With what seems like an overnight boom in the real estate market, questions are beginning to arise as to how this became possible and whether it is justified and sustainable. Although it may seem like an overnight success story, Egypt's economy began its dynamic growth in 2004, with the reforms implemented by the new cabinet. The Real Estate Finance Law is one such reform which was passed even earlier, in 2001. Interest rates, which have been stable since the turn of the millennium, have also been a major contributing factor to the rapid growth. The Real Estate Finance Law passed over six years ago has only now begun to create a real, albeit small, mortgage market. The mortgage industry received a much needed boost in 2007, due to the launch of the Egyptian Company for Mortgage Refinancing (ECMR), which provides 20-year secured loans to banks, who will in turn provide mortgages to individuals at an interest rate of 11 percent, compared to existing mortgage companies which have so far only offered 10-year tenure mortgages, with higher interest rates. Add to that investment from Gulf States who see Egypt's potential and you have a recipe for success. And as the old adage goes, success breeds success. The market is ripe for investors, large and small, especially with a new stock exchange catering to SMEs which will be launched later on this year, and will give even further opportunities for firms, funds and even individuals to invest in Egypt. The Investment Security Legislation enacted in 2007 has boosted investor's confidence in Egypt, and the UAE was reported recently by the Financial Times as the biggest Gulf investor in Egypt, investing $3 billion in 2007. The real estate market is booming on the back of those three years of economic growth, averaging at 7 percent, and is one of the most active sectors in the economy. 2007 was one of the busiest years that the sector has seen. According to an article by Business Intelligence Middle East, the real estate sector's contribution to GDP in 2006/7 was 8.3 percent, while it grew at a rate of 15.8 percent. The market has been revitalized by a strong demand for housing away from the hustle and bustle of Cairo, by government efforts to promote expansion into nearby areas and investment from the region, in addition to enormous European interest in properties located on the Red Sea. Enter DAMAC Properties, who made our debut on the Egyptian market in 2006 with the 320 million square meter mega-tourism project Gamsha Bay. Set to be completed over the next decade, Gamsha Bay is estimated at over $16 billion alone. DAMAC Properties recognized the potential of Egypt following the strong stance that the Egyptian government took towards protecting investors, and encouraging participation in the economy by multinationals. We are proud to have paved the way for other companies who followed in our footsteps and invested in Egypt's thriving economy. The parent company, DAMAC Holdings, was established in 1982 in the UAE, and has since grown into a multi-billion dollar corporation and one of the largest developers in the Middle East. Other projects by DAMAC include Hyde Park and Park Avenue, both located in the up and coming areas of New Cairo and 6th of October City. Areas, which due to their proximity to Cairo and increasing popularity, are proving to be of heightened interest to real estate developers. The government is continuing its commitment to reform that aims to protect and improve the business climate. The IFC's "Doing Business 2007 report named Egypt as the top reformer worldwide. "Egypt tops the list of reformers that are making it easier to do business, it says, by easing the red-tape that developers used to face in obtaining permits, and among other things, establishing a new private credit bureau. According to the latest economic news report published by the Ministry of Finance, Egypt is now second only to South Africa on the African continent in terms of market size and its relationship to the amount of FDI coming into the country. "From a mere $509.4 million in the 2000/1 financial year, FDI rose to $11.1 billion for the year ending June 30, 2007, says the report. The report also suggests that the focus has been shifted away from traditional sectors that normally attract investment to non-energy sectors, reflecting a widening of the Egyptian economy's base as a whole, "FDI in non-petroleum sectors of the economy topped $4.28 billion in the 2005/6 financial year, a year on year rise of some 214 percent, it states. The report also states that the economic growth is tipped to continue its upward trend.In July of last year, Egypt became the first Arab and African country to sign the OECD Declaration on International Investment and Multinational Enterprises, the signing of which indicates a commitment to improving the investment climate and encouraging further growth in the economy with participation from multinational companies. At the World Economic Forum in January, Finance Minister Youssef Boutros-Ghali was quoted as saying that, "Egypt is on course to beat last year's 7.1 percent economic growth despite indications of an international slowdown. In light of an international slowdown, many investors are looking to alternatives such as land. Despite escalating prices, land is still perceived as a solid long-term investment. With fears of a global downturn, investors are looking to land and property as a sound investment more than ever before. This is due in part to the minimal repercussions of such investments in the event of an international decline. While research by Merrill Lynch, the financial management powerhouse, suggests that with the global slowdown comes renewed interest in emerging markets such as Egypt, for investors looking for minimal risk. In an article published by Business Today, Gary Dugan chief investment officer for Merrill Lynch Global Wealth Management in Europe, the Middle East and Africa, says that "in the worst case scenario . it will be good to be Egyptian. Dugan also predicts that growth will pick up once more by Q3 2008 as interest rates fall again. Over the long-term, the real estate market moves in step with the economy, and demand for property has never been higher. It is estimated that in five to seven years, New Cairo will house three million people and so will its twin city on the opposite side of Cairo. That's six million people, the population of a small country. With rising population it is reasonable to expect that the number of homes built increase and as with any type of economic bubble, a real estate bubble is difficult to identify except in hindsight. It is natural for property value to increase in areas where people are moving into such as the areas of greater Cairo and Egypt's coasts - and this is exactly where the new real estate is concentrated.
