The Central Bank of Egypt (CBE) has decided to liberalise the exchange rate of the Egyptian pound against the dollar, a move that has been welcomed by real estate developers. Alaa Fikry, the First Deputy Chairperson of the Real Estate Development and Contracting Committee of the Egyptian Businessmen’s Association and the Chairperson of BETA Egypt, said that the decision would end the state of instability and the dual currency prices that fuelled speculation and led to further depreciation of the local currency.
Fikry added that the decision would also eliminate the parallel market and increase the availability of hard currency, especially after the Ras El Hekma deal, which would lead to greater stability shortly.
As for the impact of the decision on the real estate sector, Fikry said that it would not affect the prices of real estate units, but rather increase the dollar liquidity among the developers.
He explained that the main goal of the recent government decisions was to reduce the trade deficit, which could hurt the real estate sector by raising interest rates. Therefore, some customers might prefer to invest in bank certificates that offer a 30% return, but this effect would be temporary, as the past years have shown that real estate is the safest and most profitable investment.
Mohamed Albostany, the Chairperson of Al Bostany Developments Group and the Chairperson of the Association of Developers of New Cairo, stated that the CBE’s decision would help stabilise the property prices, both in terms of the construction costs and the selling prices, as pricing was one of the challenges that faced the real estate market in the previous period.
He pointed out that these decisions would also attract more foreign investments to the Egyptian real estate market, as the foreign investors would have a clear pricing system to base their calculations on, which would increase the cash flows to the Egyptian economy.
Albostany noted that some real estate companies had priced their units based on their expectations that the dollar price would reach EGP 70 or more, but with the expectation that the exchange rate would stabilise, the property prices might decrease in the coming period.
Mahmoud Al-Mansi, the Chairperson of Unified Development, said that the decision would also stabilise the prices of building materials and thus reduce the cost of implementing real estate projects.
However, he warned that the CBE’s decision to raise the overnight deposit rate, the overnight lending rate, and the rate of the main operation by 600 basis points to 27.25 percent, 28.25 percent, and 27.75 percent, respectively, would impose large financial burdens on the property developers who borrow from banks.
He explained that about 80% of the building materials depend on imports and are therefore greatly affected by the changes in the dollar exchange rate in the market. Therefore, the local real estate market is waiting for the dollar price to stabilise, so that the companies can calculate the construction cost and the percentage of increase in the selling prices.
