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El Sebaei: Obligatory Investment Rules To Boost Real Estate Market
Published in Amwal Al Ghad on 15 - 03 - 2012

Fathy El Sebaei, Chairman and MD of Housing and Development Bank (HDB), said that trials over illegal lands' acquisitions amid former corrupted regime is one of the main problems which negatively affected real estate market last year, adding that the volume of real estate and tourism investments represent about 30% of GDP.
Sebaei said in his Interview with Amwal Al Ghad that HDB has set a good budget estimate for the current year, pointing out that his Bank targets achieving 46% growth rate in profits, 11% growth in assets volume, 16% increase in deposits and 5% in lending.
HDB had deferred customers' repayment installments before Central Bank of Egypt's took this decision in order to support his customers amid the turmoil Egypt witnessed after 25th January revolution.
He said that the bad debts rate is less than 7% of the total portfolio, and the Bank allocated all the needed provisions as well as allocating other provisions to face any other possible risks. Those provisions were covered by HDB's concluding with some investments after achieving high profits. HDB is negotiating to implement a project in Libya similar to Hyde Park, adding that Libya enjoys high growth rates and considered as a prominent market for real estate and tourism projects.
In your point of view, What are the main problems affecting real estate market after the revolution?
Questioning the validity of lands' contracts greatly affected both tourism and real estate sectors, causing some investors to hold their current projects and investments, while businessmen are no longer attracted to inject new investments in an unstable country. Besides, customers have many problems in paying installments add to this that the decreasing purchasing power amid current fears and lack of security. Thus, GDP was directly affected of which real estate represents 16% and tourism 19%.
Do you believe that current settlements with foreign investors will activate the market?
Settlements will return confidence to Egyptian market, on the other hand, this is a late step and not enough to boost the market. Egypt shall set obligatory regulations and laws to be followed if we want to avoid many problems.
Each Investor's case is different. If the developer has already sold the project's units, determined the cost and the profit margin, he may resort to international arbitration if the price margin -demanded by the government- is too high. If the investor has not yet sold or decided the price of the units, he could bear the price difference determined by the government by amending his prices.
How much bad debts the sector has? Did you allocate any provisions?
HDB did not keep large volume to avoid bad debts, as the Bank has not had any problems with non performing loans, thanks to HDB's credit policies which made its customers committed in paying installments. In addition, HDB's portfolio is not focused on a certain sector, so that customers are not highly affected. Provisions kept HDB compensated through dissociation from investments that achieved high profits. Besides, volume of bad debts does not exceed 7% of the total volume of loans portfolio.
HDB took necessary procedures to face such risks, using adequate provisions. The bank's portfolio is “clean" and no problems included... this due to a good strategy, adherence to safe credit policies, diversity and carefully selecting clients.
Total bad debts is less than 7% of bank's portfolio, while we allocated suitable provisions to cover them.
Outline the estimated budget for banks during 2012?
The estimated budget aims to achieve EGP 296.6 million net profits for 2012, moreover, increasing the assets to reach EGP 15.2 billion at the end of 2012.
The bank also targets to boost trusts' volume to EGP 9.4 billion, in addition to increasing customers' loans portfolio and credit facilities to post EGP 7.3 billion.
What about Syndicated loans? What sectors HDB targets during current period?
The bank is ready to fund any business as long as it has a strong feasibility study and solvency to repay the loans. The bank participates in most of the syndicated loans organized inside the market. The participation rate is between EGP 50 to 100 million for a customer
The Housing and Development hasn't arranged yet any joint loans due to not having huge capital, which reach EGP 1.150 billion; especially the Central Bank set regulations for loaning the customer, represented in not funding a customer more than 20% of the bank's capital.
On the short-term, we follow a careful credit policy, because of the problems of land with investors, political and security turmoil and the protests which increase the tense inside the market and make the short-term visions unclear. I expect stability soon; especially after fixing the coming presidential elections date which will help banks in expanding funding.
The bank's investments of securities are 1% of the portfolio and their values increase and decrease according to the share rate in the market.
Do you expect the real estate market will be negatively affected due to lands' problems?
Both the local or gulf real estate developers have good reputation and strong credibility, even they didn't resort to pump new investments because of the post-revolution incidents. But they work to be committed towards their clients. We hope the government backs these developers through providing several solutions to reactivate the sector. Also not to penalize the investors over decisions or land had been bought since several years, as this will result in mistrusting the investment in Egypt moreover the inability of attracting new investments.
Experts described Hyde Park's as most successful acquisition in years?
Hyde Park Project is going to be on the HDB's most successful projects through which we will be posting bigger than expected profits. The bank has managed to market a wide part of the project; the Hyde Park Phase I has been already submitted so that we could ensure our commitment to our clients. Worthily to mention, the government would not offer new lands for the investors within the coming period, this means the prices of lands will sour up, thus the Hyde Park's profits will boost. Yet, the bank currently faces a problem in delivering the facilities due to the lack of infrastructure.
Did HDB's role with Urban Communities Authority change?
HDB is still the Ministry's main right wing not only in financing but also in collecting the contracts and reservations, following up the payments and assisting it in any national projects. This has made the HDB participate in the national project for youth in many governorates all over Egypt.
Foreign monetary reserve decreased to reach $ 16.3 billion after a remarkable decline in all Egypt's U.S Dollar resources,
Do you think that Egyptian banks will soon suffer a deficit in Dollar reserves?
If we manage to stop the repetitive trade deficit, we will not suffer from any crisis in the USD liquidity. In addition, if the government adopts procedures which would regain the confidence in making investments in Egypt, would attract new investments and would also achieve political stability, this will positively reflect very shortly on all the resources that provide USD for Egypt.
HDB is targeting Libya,
Do you believe that investing abroad is convenient for the current period?
In fact, we have received offers, but still we are considering the first phases of the project. The bank waits to have all the project's terms within a month. We are supposed to send a group of representatives to Libya within the coming period so as to visit the site and to get familiar with all the tools which help in taking part in the project and in achieving high profitability. Libya enjoys high growth rates and targets at establishing a multiple of real estate and tourism projects within the coming period.
In overall, we have postponed all plans for expansion that we intended to do in the KSA through a mortgage company and in Iraq as well. This was due to economic situation in Egypt and the Arab countries.
Do you believe that Islamic banking will take a greater part of banks' business in the next period?
The transition to “Islamic banking" is not a major concern for any bank, noting that all banking transactions are alike.
The transition of all banks in Egypt into an Islamic system needs to be endorsed via a parliamentary legislation and in coordination with the Central Bank, as it is the supervisory entity of the whole banking system in Egypt, and in case of endorsing this legislation, it will take a long time to be applied, and for this regard we are studying in the current time the issuance of some Islamic retail products according to the Al- Shariaa rules.
During 2011, On increasing non performing clients, some banks shrink their retail market gradually,
Do you consider similar step?
Market fluctuations and the effect on most of economic sectors, as well as the clients' fears to lose their jobs are the main reasons behind that attitude.
If banks became unable to collect their clients' premiums, how could they expand into retail sector?
Banks' profits and losses are accountable to the shareholders, adding that the higher risks and the lack of clear vision made the banks to be careful, not only with individuals finance, but also with corporate, banks then will have to carefully choose their clients and to guarantee their ability to re-pay the loan.

Did you update your mortgage finance program to cope with increasing market's risks?
Actually we took a group of steps in line with the current requirements, through working with different financing entities, which enable the low income people of having an appropriate shelter, particularly after the increase in unit's price, and also we increased the tenor's length to reach 20 years with lower interest rates.
Yes, Mortgage was greatly affected in 2011, but I believe it can regain its performance rapidly, and achieve high growth rates according to the greater need to it, but all of this depends mainly on the stability of the political and security positions in Egypt in the upcoming period.
Finally, do you think that the Egyptian economy is still attracting foreign investments?
Egypt still has all the tools for attracting investment, main factors are represented by large size of lands, water, cheap labor, in addition to its unique geographical location, and development of ports prepared for exporting, and re-exporting, in addition to the availability of minerals and mining sources.
But we will not be able to attract investment, unless all of the regulations become clear for both investors and state.

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