CAIRO: Experts and industry insiders discussed financing and supplying affordable housing for the Egyptian market at Monday's third annual Euromoney Egypt Housing Finance Conference. Experts from the real estate, mortgage finance and government sectors as well as international experts debated key issues in two panel sessions chaired by Middle East Director of Euromoney Conferences Richard Banks. The first panel session covered the new dynamics in both the international and Egyptian housing markets. Panelists discussed everything from government involvement in the affordable real estate sector to the future of the mortgage industry to demand structure on the local market. Sahar M. Tohamy, economic advisor to the Minister of Housing and Utilities, began the session by discussing government efforts to expand supply of low-income housing units in partnership with the private sector. Though the government has long been involved with building and financing affordable housing units, Tohamy emphasized the importance of involving the private sector in this effort in order to permanently incorporate this demand demographic into the market. The Ministry of Housing is approaching strong demand for affordable housing by both building new housing units in cooperation with developers to be sold at subsidized prices, and by providing a site and service option that allocates land to qualified buyers to build their own houses. These two programs are expected to provide at least 190,000 new affordable housing units over the next two years. According to government figures, the total annual supply of housing units is 150,000 only, which represents a deficit of up to 350,000 units per year. The provision of affordable housing units is only one aspect of the issue, however, with financing being an important stopping block to home ownership for low-income Egyptians. Osama Saleh, chairman of the Mortgage Finance Authority, gave an optimistic take on the market and detailed the aggressive growth of the local mortgage finance industry since its beginnings seven years ago. "Mortgages didn't take on as quickly as we'd hoped initially, but they have been growing steadily and there are now 10 companies in the market providing housing finance. Our goal is to do LE 40 billion in mortgage loans over the next seven years, which will bring Egypt's mortgage to GDP ratio up to a level comparable with other developing countries, he said. According to Cairo investment bank EFG-Hermes, Egypt's housing finance sector is growing, but still underdeveloped, with outstanding mortgages representing just 0.3 percent of GDP, a low number even by emerging market standards. The latest available figures show that the size of Egypt's mortgage finance market is approximately LE 3 billion, according to EFG-Hermes. Suha Najjar, managing partner and director of research at Pharos Holding provided a more realistic look at the situation by addressing some of the issues impeding the progress of affordable housing finance in Egypt. "Egypt has low home ownership rates and high housing to income ratios. This is fueled by the fact that mortgage rates, at 13 percent, are extremely high and unaffordable for most. The solution is the development of a strong bond market and increasing access to long-term cheap credit, she explained. Panelists Pamela Lamoreux of International Housing Solutions South Africa and Tonia Secker of UK-based law firm Trowers and Hamlins LLP shared lessons from their respective countries, emphasizing the need for involvement across sectors to reach viable solutions to affordable housing. The second panel covered the Egyptian housing finance market in more detail, with speakers from major banks and mortgage companies identifying challenges to growth in the market. "Education is a major obstacle to growth of the mortgage market; we need to educate our clients and give them time to learn more about the process of buying a home through financing, said Ahmed Zahran, managing director and CEO of Tamweel Finance Holding. Zahran also emphasized the profits to be made by companies shifting from the upper crust of the housing market to the lower demographics. Agreeing on this point, managing director of the Egyptian Housing Finance Company Hala Bassiouni explained that local real estate companies have shifted products quickly in the wake of the financial crisis to tap into the more stable demand in lower- and middle-income segments of the market. As Basel El Hini, managing director at Banque du Caire, pointed out, high demand for housing finance products from lower income demographics has fueled the desire of new banks and companies to enter the mortgage markets. However, he said that the lack of retail finance in Egypt poses a challenge to the further development of the housing finance market in the country. "Mortgage finance will only excel in Egypt if the country adopts the mentality of consumer finance that would allow mortgages to become a mainstream idea. Without this the market will never develop fully, he said. Iman Ismail, managing director at the Egyptian Mortgage Refinance Company, put the afternoon's discussion into perspective with her observation that the initial health of the housing market is fundamental to the growth of the finance industry and that the growth of the affordable housing market is a long-term process. "Developers have changed products to respond to demand, but property has a long way to go to being truly affordable. On the finance side, we need to undertake long term plans to develop the bond market and begin securitization; to introduce new capital and new products in order to move forward, she said.
