The attraction of massive private investments and implementation of key reforms show the government is determined to effectively tackle the country’s housing shortage
With the real estate sector consisting of over 8 per cent of Egypt’s GDP and employing around 12.8 per cent of the working population, the Egypt Economic Development Conference (EEDC) was a key opportunity for big listed developers to establish new, international relations and lay out their future plans for growth and diversification.
“With the government opening up Egypt’s property sector to the international market, the country has seen a boom in real estate,” says Mohamed Abo El Yazid, Managing Director of Citystars Properties. That seems something of an understatement considering the six agreements worth total investments valued at $77 billion that were signed at the EEDC to implement a number of mega real estate projects.
Indeed today, a combination of supply scarcity and ample unmet demand constitute the optimal preconditions for the housing market to really flourish in Egypt. All too aware of the housing shortage and the economic potential linked to its resolution, the Egyptian government has been determined to handle this issue effectively. Aside from attracting billions of dollars worth of investment into the real estate sector at the EEDC, a sign of further such resolution came in the form of the Social Housing Law 33 which was ratified by President Abdel Fattah El Sisi in May 2015. The law brought to pass a Social Housing Programme, backed by the World Bank, whose aim is to provide one million housing units for low-income households over the following five years. Prior to that, in February 2014, the Central Bank of Egypt (CBE) had already announced it had allocated EGP 10 billion (£805 millon) to finance low-income housing projects, with the aim of boosting the construction and real estate sectors.
“For the business community in particular, the broad economic reforms and decisions, have been very straight forward in reactivating the economy,” says Mr El Yazid, whose Citystars Properties have helped fill the housing gap with its Citystars Heliopolis, the first integrated real estate development of its kind in Egypt.
Over the last four or so years of political volatility, the housing demand coming from the upper middle and upper classes has remained robust as buyers saw in real estate a reliable form of investment. With political stability having returned though, property developers and governmental bodies alike are looking to cater for the residential needs of the lower strata of Egyptian society.
One particular aspect that emerged from the EEDC was the successful interaction between the Egyptian government and the private sector, says Maged Helmy, Chairman and CEO of Wadi Degla Real Estate Development, Egypt’s fastest growing estate conglomerate which itself signed two contracts at the conference resulting in a total of 2000 units in the Red Sea area. “All in all, the conference showed the political will to tackle the issue of democracy in order to be able to develop the necessary projects. The event showed the important amount of opportunities that exist to invest in Egypt but at the same time it has brought up some of the difficulties that remain, particularly concerning bureaucracy.”
Mr Helmy refers to a major issue surrounding legal disputes over land prices between the government and private developers. In February 2015 one of such disputes was settled and saw one of Cairo’s main developers offering the government 3.2m squares meters of completed homes and paying $380m over a period of 10 years. “We are very committed to overcoming all the problems that we’ve encountered in the past few turbulent years” remarked the Minister of Housing, Utilities and Urban Communities, Moustafa Kamal Madbouli Mohamed, “and we are very keen to pass the message that the government is willing to partner with the private sector which we believe will lead such kind of economic development” he concluded.
One other virtuous example of productive cooperation among the private and public sector is the initiative whereby the Egyptian government provides private developers with land in return for an agreed number of homes or revenue sharing. This being a particularly advantageous proposition for developers at a time when land prices are going up again.
A simplified land and property registration system for new developments and a unified Building Code offer a smooth legal framework within which both private developers and households can profitably interact and supply & demand match. To streamline the legal hull of the Egyptian estate market is to facilitate its development. As conditions become more favourable, the Egyptian estate market is attracting foreign investors as well. The latter are to be crucial partners in an ambitious new plan that was announced during the EEDC: the building of a new administrative capital to the east of Cairo. The project is expected to cost around $45bn and be completed in five to seven years. With the population of Cairo around 18 million expected to double within the next 40 years, the new district aims to ease the congestion that such a demographic climb is certain to cause. Meanwhile, the value of the estate market has been steadily growing over the last decade. In 2001/2002 its value was of EGP 7.9 billion while in 2012/2013 it recorded EGP 31.8 billion, growing at a rate of 27.5 per cent. The market is expected to grow at an even more stunning rate of 70 per cent by 2020.