CAIRO: The real estate market is the main driver behind Egypt's higher growth and employment rates, said Investment Minister Mahmoud Mohieldin in his keynote address Monday at the Euromoney Egypt Housing and Real Estate Finance Conference. "The real estate market constitutes 8.6 percent of Egypt's GDP; and if the market was bigger, growth rates would be even higher, he added. "The market is also labor intensive and absorbs some 11 percent of Egypt's labor force. As the most populous Arab country, Egypt will continue to fuel more growth in its housing market, whereby 360,000 units need to be built each year. Total investments in Egypt's real estate market have so far soared to $52 billion in some 16 mega projects. According to Prime Minister Ahmed Nazif, the value of built-up real estate as of last February stood at LE 200 billion ($37.5 billion). "The size of built-up property has grown by 41 percent in 2006/07 and estimates indicate that around 5.3 million housing units have to be constructed between 2005 and 2017, said Mohieldin. He added that more growth in Egypt's real estate market is the ultimate solution to housing and unemployment problems - where some 60 percent of the population is under the age of 30 - which entails an increase in housing supply as well as job creation. The minister spoke to some 700 high-profile industry experts gathered for this year's conference, which aims to foster local and international investment in the country's real estate market and mortgage finance markets. "The Euromoney believes in Egypt's higher growth rates, reformist economic policy, and opportunities for investment, and Euromoney's role is to explain these opportunities to international investors, said Richard Banks, Middle East director for Euromoney. He explained that during last year's Euromoney Conference, there was unfounded optimism or "euphoria in housing markets worldwide. "Those were the golden days. But now, the international environment is different. The US is in recession even though they'd like to say otherwise. The UK is heading towards recession as well, while Japan and other Asian countries may hit lower growth rates. Furthermore, he said, major currencies such as the dollar and the British pound are depreciating, while many countries around the world including Egypt are grappling with inflation. Hence, comes this year's Euromoney Conference with an agenda to "create solutions to domestic challenges in the housing market as well as draw on international experience from counties such as Hong Kong, Mexico, Canada, Pakistan, the US, the UK and Gulf countries, Banks said. As experts continue to see a promising prospect in Egypt's real estate market, the mortgage finance market also stems as a sub-sector with huge potential. Minister Mohieldin boasted that the total size of mortgage finance in Egypt has grown from LE 16 million in 2005 to LE 2.2 billion last March. "Number of entities operating in mortgage finance has now reached eight companies and 16 banks, he said. "Such figures suggest that there is diversity and competition on the market, which act to the benefit of consumers. Mohieldin added that Egypt's mortgage finance market is now on the move, with a healthy 31.5 percent growth rate during the first quarter of 2008. The number of granted loans is also rising from 1,428 loans in March 2007 to 3,368 loans last March. On the downside, skeptics fear that ongoing hikes in costs of construction material could act as a bottleneck to growth for Egypt's real estate and mortgage finance markets. Currently, steel prices sell at an all-time high of LE 7,500 per ton, up from LE 3,900 last December, and cement at around LE 500 per ton, up from last December's LE 380. Consequently, construction costs have surged 30 percent since January and property prices to almost 75 percent. "Upsurges in steel and cement are not a new phenomenon. It's been around for many years, the minister explained. "Despite these upsurges, people continue to eye real estate investments. "There continues to be growth in housing demand and mortgage finance schemes. .This is because real estate has always been an inflation hedge. When inflation rates increase, people resort to real estate investment as a safe haven from inflation.
