Egypt has taken different approaches to helping the underprivileged gain access to affordable housing. These have varied from direct provision in the form of affordable housing units to offering land plots together with access to the credit needed to finance construction. This week these efforts were supplemented by legislation and financial mechanisms aiming to modify the mortgage law. The cabinet has approved the social housing law, which sets a general framework for the country's social housing programme in terms of objectives, the authorities entrusted to oversee its implementation, and the obligations of beneficiaries. The law aims to provide adequate housing for low-income and middle-income people. The Ministry of Housing, Utilities and New Urban Communities will be responsible for social housing projects under the new law through offering already existing units as well as building new ones and making available plots of land in new communities. The ministry plans to build about one million housing units in Cairo and other governorates and in the new cities and to allocate new land plots for the social housing programme. It is considering funding the units to beneficiaries through a mortgage finance system, determining the value of the subsidy made available according to the income of the beneficiary. The lower the income, the higher the value of the subsidy will be. “The housing problem in Egypt has been aggravated by a culture that sees a house as more of an investment than accommodation. Even low-income people have unrealistic dreams of having vast houses, when in reality they can only afford a two-bedroom apartment,” said Hisham Aref, a professor at the Faculty of Engineering at Cairo University. The new law aims to revitalise the country's public provider, the Mortgage Finance Fund (MFF), by providing a degree of flexibility with regard to determining the conditions on who can benefit from it and expanding the beneficiaries' basic mortgage financing. The MFF usually provides financial support to reduce the burden of funding for beneficiaries on the price of units whose prospective down-payments range from LE5,000 to LE25,000, depending on the income of the individuals concerned. The Ministry of Housing and the MFF earlier this week made available 10 thousand residential units through an initiative by the Central Bank of Egypt (CBE). The offered units are of various sizes, ranging from 57 square metres to 63 square metres. They range in price from LE75,000 to LE122,000, with down-payments of 15 to 40 per cent of the total unit price and instalments not to exceed 25 per cent of income. The purchase of these units will be financed by loans offered by the banks at an interest rate of seven per cent. The tenure of the loans can be extended to 20 years. In order to make sure that the units will be provided to those in need, they will be allocated to single applicants with annual incomes of less than LE21,000 or families with incomes of less than LE30,000 provided they have not previously had access to subsidised housing units or a piece of land or a cooperative housing loan. The age of the applicants should not exceed 50 years or be less than 21 years. Aref said that as a result of the new law, young people with steady jobs should be able to afford social housing units. He calculated that a young man could afford the down-payment of a unit if he saved 25 to 30 per cent of his salary over six to eight years. “He will then pay monthly instalments of about LE300 pounds over 20 years,” Aref said, adding that this meant that many low-income people would be able to afford housing units. “Most young people do not want to live in 57 square metre housing units, however,” he added. The government has agreed to allow women to take out mortgages if they are the breadwinners of the family, and women are to be added to the list of eligible beneficiaries of the units. “Through the new social housing law, the state will take an intermediary role between the financing entities and the beneficiaries. It will issue legislation and control decisions to ease the building and funding of units for low-income groups,” Aref said. The new law would also encourage the private sector to join such projects. After the approval of the cabinet, Minister of Housing Mostafa Madbouli said earlier this week that he would soon announce procedures for reserving the social housing units. “The government realises the severity of the state of poverty in the country. Denying people job opportunities and adequate housing will only breed instability and upheaval, and no regime will ever succeed under such circumstances,” economic expert Abdel-Khalek Farouk commented. Affordable housing was a major issue for the government and it was essential for economic development, he added. He said the law would make property registration easier and more transparent, while stimulating Egypt's real-estate market by providing lower-income people with better access to loans. For years, private-sector real-estate developers have focused on luxurious developments in uptown areas on the outskirts of Cairo that tend to offer better profit margins and more consistent results. The result has been a shortage of affordable housing units and an over-supply of upmarket properties, many of which sit empty. The shortage of affordable residential units has triggered a surge of informal construction, with some 500,000 units being built without permission over the past three years, according to a February report from the ministry of housing. Farouk said that without the government intervention, no social housing or affordable houses for low-income people would be built, adding that there were 1.5 million empty residential units in Cairo alone that were only suitable for medium-income and above individuals. Farouk added that the state would act to support investors, whether local or foreign, in building new units in the social housing programme. As the economy recovered, housing demand would increase, and more and more investment in real estate would be needed, he said. The minister of housing has said that more needs to be done to spur private investment, noting that access to real-estate project financing was being studied in cooperation with the Central Bank. The ministry will begin the delivery of the units to beneficiaries starting on June 30, after checking the applicants and completed facilities in the new cities in order to avoid previous slip-ups. Arabtec Holding, Dubai's largest listed construction firm, has also agreed to build one million houses in a project worth $40.23 billion in a deal with the Egyptian army. The project will cover 160 million square metres across 13 sites in Egypt, and the houses will be for lower-income individuals. The company said it expected that work on the project would start in the third quarter of this year and be completed before 2020.
