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Egypt's mortgage finance market is resilient, says Amlak CEO
Published in Daily News Egypt on 18 - 09 - 2008

CAIRO: As the ripple effects of the subprime mortgage meltdown signal a seismic shift in global financial markets with big names biting the dust, Egypt's mortgage finance market remains intact, says one industry executive.
"Egypt's mortgage finance market is decoupled from the ongoing global market turmoil, said Ahmed Haggag, CEO of Amlak Finance and Real Estate Investment, a wholly owned subsidiary of Amlak Finance.
Experts explained that mortgage finance companies in developed markets offered risky financial schemes that at times exceeded a property s value at low interest rates. However, it's a different story in Egypt altogether.
"The Central Bank of Egypt earmarks only 5 percent of its total financing portfolio to mortgage finance, Haggag said. "Mortgage finance in Egypt is still at its fresh stages, and demand on real estate - and naturally mortgage finance - is growing.
Industry insiders pointed out that mortgage financers in Egypt are less liberal when lending money. 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 13-15 percent, payable over a maximum of 10-20 years.
"We sell the most valuable product: money; and when doing that, we are [careful] not to lose our money, Haggag stated. "Demand on real estate in Egypt is growing. Supply does not meet demand, therefore will continue growing especially as Egypt's population increases each year.
According to company data, Egypt's real estate sector is estimated to grow 15 percent annually, while the market witnesses a shortfall of around 450,000 units per year. Furthermore, more than one million apartments remain uninhabited in Egypt, partially due to lack of financing schemes.
However, skeptics remain concerned about Egyptian real estate, as high inflation rates could dampen consumers abilities to buy new homes.
For mortgage finance, the opposite is true, as Haggag argues that mortgage is the ultimate solution to coping with leaps in inflation rates.
"With such rapidly escalating property prices in Egypt, mortgage finance has become the cornerstone that allows clients to own housing units, he said. "Mortgage finance schemes offer a helping hand that enables clients to afford price upsurges by paying value of a property over some 20 years.
Still, some prospect homebuyers remain crippled by relatively high interest rates on mortgages. Haggag points his finger to the country's monetary policy. "The Central Bank raised its lending interest rates, which in turn increases our interest rates. They are correlated.
"It's the monetary policy, he added. "We wish banks would lower lending rates, so that our rates would be lower. But inflation is surging, and the Central Bank has to raise its rates.
This year, the Central Bank has raised its corridor interest rates five consecutive times by a cumulative 2.25 percent in an attempt to curb inflation, which rose from 10.5 percent in January 2008 to 23.6 percent in August. Economists expect the bank would further hike its rates.
The total size of mortgage finance in Egypt soared to LE 2.6 billion as of last June. It is available through nine companies that have begun operations in the past two years, besides some 16 banks.
Though the figure is growing at unprecedented levels, mortgage finance in Egypt represents less than 1 percent of GDP. "The market is growing and is appealing to investors. This figure shows there is room for growth and that the market is not saturated yet, Haggag explained.
Amlak Finance - an affiliate of Emaar Properties - officially began operations in Egypt last October. Its mortgage disbursements in Egypt have so far totaled LE 315 million. The company expects to finance more than LE 500 million worth of mortgages by the end of fiscal year 2008.
Last Wednesday, Amlak Finance launched Aurora in Ein Sokhna, billed as one of the most affordable luxury projects in the Egyptian city. Aurora-Ein Sokhna will have 19 villas and 150 chalets of varying sizes and is centered around a 350-room hotel with a 250-meter beachfront. The resort will be ready for delivery in the third quarter of 2010, boasting four swimming pools, multi-cuisine restaurants and a children's play area.


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