New regulations may help realise the full potential of Egypt's real estate market, Sherine Nasr reports Lucky were those who lived during the merry old times when apartments up for rent outnumbered potential tenants. Nine years after issuing the Mortgage Finance Law, low and middle income classes are still struggling to afford to buy a house. But while the majority of Egyptians lack the means to provide for decent housing, the market has witnessed an unprecedented growth of construction during the past few years -- 71 per cent growth during 2009 compared to other sectors such as tourism. In 2009, the construction sector contributed 11.4 per cent of GDP while during the second quarter of 2010 alone it has so far contributed 4.8 per cent of GDP according to statistics released by the Ministry of Economic Development. And while mortgage finance lending from banks and companies remains slow and below expectations, figures show that it has grown from LE200 million in 2005 to LE4.43 billion in March 2010. Mortgage financed units have also grown from 865 in 2005 to 18,351 in 2009. These figures could witness further growth by next year. "An ambitious plan to promote the mortgage finance sector is now in the making," said Mahmoud Mohieldin during the Euromoney Housing and Real Estate Finance Conference, held in Cairo Tuesday. Mohieldin added that a new mortgage finance bill has already been approved by cabinet and will be discussed in the People's Assembly during its coming session. "The new bill will introduce amendments to some provisions of the Mortgage Finance law. It will also provide a comprehensive vision to develop the sector, to raise the efficiency of the market and to encourage more companies to get involved in the activity," said Mohieldin. There is also good news for the limited income classes. According to Mustafa El-Hayawan, chairman of the Mortgage Finance Fund (MFF), the World Bank (WB) has provided $300 million to finance the building of small units for low-income people. "The loan has a grace period of eight years and will be paid over a 28 year-period at an interest rate less than one per cent. It is dedicated to building 65,000 housing units over the next three years," said El-Hayawan, adding that LE642 million has already been received to build the assigned number of houses for this year. The MFF is mainly concerned with financing middle and limited income housing through providing loans to cover either dowpayments or instalments, and sometimes both. Established in 2005, the fund only became active lately. According to Mai Abdel-Hamid, deputy chairman of the MFF, finance to purchase housing units is available across the country, and grants to buy a house range from LE3,000 to LE25,000 for units priced between LE45,000 and LE95,000. "Priority is given to those who apply for the first time, and to singles with a maximum annual income of LE1,750 or families with LE2,500 income ceiling per year," said Abdel-Hamid who added that new protocols to finance more housing units have been signed with a number of governorates including Luxor, Minya, Giza and Beheira. Nevertheless, defining limited income has been controversial. "The fund has shut out individuals with a better income, yet they can hardly afford a house," argued Basel El-Hadidi, a real estate developer. According to Mohieldin, the new phase of developing mortgage finance in Egypt will witness a more active role by the Egyptian Financial Supervisory Authority (EFSA) to observe the activities of lending companies. "Companies will not be allowed to practise unless they get permission from EFSA. The authority will be given the right to stop all activity in case of malpractice. And merging will only be allowed for companies practising the same activity," said Ziad Bahaaeddin, chairman of EFSA, adding that the authority will coordinate efforts with the Central Bank of Egypt and the Egyptian Credit Bureau to create a database on companies in operation. The prospects for a growing real estate market remain impressive. According to Ayman Ismail, chairman and CEO of Dar Al-Mimar Group, construction and real estate have been growing by double-digit figures during the first quarter of 2010, driven by a high demand. "Investors have shifted interest from Dubai to Cairo where local demand is amongst the highest," said Ismail, adding that Egypt has the prospects of a real estate boom in the region. Encouraging factors include a large domestic market and the fact that 82 per cent of the population is under 40. Furthermore, there are 600,000 new marriages annually. Seven per cent of Egyptians are planning to buy an apartment within the next six months, and average price per square metre is amongst the lowest compared to other regions while prices of apartments have multiplied six-fold in the new cities. "There is $16 trillion dedicated to investment in real estate globally. Our share is still minimal," Ismail said.
