Spe­cial cov­er­age on the real es­tate sec­tor lat­est de­vel­op­ments ahead of

The Daily News Egypt - - Front Page - By Shaimaa Al-Aees

Although the gov­ern­ment has so far pro­vided ap­prox­i­mately EGP 17.5bn as mort­gage funds to serve 200,000 clients, real es­tate de­vel­op­ers are un­sat­is­fied re­gard­ing the state’s con­duct re­gard­ing this is­sue. Ad­di­tion­ally, the real es­tate mort­gage fi­nance port­fo­lio of 11 com­pa­nies op­er­at­ing in the Egyp­tian mar­ket reached EGP 9bn by the end of the first quar­ter (Q1) of the cur­rent year, com­pared to EGP 8.47bn in De­cem­ber 2017—an in­crease of EGP 554.5m.

De­vel­op­ers be­lieve that pro­mot­ing mort­gage fi­nance sys­tems is the best and ideal method to re­vive real es­tate sales and avoid a re­ces­sion in the mar­ket.

Man­ag­ing Di­rec­tor (MD) and Board Mem­ber of Tatweer Misr, Ahmed Sha­l­aby, ex­pected that the mar­ket would wit­ness a hia­tus in sales dur­ing the com­ing phase, es­pe­cially with the con­tin­ued fo­cus on a spe­cific res­i­den­tial seg­ment, in ad­di­tion to the last­ing sta­bil­ity of cus­tomers’ pur­chas­ing power.

Sha­l­aby added that real es­tate com­pa­nies have played their role dur­ing the pre­vi­ous spell, apro­pos eco­nomic and mar­ket vari­ables and main­tain­ing mar­ket op­er­a­tions, which may dis­con­tinue in the event of new re­forms, as these com­pa­nies have a fi­nan­cial sol­vency which must be main­tained, so pro­vid­ing any new ar­range­ments linked to com­pany’s cap­i­tal must have lim­i­ta­tions in or­der for the com­pany to be able to re­main in the mar­ket.

The gov­ern­ment must re­con­sider the mort­gage fi­nanc­ing sys­tem, which cur­rently is the most prom­i­nent op­tion to rein­vig­o­rate sales op­er­a­tions in the real es­tate mar­ket, in­di­cated Tatweer Misr’s MD.

ARCO’s CEO Ayman Ibrahim noted that the mort­gage fi­nance rate is rather lim­ited, and that it must be changed. Nat­u­rally, it is not less than 90% of the to­tal cus­tomer num­bers—as in the rest of the world—and the gov­ern­ment must com­pen­sate the in­ter­est in mort­gage fi­nanc­ing, clar­i­fy­ing that there are in­ter­na­tional mort­gage fi­nance bench­marks which can be ap­plied.

Next year will wit­ness ma­jor changes in the real es­tate mar­ket, fo­cused pri­mar­ily on categorising se­ri­ous and com­mit­ted de­vel­op­ers, who are ca­pa­ble of man­ag­ing the vari­ables that will be im­posed upon them by the mar­ket dur­ing the next stage, Ibrahim elab­o­rated,

Com­pa­nies which have a solid fi­nan­cial sol­vency will sur­vive, through which they will pro­vide pay­ment pe­ri­ods and a unique pay­ment sys­tems for their cus­tomers to en­cour­age them to take a pur­chas­ing de­ci­sion ,stressed ARCO’s CEO.

Am­lak Fi­nance and Real Es­tate In­vest­ment’s CEO, Hatem Amer, said that the real es­tate mort­gage sec­tor is fac­ing cer­tain chal­lenges, in­clud­ing the lack of aware­ness among Egyp­tians about the im­por­tance of real es­tate fund­ing.

Amer added that the CBE’s ini­tia­tive to sup­port mort­gage fi­nance has suc­ceeded in in­creas­ing the spread of mort­gage fi­nance, not­ing, “The in­crease in in­ter­est rates is an­other chal­lenge to mort­gage fi­nance, es­pe­cially af­ter the raises in the value of the in­ter­est rate in the past pe­riod, which neg­a­tively af­fected the sec­tor.”

Pre­mium As­sets for in­vest­ment and Real Es­tate CEO, Riad Eladly, said that the short­age of af­ford­able res­i­den­tial units cre­ated a up­swing of il­le­gal con­struc­tion, with­out gov­ern­ment per­mits dur­ing the past three years.

Eladly elab­o­rated that the com­pli­ca­tion mort­gage fi­nance law forced some peo­ple to pur­chase units at low prices in some in­for­mal ar­eas, how­ever, if the gov­ern­ment pro­vides an af­ford­able mort­gage fi­nance, it will elim­i­nate and de­crease in­for­mal build­ings.

The mort­gage sys­tem in Egypt needs more prac­ti­ca­bil­ity to at­tract more clients and in­crease real es­tate mar­ket’s sales, stressed Eladly.

Asser Hamdy, ex­ec­u­tive chair­man of Ori­en­tals for Ur­ban De­vel­op­ment, said that it is no­tice­able dur­ing Q3 of the cur­rent year that de­mand for projects im­ple­mented in some ar­eas such as New Cairo, Sheikh Zayed and Sixth of Oc­to­ber, is still.

“But, in gen­eral, the seg­ments where most com­pa­nies com­pete in be­gan to sat­u­rate, es­pe­cially with the high vol­ume of com­pe­ti­tion, and the sup­ply­ing of at­trac­tive of­fers which led to the split of res­i­den­tial seg­ments be­tween com­pa­nies, de­creas­ing each com­pany’s share to that its pre­vi­ous state,” Hamdy elab­o­rated.

He ex­plained that the high prices in those ar­eas re­sulted in in­creases in land prices and con­struc­tion ex­penses, with the sup­ply in­crease, es­pe­cially af­ter the growth in the vol­ume of projects in East Cairo dur­ing the re­cent pe­riod, which may be the main rea­son for tran­quil de­mand op­er­a­tions in the real es­tate mar­ket, which drives com­pa­nies to re­for­mu­late an al­ter­na­tive plan, in the event of a sub­dued de­mand.

Hisham Shokry, chair­man of Rooya Group for Real Es­tate In­vest­ment, said that real es­tate mar­ket is wit­ness­ing a de­cel­er­a­tion ,deny­ing an im­mi­nent bub­ble driven by in­creased de­mand, since about 900,000 cou­ples marry an­nu­ally, and ev­ery five years de­vel­op­ers pro­vide about 50,000-60,000 units, which ob­vi­ously does not match de­mand.

He also re­quested that the gov­ern­ment pro­vide in­creased in­cen­tives for de­vel­op­ers, deny­ing that de­vel­op­ers’ profit mar­gins are not highly driven by high land prices.

How­ever, Ashraf Dowidar, CEO of ARDIC Real Es­tate De­vel­op­ment, said that banks are wary from of­fer­ing loans with low in­ter­est to de­vel­op­ers, and there­fore de­vel­op­ers pro­vide units at high prices.

There is no bub­ble, but it oc­cured in a spe­cial seg­ment of real es­tate projects, Dowidar in­di­cated.

The gov­ern­ment’s in­ter­ven­tion in the sec­tor may par­tic­i­pate in the sec­tor’s de­ce­la­ra­tion, how­ever, the state can be re­spon­si­ble for iden­ti­fy­ing mar­ket needs and ad­dress­ing their prob­lems, re­marked ARDIC’s CEO.

Mo­hamed El Barouny, head of Cor­po­rate Bank­ing at CIB, said that banks are act­ing as tech­ni­cal sup­port­ers and su­per­vi­sors for com­pa­nies and de­vel­op­ers and not just fund providers.

El Barouny noted that banks are in­ter­ested in pro­vid­ing fi­nance for in­fra­struc­ture de­vel­op­ment in projects such as new cities, road net­works, and other util­i­ties.

He reaf­firmed that the size of mort­gage funds and de­vel­op­ers’ loans is very small.

No down­trend in real es­tate sales

How­ever, CEO of Brickzey Prop­erty Man­age­ment, Ahmed Se­lim, sees that there is no down­trend in real es­tate sales, de­spite the re­cent high com­pe­ti­tion level among the com­pa­nies on a spe­cific res­i­den­tial seg­ment, es­pe­cially above mid­dle-in­come and lux­ury hous­ing, how­ever, that seg­ment still needs more hous­ing units.

Se­lim pointed out that the mar­ket’s over­all de­liv­ery, in gen­eral, is less than mar­keted, stress­ing that the vast and strong com­pa­nies—who have a strong fi­nan­cial and out­stand­ing sol­vency and com­mit­ment with their cus­tomers— are out­side the com­pe­ti­tion, and they man­aged to sur­vive through­out the mar­ket changes.

How­ever, Se­lim be­lieves that the mort­gage fi­nance fund is not the best so­lu­tion to re­vive the sales in the sec­tor be­cause the mort­gage plays its role in serv­ing peo­ple who want to pur­chase prop­erty for hous­ing pur­poses only and not as in­vestors.

It is il­log­i­cal to have a mort­gage fi­nance to pur­chase a unit for in­vest­ment pur­poses, not­ing that there is a real de­mand and sales in the sec­tor, Se­lim pointed out.

Ali Gaber, CEO of Im­pact Com­mer­cial Real Es­tate, agreed with Se­lim that the mort­gage fi­nance is not so­lu­tion to the de­cel­er­a­tion in the mar­ket, how­ever, price land in­creases and cost spikes af­fected the mar­ket be­cause the clients’ pur­chas­ing power re­mained un­changed.

Gaber noted that mort­gage fi­nance, along with ex­port­ing prop­erty, can lead to the re­cov­ery of the real es­tate mar­ket with the con­di­tion of elim­i­nat­ing bu­reau­cracy—es­pe­cially since there ex­ists con­trols which en­sure all the fi­nancer’s rights.

How­ever, the real es­tate mar­ket must de­con­tam­i­nate it­self of the fan­ci­ful de­vel­op­ers whose fi­nan­cial abil­i­ties do not ex­ceed pay­ing the amount of land con­tracts in the New Cap­i­tal.

De­vel­op­ing a new mort­gage fi­nance sys­tem at an ap­pro­pri­ate in­ter­est rate with less bu­reau­cratic pro­ce­dures, will con­trib­ute to­wards in stim­u­lat­ing sales op­er­a­tions, es­pe­cially in some seg­ments, which are sat­u­rated, Gaber elab­o­rated.

NEXT YEAR WILL WIT­NESS MA­JOR CHANGES IN REAL ES­TATE MAR­KET, FO­CUSED PRI­MAR­ILY ON CATEGORISING SE­RI­OUS, COM­MIT­TED DE­VEL­OP­ERS, CA­PA­BLE OF MAN­AG­ING VARI­ABLES IM­POSED UPON THEM DUR­ING THE NEXT STAGE

THE GOV­ERN­MENT MUST RE­CON­SIDER THE MORT­GAGE FI­NANC­ING SYS­TEM

THE MORT­GAGE FI­NANCE RATE IS RATHER LIM­ITED, AND IT MUST BE CHANGED

MORT­GAGE PLAYS ITS ROLE IN SERV­ING PEO­PLE WHO WANT TO PUR­CHASE PROP­ERTY FOR HOUS­ING PUR­POSES

Gov­ern­ment in­creases mort­gage fi­nance

Head of the Mort­gage Fi­nance Fund (MFF), Mai Ab­del Hamid, said that banks’ fi­nanc­ing pro­vided un­der the Cen­tral Bank of Egypt’s (CBE) mort­gage fi­nance ini­tia­tive in­creased by EGP 1bn in one month.

Ab­del Hamid added that banks raised their fi­nanc­ing share which was in­tro­duced into the mort­gage fi­nance ini­tia­tive un­til the end of Oc­to­ber, to reach ap­prox­i­mately EGP 17.5bn com­pared to EGP 16.5bn by the end of Septem­ber.

The CBE has al­lo­cated EGP 20bn to­wards the mort­gage fi­nance ini­tia­tive four years ago, with a sub­sidised in­ter­est rate for a low-in­come and mid­dle-in­come cit­i­zens, and a de­creas­ing in­ter­est rate rang­ing from 5% to 7% for low-in­come peo­ple, 8% for mid­dle-in­come and 10.5% for above mid­dle-in­come cit­i­zens.

Deputy Min­is­ter of Hous­ing for Na­tional projects, Khaled Ab­bas, said that the size of mort­gage fi­nance un­der the ini­tia­tive of the CBE will reach EGP 20bn by the end of this year.

Ab­bas added that mort­gage fi­nance faced a big prob­lem dur­ing the past pe­riod, where it was wrongly mar­keted, elab­o­rat­ing that mort­gage fi­nanc­ing does not fo­cus on the in­ter­est rate.

Ab­bas noted that the Min­istry of Hous­ing suc­cess­fully solved the cri­sis of mort­gage fi­nance for low-in­come and mid­dle-in­come peo­ple.

SOURCE: MIN­ISTRY OF HOUS­ING

Khaled Ab­bas, Deputy Min­is­ter of Hous­ing for Na­tional projects

Ayman Ibrahim, ARCO’s CEO

Ahmed Sha­l­aby, Man­ag­ing Di­rec­tor and Board Mem­ber of Tatweer Misr

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