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No bubble in sight
Source:Al-Ahram Weekly	7 / 5 / 2010
Egypt's real estate market may have come out of the global crisis unscathed, but to avoid any future meltdown it has to do things differently Around this time a year ago Egypt's real estate market was in limbo. Buyers were holding back in the expectation that prices would drop while developers stood their ground keeping prices constant. That hesitation is a thing of the past, according to Mohamed Allam, managing director of Hassan Allam Properties, a leading property developer and a subsidiary of Hassan Allam Holding. "The situation today is totally different from a year ago," Allam said. "The market is vibrant." In fact, Allam believes that last year's freeze was unjustified. "We did not have a problem in the first place," he said, explaining that real demand for property spurred by Egypt's growing population makes Egypt's real estate market very different from surrounding markets. Indeed, as long as demand exists there are no fears of real estate becoming the next bubble. Tarek Aboualy, head of Jones Lang LaSalle Misr, the financial and professional services firm specialising in real estate, says local demand has been the main driver of the real estate market in Egypt, causing it to be much less impacted by the global financial crisis. He said that a recent investor sentiment survey carried out by Jones Lang LaSalle Misr revealed that more than 80 per cent of respondents believe that the local real estate market will recover within 12 months. He estimates Egypt's current real estate market growth rate at 10 per cent and expects it to reach 13.5 per cent by the end of 2010. At such levels of growth prices have certainly not dropped. They have maintained their same levels, if not increased slightly on pre-crisis levels. If one good thing were to come out of the crisis, Allam said, it was that it pushed real estate speculators out of the market: those who had been buying into any project, holding onto it for a short while, and selling it afterwards at a premium. That was one of the reasons prices went so high, Allam explained. Today, only the long- term investor is in for the ride. That long-term investor, however, still must be well financed. Surveying prices at Next Move, the real estate exhibition that ended earlier this week, Al-Ahram Weekly found that the lowest prices ranged around LE3,000 per metre of unfinished property. Next Move offered products in the new suburbs of Cairo like Zayed, Katameya, New Cairo, 6 October governorate as well as holiday homes in the Northern Coast, Sharm El-Sheikh, Marsa Allam and Hurghada. Allam acknowledges that LE3,000 per metre is not cheap, but he said in these new locations prices have been benchmarked and will not drop. He attributes high prices to the auction system adopted by the Ministry of Housing in selling land. In addition, according to Aboualy, the relocation of major international organisations operating in Egypt, and government plans to move several governmental departments as well as university branches to new areas, led to an increase in land prices, residential and commercial buildings sales and rental prices. Allam believes hope for cheaper prices could be in new developments along areas such as the Cairo-Alexandria Desert Road or the Cairo- Suez Desert Road where land prices are still cheap, thus lowering costs for developers. He points out that many are today willing to move out of the city in search of cheaper prices, knowing that in five to 10 years those prices will leap. But this according to Aboualy has put tremendous pressure on roads and infrastructure. "As with all megacities worldwide, there are considerable planning constraints," he said. The move out of the city has not cut the price on inner city property, however. According to Allam, many after having moved out of the city are moving back in because of problems they face with road networks or basic services such as hospitals. "This is causing inner city prices to spike again." Nonetheless, Youssef Khalil, vice-president of Coldwell Banker, a leading real estate services company, points out that though prices are high when compared to prices in the recent past, they remain lower than world and regional prices. He attributes the high prices to the price of land, coupled with inflation and strong demand. Prices are not only a question of location, but also the willingness of developers to offer smaller-sized cheaper units. Mohamed Allam explains that so far developers have been focussing on providing units for the upper class and upper middle class income brackets. This is changing due to saturation in this segment of the market, he said. While developers will still build for that segment, they will increasingly provide cheaper units, not by compromising on quality but by offering smaller sized units, to address the wider middle class segment. Khalil compares the real estate market to a pyramid. "The greatest need is at the base of the pyramid where affordable housing is in demand by the majority," he said. While that is not where developers are heading at the moment, he said, they are increasingly beginning to tap the middle segment where there is also plenty of demand. Allam estimated demand to be around 100,000 units annually in that segment. Aboualy, too, acknowledges that there is recognition of the necessity to build "real homes for real people", or in other words affordable homes that meet the needs of the broader Egyptian society. "In Egypt, mid-range or affordable homes are central to the ongoing growth of the broader community," he said. Aboualy said that Egyptian real estate developers have already adjusted their business models by offering apartments and smaller units, rather than houses and villas. He estimates that the low-end market has a huge shortage and that the government should look into offering more incentives to attract developers to this sector. Allam agreed that the low- income housing segment is not attractive enough to developers. To start with, he said, the areas allocated for such housing are difficult to sell because of remoteness and lack of services. Also, profit margins in such projects are not attractive unless other construction methods different from traditional concrete and steel are employed. Meanwhile, though mortgage finance can help all segments of society acquire the homes it remain underutilised. Allam says that while his company has agreements with several mortgage companies to provide financing to anyone wishing to purchase property from them, hardly anyone has taken advantage of it. Many are deterred by high interest rates. As Khalil put it, people are scared away when they realise that by the end of the instalment period they will be paying twice the original price of the unit. To overcome this obstacle, Allam said interest rates on mortgages should be lower than market rates. But that does not appear possible at the moment: "The market cycle is not mature enough for that yet." Aboualy agrees that mortgage finance still plays a limited role in the Egyptian real estate market. He said that despite the fact that a conservative mortgage market has saved Egypt from the worst excesses that led to the global economic downturn, mortgage companies still struggle with high mortgage rates as well as the registration law and other regulations. In the meantime, Khalil points out that developers are being innovative and are offering in-house instalments of up to seven years to encourage buyers. However, he warned that though they may announce that they are not charging interest, he believes their costs are by default woven into the original housing price.
Proper property registration poses hurdle to mortgage finance
Source: Zawya	27 / 4 / 2010
One of the main hurdles to the development of Egypt's mortgage finance industry has been the erratic property registration practices in Egypt, insiders say. In 2001, the Egyptian government launched Law 148 outlining regulations of the mortgage industry. It was not until three years later that the first mortgage finance companies began operations. Today, after nine years, the mortgage business continues to be underdeveloped and far from able to satisfy homebuyers' demand for funds. "The culture of registration is still not widespread because we have lived like this for the past 50 years," Hala Bassiouni, managing director of the Egyptian Housing Finance Company, said. Her company rejects 50 percent of the applications it receives, she said, mostly due to problems with the property documents. Often the land for development is not registered, there is no clear ownership on the property, or the construction does not reflect the building license. According to her, preliminary contracts allow real estate developers to build on land that is not registered, which further exacerbates the problem. "Property documentations are lacking the most [in the application process] because of the trend of not registering property," concurred Ahmed Haggag, board consultant for Sakan Finance. His company has also denied more than 50 percent of its applicants. Since 2004, registration fees have come down after several reductions, from 12 percent to 3 percent of the property price, to a flat fee of maximum LE 2,000. Registration time was decreased from 1.5 years to between three-six months and it is gradually improving. Despite this, registration is not moving fast enough to accommodate the market and accordingly, it is negatively affecting the mortgage business, Haggag said. High interest rates have also burdened the mortgage finance industry. After several stimulus packages launched by the Egyptian government, the inflation rate has remained high at almost 13 percent. "With the current inflation rates, the Central BankCentral Bank has increased interest rates. This impacts interest rates generally speaking. Mortgage companies are sourcing their funds from either banks or from going into the capital markets and issuing bonds. "Since they are all very nascent companies, they are not able to issue bonds, so they are going to source their funding from banks. [The bank interest rates] are already high, so we are talking about 11-12 percent [borrowing interest]; with the extra stress you are talking about an average of 14 percent," Bassiouni explained. High cost of funds in Egypt also affects real estate developers which often finance new projects with a mix of company capital and borrowed funds from banks. "This is, I believe, one of the major reasons behind mortgage not taking off the way everyone expected it to. [The real estate companies] are recipients of funds from banks. If banks have high lending rates, so will the companies. It's a vicious circle... the prices of properties still, relatively speaking, do not match the income of the people," Bassiouni said. Haggag also recognizes the discrepancy between average incomes and property prices as a challenge to the mortgage business. In his view, Egypt's middle class is unable to find properties fitting its budget. "What concerns me is really the clientele with the LE 6,000 and LE 7,000 and LE 10,000. Would they find property that suits or matches their requirements? I don't think there are properties that match this type of demand in the market," he said. Families in the lower-income segment do not even qualify for a mortgage because, according to law, the monthly mortgage payment cannot exceed 25 percent of monthly income. The government, however, is planning to increase this percentage to 33. Additionally, there is a state program for mortgage subsidies for families with income of less than LE 2,500. The novelty of mortgage products also deters Egyptians from considering them seriously. "We are still a cash-based society. People are still a bit hesitant to go for mortgages probably because it's a cultural [sensitivity] to be indebted on the roof that you are living under," Bassiouni said. In her estimations, not more than 10 percent of home buyers take out mortgages, incomparable, in her opinion, to the population size and the real estate stock of Egypt. "People don't look at it as an investment; they look at the property as the place they live in until they die. People become very hesitant about getting this long-term investment," Haggag said. He confides that some clients get approved, but then change their mind and end up not accepting their mortgage. Another barrier to mortgage finance's popularity is the prohibition of receiving or paying an interest in Islamic law. Before the global financial crisis, Amlak Finance, a UAE-based mortgage company, was to offer Islamic mortgage products in Egypt, but after posting significant losses in 2009, the company has ceased operations. Started by a subprime mortgage failure, the global financial meltdown also affected the Egyptian mortgage market, but only on the surface, as two Gulf-based mortgage companies with licenses did not start operations. The stable growth of the Egyptian Housing Finance Company and Sakan's dynamic entry at the end of 2009 demonstrate that the worst has passed. Now the hope is that the mortgage finance industry will advance and will help solve the housing shortage in Egypt. "The culture of this economy or this society is investing in real estate because it's the safest of all saving or investment tools. If [you take] time deposits, because of the inflation, you are not gaining; if you go to the stock market, it is very risky; and if you go to foreign currency, it is more or less stable. "There is still an unfulfilled demand [for real estate] and this unfulfilled demand is increasing, not decreasing," she said. "I'm very optimistic. It's hard, but it's affecting the lives of people. And once it's done properly, it will affect a vast majority of people," predicted Haggag
Egypt aims to boost mortgage industry: agency
Source:Reuters	30 /1/2010
Egypt seeks to augment its mortgages market to 10 billion Egyptian pounds within the next three years, up from around 4 billion pounds now, the state news agency MENA quoted board chairman of the Mortgage Finance Fund as saying on Saturday. In addition to helping more people buy homes, a robust mortgage industry would boost the construction sector and create financial instruments for people building up pensions or seeking other long-term returns, analysts say. Mortgages in Egypt represent well under 1 percent of gross domestic product (GDP), partly because of a complex property registration process that makes it hard for lenders to secure the right to sell a property in case of default. "The size of Egypt's mortgages market does not commensurate with the size of its real estate market," Moustafa El-Haiawan, board chairman of the Mortgage Finance Fund told MENA. He valued the size Egypt's real estate market at some $270 billion. The level of mortgages in Egypt compares with over 50 percent of GDP in Cyprus and more than 80 percent in Britain in 2008, according to the European Mortgage Federation. Source: Reuters
New Egypt mortgage firm to lend $365 mln in 5 yrs
Source: Reuters	9 /12/2009
Egypt's Sakan Finance expects to issue 2 billion Egyptian pounds of mortgages within five years, more than half the country's current total, thanks to housing demand in Cairo's suburbs, its chairman said. In addition to helping more people buy homes, a robust mortgage industry would boost the construction sector and create financial instruments for people building up pensions or seeking other long-term returns, analysts say. Mortgages in Egypt represent well under 1 percent of gross domestic product (GDP), partly because of a complex property registration process that makes it hard for lenders to secure the right to sell a property in case of default. "If we had a speedy process...I'm sure this company in five years can multiply the 2 billion by 10," Sakan's chairman Fathi El Sebaie said in an interview. "The demand is there, and the capacity is there, and the units are there. But it takes a long time to finalise one transaction." The level of mortgages in Egypt compares with over 50 percent of GDP in Cyprus and more than 80 percent in Britain in 2008, according to the European Mortgage Federation. Sakan, which means 'housing' in Arabic, is starting with 150 million pounds, making it the second highest capitalised mortgage company in Egypt, the company said. It plans to issue its first loan next week. The firm expects Egypt's National Housing Project, a state-run initiative that encourages private investment in budget housing and subsidises low-income buyers, to fuel demand for mortgages in Cairo's new suburban cities, Sabaie said. Next year the company's loans are expected to average 650,000 pounds, but this could change as it adds products for poorer home buyers, he added. "There's a huge demand, and it will remain at least for the coming 10 years, mostly in the below-average or middle-average income people," Sebaie said.
Egypt mortgage mkt hit by crisis, red tape
Source:Reuters	7/12/2009
Egypt's nascent mortgage sector, hamstrung by a year of slow housing sales and an archaic property registration system, will not meet its early growth targets anytime soon, a top industry executive said. In addition to helping home buyers, more mortgages would spur the construction industry, unlock a vast pool of capital and create financial instruments for people building up their pensions or seeking other long-term returns, analysts say. Egypt now has mortgages worth just 3.7 billion Egyptian pounds, well under 1 percent of gross domestic product (GDP), Iman Ismail, managing director of Egyptian Mortgage Refinance Company (EMRC), said in an interview on Sunday. "We're looking for a huge increase," she said. "And to do that all the pieces have to fall together." A lender to mortgage providers, EMRC was established in 2006, a time of buoyant private investment in Egyptian real estate and big hopes for its mortgage industry, which since then has been slow to take off. The financial crisis brought Egypt's housing market to a virtual standstill in the fourth quarter of 2008, dragging down mortgage sales with it, Ismail said. "This affects our growth in 2009, obviously, because we've got a whole quarter that was basically lost," she added
Recent Developments In The Mortgage Market Of Egypt
Source: Economy Watch	19 /11/2009
The Ministry of Investment and the Mortgage Finance Authority (MFA) have stepped forward for introducing mortgage insurance to the Egyptian mortgage market. Nevertheless, the Guarantee and Subsidy Fund (GSF) has already been guaranteeing payment for three months on behalf of low-income investors. The three -month guarantees are offered only once every five years and only in rare cases of extreme inability to meet payments. The Egyptian Government wants to ensure the well being of the market while protecting the low-income citizens and providing him with the tools to enhance his living conditions. The mortgage authority in Egypt was established in the year 2002. In early 2004 only two mortgage-financing companies were established. The first mortgage company has its chief shareholders the state-owned Housing and Development Bank and state-owned insurance companies, which jointly own 96% of its shares. First Mortgage Company have decided to provide a liberal mortgage finance strategy. It offers financing up to 85% of a property's value, at an interest rate of 14%, payable over a maximum of 20 years. Favorable terms apply for borrowers with an annual income lower than LE 9000 (around $1450), including a government-subsidized interest rate of 6%, a longer mortgage period of 30 years, and a lower installment/monthly income ratio of 25%. The second company is Egyptian Housing Finance Company (EHFC), which has as shareholders the Egyptian American Bank (at 40%, the largest shareholder), the Housing Development Finance Corporation of India, the German assistance agency KFW, and the International Finance Corporation (IFC). Changes in both companies' strategies are expected with regards to the market development. Amendments made in 2004 to the Capital Market and Mortgage laws in 2004 permit securitization, which opens the way for an eventual secondary market in mortgages.
Nine Egyptian firms bid for Damac deal
Source: Zawya	19 /11/2009
Nine major Egyptian contracting firms have joined the bidding for a new tender from Damac PropertiesDamac Properties for a first grade main contractor at its Hyde Park project in New Cairo. The contract will involve constructing 88 buildings comprising 320 villas (town houses). Alaa Ayoub, CEO for Damac PropertiesDamac Properties Egypt said: "We promised our clients luxury in all our projects, and the issuing of this tender is a major step in our development. "We have set November as the deadline for receiving tenders. "The successful tender bid will be announced by mid of December 2009 and the successful contractor will commence immediately after''. The developer will start delivering the first units of Hyde Park by the end of 2011, he added. Hyde Park was launched in December 2007 covering 4.7 million square metres. Bassenian Lagoni Architects have designed the villas along the theme of Italian-Country, California-Spanish and Neo-classical. The grading works have been tendered and work has commenced on site. Arabian Company is the grading contractor and developer had also signed a contract with ECG consulting company to handle supervision and design. The project will feature green spaces with more than one million sq m. By Emirates Business
Registration Issue In Egyptian Mortgage Market
Source: : Economy Watch	19 /11/2009
One of the major problems to the development of the mortgage market in Egypt has been classified as the registration issue. The Egyptian Government had made the development of the registration system in Egypt a high priority with the appointment of the Ministry of Administrative Development for oversight. A committee has been created to oversee the development of registration pilot projects and assess their success. The members of the committee include the Ministry of Administrative Development, Ministry of Justice, and the MFA
Minister Witnesses Signing of Four LE82.5-Million Protocols to Establish 3300 Housing Units
Source: Ministry of Investment	12 /11/2009
Mahmoud Mohieldin, the Minister of Investment, has witnessed the signing of four protocols between the ministry's Mortgage Subsidy and Guarantee Fund on the one hand and Sharqiya, Damietta, Kafr El Sheikh and Dakahliya governorates on the other hand. The protocols were signed within the framework of the third investment conference of the East Delta governorates in Zagazig city, Sharqiya. The first LE25-million protocol was signed with Sharqiya to establish 1000 housing units. It was signed by Sharqiya Governor Yahia Abdel Magid. The second was signed with Damietta to establish 300 housing units at a subsidy of LE7.5 million. It was signed by Damietta Governor Fathi al-Baradei. The third was signed with Kafr El Sheikh to establish 1000 housing units at a subsidy of LE25 million. It was signed by Kafr El Sheikh Governor Ahmed Abdeen. The fourth was signed with Dakahliya to establish 1000 housing units at a subsidy of LE25 million. It was signed by Dakahliya Governor Samir Sallam. The Fund will therefore provide those falling into the low-income categories with an LE82.5-million subsidy to establish 3300 housing units in the four governorates. This is a part of the national housing project until 2011 within the framework of President Mubarak's electoral program.
Efforts Continue to Provide Dwelling Units for Millions of Egyptians" States the Minister of Investment
Source: Ministry of Investment	11/11/2009
Minister of Investment, Dr. Mahmoud Mohieldin, participated in the Real Estate Forum, which focuses on the Egyptian real estate market. It was attended by young executives concerned with investment in real estate sector and several international key academic personalities. The forum aims to familiarize participants with the global trends in real estate investment. It also seeks to highlight the importance of investment in growth. The forum is designed to provide ideas on how to take sound and accurate investment-related decisions under the pressure of the global economic slowdown. The real estate market constitutes 8.6% of Egypt's gross domestic product (GDP). Its annual growth rates were as high as an average of 22% during the past three years. The real estate sector is one of the most labor-intensive markets. Egypt is the Arab world's most populous nation where many people, mostly young adults under the age of 30, like to enter into the housing market for marriage or when their income improves. Dr. Mohieldin hailed the efforts of the American University in Cairo and the National University of Singapore in establishing a new institute at the AUC's Business School. The institute would focus on the real estate sector and its development. He confirmed the importance of such a step for the educational process and said it would create opportunities for entrepreneurs to study the real estate market. The minister also reviewed the latest reform efforts by the Egyptian government to bolster the real estate sector, hailing the Central Bank of Egypt and Finance Ministry's efforts to streamline real estate registration procedures. Dr. Mohieldin reviewed the Ministry of Investment's efforts in this sector, including cooperation with the Ministry of Housing and Utilities to provide housing units suitable for all Egyptians at affordable prices. Such cooperation also aims at developing a new program providing 65,000 new housing units nationwide for youth and low-income categories, and to activate the role of the Egyptian Financial Supervisory Authority (EFSA). The panel of speakers at the Forum made several proposals on how to develop the sector, promote its growth and achieve its stability. There is still a need to develop the mortgage market and promote relationships between governmental bodies and real estate development companies within the market. This could be achieved through an open and constant dialogue, cooperation between decision-makers and real estate development companies, investment in research and data, benefit from the expertise of other countries, especially in emerging markets, and allow real estate specialists to help investors make decisions while enjoying more confidence and safety with respect to their investments. Dr. Mohieldin has confirmed that learning and knowledge are key factors for further growth and sustainable development in the real estate sector. The culture of the Egyptian market depends on the quality of information or data provided to investors. Minister Mohieldin referred to the efforts made to develop the mortgage finance sector. Such efforts increased the number of real estate finance companies to a total of 11 companies so far and banks operating in this field currently stand at 19 entities, in addition to the rating agencies and credit rating of customers and real estate finance agents. Accordingly, this sector has proved itself as being one of Egypt's best activities in terms of growth rates
Mohieldin: Mortgage Finance Fund Discusses Action Plan for Supporting 65,000 Dwelling Units in 3 Years
Source: Ministry of Investment	24 /10/2009
Investment Minister, Mahmoud Mohieldin, discussed the plan of action for the Mortgage Finance Fund over the coming three years (2009-2012). The fund is responsible for providing housing for the low-income people. During the Fund's first meeting, the minister and the Fund's board of directors discussed means to energize the Fund's action plan during the coming period. This plan includes developing the existing economic housing support programs and benefiting from the LE 1.650 billion finance extended by the World Bank. There is a plan to support 65,000 dwelling units during the coming three years. A main objective is to raise financial awareness and disseminate financial culture so as to inform the citizens about the benefits and costs of mortgage finance. Field researches will be carried out and periodical reports will also be produced. The legislative amendments meant to develop mortgage finance business and energize the Mortgage Finance Fund are near completion, according to the minister. Also underway is the required development of the organizational structure as well as efforts to enhance the supervisory role. This aims to protect the market and market dealers and to raise workers' efficiency through training programs to produce specialists in technical, financial and legal fields, he added. Minister Mohieldin stressed the importance of coordination and cooperation with the other bodies working in the housing sector, particularly the program of dwelling units that need support the most. The Fund's activity will be expanded. He also said it was highly important to provide integrated insurance programs for mortgage finance activity in order to cover the credit risks through coordination with insurance companies, the Insurance Federation of Egypt and the Egyptian Financial Supervisory Authority. Mohieldin pointed to the rapid growth of mortgage finance activity during the past three years, particularly in providing housing for low-income people. He said this issue was prioritized in the President's electoral platform and thanks to the government's financial sector reform plan in its first phase between 2005 and 2008 and its currently-underway second phase between 2009 and 2012. Source: Ministry of Investment

Egyptian Gulf Bank considers financing Naeem capital increase
Source: Arabfinance.com	20 /10/2009
Egyptian Gulf Bank - (EGBE) is intending to participate in consortiums to finance Naeem Real Estate Mortgage capital increase by providing amount ranges from L.E 12 million to L.E 50 million. However, such consortium will be defined once shareholders can make their final decision over real estate Development Company that will be the third part in company structure after capital increase. Hatem El Shafey, Senior General Manager Investment Banking at EGB, revealed that negotiations are in progress with number of real estate development companies, expecting bank share to be set during the next months according to agreed ownership structure. It is notable that, such step came as a part of Naeem interest to benefit from real estate license obtained earlier. Source: Arabfinance.com