CAIRO: If you are a newlywed couple looking for your dream house; or if you are a middle/low-income family hoping to own an apartment; or if you are a tourist seeking to buy a second home in one of Egypt's cities, your dream might just be a step away from becoming a reality. This was the subject of the inaugural Euromoney Egypt Housing Finance Conference held on May 14 under the patronage of the Ministry of Investment and the Mortgage Finance Authority (MFA). Despite the ongoing boom in construction and real-estate markets, with roughly 270,000 housing units going up every year, there is a deficit in supply causing an upsurge in prices, and limiting supply to upscale consumers. "Egypt's population is increasing intensely, and the need to buy housing units always exists. Still, supply does not meet demand, said Osama Saleh, chairman of the (MFA). Escalating prices of housing units sold on the market nowadays - reaching on average LE 1,500 per square meter - have prohibited around 60 percent of Egyptians from buying apartments. From that standpoint, speakers at the conference referred to the growing importance of mortgage finance, which would ideally enable individuals, even those with limited financial capabilities, to own housing units across the country. Depending on their mortgage finance strategies, mortgage companies as well as banks in Egypt basically finance up to 75-90 percent of a property s value, at an interest rate ranging between 12-14 percent, payable over a maximum of 10-20 years. Over the last two to three years "mortgage finance companies have so far signed 1,400 contracts, said Mahmoud Mohieldin, minister of investment. "And this is only the beginning. Mortgage finance is a relatively young sector in Egypt. After passing the mortgage law in 2001, the MFA was established to oversee proper implementation of the mortgage law, supervise mortgage finance companies in Egypt and ensure efficiency of the mortgage market. "Within the last two years, a lot was done to move this sector ahead. There is great potential in the market, and the volume of transactions is getting bigger and bigger, explained Saleh. Mortgage finance is now available through three companies that have begun operations in the past two years, besides Amlak Finance that entered the market last February and is due to officially begin operations mid summer. The MFA is currently looking to license three new mortgage finance companies by the end of the year. "We, at the MFA, are very committed to the market in terms of training employees at different banks and mortgage companies to better handle mortgage operations, Saleh stated. Last year, he added, the MFA organized the allocation of 4,000 housing units given to middle/low-income Egyptians through the mortgage finance system. To buy property through mortgage finance, individuals have to provide a letter from Human Resources verifying their monthly salary to the mortgage finance company or the bank, which will then appraise the property to finally determine the value of the mortgage. Speaking at the conference Mohieldin said that last year's total lending amounted was LE 1 billion "which is a significant achievement relative to the LE 16 million recorded in June, 2005. He predicted that by the end of this year mortgage finance would have reached LE 2 billion, representing around 7-8 percent of the country's Gross Domestic Product. Addressing areas related to funding and developing of mortgage finance, Mohieldin said that the market was getting more developed each year. He particularly referred to recent deductions in property registration fees, a step that would encourage more people to buy different housing units across the country. "Registration fees have recently dropped from three percent of a property's value to LE 500-2,000 only, the minister explained. "Still, with such reforms and developments in the market, mortgage finance is just getting started in Egypt. And in next year's Euromoney conference, developments will multiply three or four times. Indeed, different speakers predicted an immense improvement in mortgage finance in the next few years. "With the entrance of more mortgage finance companies, competition will increase, and lenders will have to find better and cheaper ways to provide financing, which mainly entails fewer interest rates on mortgage, said Ahmed Haggag, country head of Amlak Finance. "Operations will also be more easily handled with the establishment of the Credit Bureau. Projected to begin operations this June, the Credit Bureau will enable mortgage companies and banks to verify their clients' credit and financial history, which will in turn reduce the risk of fraud.
