As the Egyptian economy experiences a slowdown brought about by the Covid-19 pandemic, several factors have combined to create a stable outlook for its traditionally resilient real-estate sector. In a country of over 100 million people over half of whom are under the age of 20, the real and pressing demand for housing continues to outstrip supply. In a bid to help fill the supply gap by which some 500,000 to 600,000 people seek housing every year, according to the Ministry of Housing, Utilities, and Urban Communities, the government since 2014 has embarked on an ambitious infrastructure and urban-expansion plan spearheaded by the New Administrative Capital east of Cairo in addition to further expansions in different governorates and regions of the country. Assessing the immediate impact of the Covid-19 pandemic on Egypt's real-estate sector, Maged Sherif, CEO of the Sixth of October Development and Investment Company (SODIC), told Al-Ahram Weekly that sales would be impacted in the short term since “March and April are usually high sales months” and “Cityscape, the largest real-estate event in Egypt for developers, was cancelled this year.” He predicted that while some real-estate companies might exit the market “having brought land at very high prices and sold homes under market prices and with extended payment plans,” the real-estate market as a whole would “self-correct” and shift because of the length of the real-estate cycle. Egypt's real-estate sector is “a resilient one”, he said, “with very strong underlying fundamentals and real drivers for demand”. As part of measures undertaken to stimulate the market, the Central Bank of Egypt (CBE) in March reduced interest rates by 300 basis points (bps), its biggest rate cut on record, setting the lending rate at 10.25 per cent and the main operations and discount rates at 9.75 per cent. Sherif described the measure, which should help businesses access cheaper debt and enable them to withstand pressures during the pandemic, as a “very welcome and bold move”. The reduction in interest rates would have a positive effect on the real-estate sector, he said, “which has always been a preferred investment in Egypt and has had to compete with high-interest yielding instruments since the devaluation of the Egyptian pound” in November 2016. With real-estate development feeding over 90 industries and directly employing over 12 per cent of Egypt's workforce, investing money in real estate “stimulates the economy while safeguarding savings and hedging them against inflation”, he added. Sherif said that additional measures by the CBE could help the private sector to play a larger role in filling Egypt's housing deficit, adding that developers would also like to step away from financing buyers, which they have been doing to fill the financing gap in Egypt's housing sector. One much-needed measure, according to Sherif, would be the modification of the current regulations so as to “allow the financing of construction by the banks”. This would enable developers to sell delivery ready units and help to finance buyers “like they do almost everywhere else in the world”, he said. Another much-needed measure would be to “expand mortgage funding so as to unlock more of the pent-up demand for homes,” Sherif said, adding that “if these two instruments come into play, we could see a breakthrough in addressing Egypt's ever-growing housing gap and a real surge in job creation.” Real-estate developers work hand-in-hand with the construction sector, which in turn is a mainstay of the Egyptian economy. Until 2018, the construction sector had helped to provide approximately 3.7 million jobs, representing 20 per cent of Egypt's total domestic work force, according to a statement by Minister of Planning Hala Al-Said at the Builders of Egypt IV Forum held in Cairo in March 2018. Egypt's real-estate sector even in current circumstances continues to draw investors, whether as end-users or partners in projects, many of them hailing from the informal sector and opting to put their money in real-estate projects. “Construction work has actually never stopped on our projects,” said Tarek Aziz, project manager at the Alieddin Group, a real-estate company which builds commercial and administrative malls in popular districts and what Aziz described as middle-income, rather than high-end, real estate. “Clients, many of them with an abundance of cash, continue to put their money in such projects [as partners in the investment] through direct cash payments,” Aziz said. Construction materials continue to be available in the market, even during the current slowdown, Aziz said, describing the construction sector as “a bellwether for the Egyptian economy, and one that can never be allowed to collapse.” In parallel with ongoing private-sector real-estate projects, the government is continuing construction on an ambitious housing project launched in 2015 that targets the construction of 725,000 housing units over six years. Projects are underway in the Delta and Upper Egyptian governorates, as well as in new cities such as 6 October, Al-Rehab, and others. The government-sponsored housing projects aim to provide housing for middle- and lower-income groups and are offered at cost price, with payment schemes of up to 20 years and interest subsidised by the CBE. Delivery is slated to be on schedule on these projects. In the high-end real-estate market, sales have slowed but have not halted during the pandemic. “While it's true there has been a reduction in sales, we have still seen purchases,” Nariman Al-Feki, assistant sales manager at Orascom for Hotels and Development, said. “It's true that the partial lockdown of the economy has negatively affected many sectors, but some sectors like the food industries and the retail sector including supermarkets, pharmacies and even e-commerce have thrived and made a lot of money. We find many people opting to put their money in real estate, even at the current moment,” Al-Feki said. In a real-estate market where long-term structural demand continuously exceeds supply, the downside in the current circumstances has been a glut in high-end property, which has already seen a slowing down of sales. Egypt also faces the paradoxical problem of having housing units whose owners leave them uninhabited at a time of a scarcity of affordable housing. In 2017, the Central Agency for Public Mobilisation and Statistics said there were 13 million unoccupied homes kept as second residences or for long-term investment in Egypt. The challenge within this context remains creating a balance so that the real-estate sector can provide affordable housing to middle- and lower-income groups. Direct intervention on the part of the government and plans to help home-buyers access commercial mortgages is the double-pronged policy that the government is adopting to meet the challenge.
*A version of this article appears in print in the 30 April, 2020 edition of Al-Ahram Weekly under headline: United we stand
