-up, has also launched a consumer-driven real estate platform dubbed ‘Liza’ to empower its consumers to choose properties that fit their needs and dictate their rules.
Liza is a web platform that facilitates the process with state-of-the-art tech for a smooth user experience catering to different segments of society to unlock various real estate investment opportunities for its stakeholders. Furthermore, it aims to link the buyer and the seller with a chat system. Additionally, it enables developers’ sales teams to maximise direct sales numbers.
