Despite the current political and economic turbulence, local and foreign investors have been showing their confidence in Egypt's real estate sector and its ability to contribute positively to economic growth. The country's solid real estate market is attributed to its strong fundamentals, notably the relationship between supply and demand, and it is this which is believed to have caused the market to thrive despite the recent harsh conditions. “I don't have any fears concerning the market as long as the fundamentals are intact,” said Hisham Shukri, chairman and CEO of Rooya Group, a local real estate developer. Shukri said that although there had been a slowdown, the market had not fallen apart and it had not stopped operating. He said that although conditions in Egypt were still unstable, the real estate market had witnessed a surge in the past couple of months on the back of higher dollar rates. “The hike in dollar rates has prompted people to invest in real estate,” Shukri told Al-Ahram Weekly on the sidelines of the Egypt Real Estate Summit held in Cairo last week. Shukri said that there had always been some minimal demand in the market and that this had helped to keep it stable. This had been demonstrated in 2008 after the global financial crisis, he said, as well as over the last two years following the 25 January Revolution. In times of crisis, Shukri said, demand for real estate continued, but the decision to buy is often put off. This causes a slowdown in the market until stability is restored and the market picks up. It was this that had happened last year when market performance had improved after the presidential elections in June, signalling that Egypt was moving towards stability, Shukri said. The market had later slowed when instability resumed. Political instability has indeed affected market growth, with growth rates of only two to three per cent being recorded over the past two years, compared to the 14 per cent before the revolution, Shukri said. Meanwhile, if the situation stabilised for an adequate period of time, he added, “the real estate market will boom.” Shukri was hopeful that the market would see such a boom by next summer, should political stability be achieved. Achieving political and economic stability is not only necessary for the market to pick up, but it is also necessary to attract foreign investors. According to Philip Blumberg, founding chairman and CEO of Blumberg Capital Partners, a US-based real estate investment management service, political and economic stability is the key to attracting foreign investors. The same point was made by Tarek Ramadan, chairman of Tharaa Holdings, a UAE-based real estate investment company, who said that in addition to political stability, foreign investors want to see transparent real estate laws, incentives and tax benefits. Both men stressed the many opportunities Egypt's real estate market offered to foreign investors and its strong fundamentals. According to Shukri, these were represented in the large gap between real estate supply and demand. “For years, Egypt has seen this gap increasing,” he said. The country's fast-growing population was another strong fundamental, he added. Roughly two million customers enter the market each year, and the ratio of young people in the country's population is very high, something which helps the real estate market since young people represent increased demand. Shoukri said that there was unmet need from developers of residential as well as commercial real estate units. Commercial real estate in Egypt has been suffering from a shortage of retail and office spaces, and Shukri said that the share of individual ownership of administrative buildings and commercial spaces was low compared to other countries. There was a shortage of hotels as well, he said, despite the current slowdown in tourism. Olivier Garnet of Accor Middle East, a leading hotel operator, agreed, saying that despite the number of visitors arriving in Egypt for tourism and business purposes the country still lacked internationally branded hotels. “There are still untapped segments in Egypt's real estate market,” Garnet said during the Real Estate Summit, adding that despite the political instability the country had received 11 million tourists in 2012, “which is still good,” he said. Regarding the challenges facing the real estate sector, Shukri said that many of these had to do with the political problems the country was experiencing. He also said that investors wanted to see a clear and transparent system of land allocation. “I want to operate in a transparent, legal and fair system,” Shukri said, adding that this was a challenge that had been present since before the revolution. Many real estate developers had faced legal challenges to their holdings following the revolution after accusations that they had acquired land through illegal direct allocation. The Real Estate Summit coincided with the Cityscape Egypt/Next Move real estate exhibition, which ended on Sunday. This four-day exhibition hosted exhibitors from across the country and featured leading real estate agents. It witnessed a high turnout of home-buyers and investors.
