CAIRO: Real estate developers sounded out about the impact of regulatory changes, the availability of bank capital and why institutional investment capital is reluctant to enter the market at a panel discussion Tuesday. They also highlighted the growing potential in developing retail and office space. In a panel titled “Investing in Real Estate Development” at the Euromoney Egypt Housing and Real Estate Finance Conference, experts shared their views on how to finance the vital sector from the perspective of investors and developers. The financers and investors voiced their concerns about lending to real estate and their plans for risk management in the event of a global real estate crash similar to the one that brought about the economic crisis. Ahmed Demerdash Badrawi, chief business development officer at SODIC, assessed the current situation in Egypt. “Investment is quite a new concept in Egypt. It's only in the last five to seven years that the market has become more sophisticated, where companies rely on something other than off-plan sales. “Since then, bigger companies have come in with access to capital markets and more diverse portfolios,” said Badrawy. “These new options allow us to bring a new view into the market and create longer term projects.” “We have more options now as developers and investors; we can develop mixed-use space, offices and shopping malls in addition to residential areas and either hold onto it as an asset and lease the commercial space or sell it off in packages,” Badrawy added. Khaled Sedky, chief portfolio officer at Palm Hills Developments, explained the importance of retail and office space in the real estate market. “I see massive investment and movement from trends in the UAE for office and commercial space. So, there are great benefits in developing for-lease space. The problem is obtaining the initial investment to carry such projects through the initial stages,” said Sedky. Chris Jolly, CEO of Cadena, an international real estate investor, talked about the market in Egypt from a foreign investor's point of view. “The number of commercial registrations is currently increasing this will be bring a large investment flow into the market. Also, the way things are priced here hasn't gotten to the point where it's that reflective of the market,” said Jolly. “A constraint in Egypt is liquidity and funding and once investment comes in, then you'll get more money and liquidity and the whole segment gains momentum, but it's still early for Egypt,” added Jolly. Panelists pointed out that in the absence of international investors who are more reluctant to take risks, the need for domestic investors to fill this role increases. “There is a huge gap between complete and incomplete assets; our developments are not really finished. The gap needs to be funded by domestic investment first. Foreigners want ready-made assets and until things are completed, it is difficult for developers to pay the bills without them,” said Hazem Ashry, general manager Emaar Misr. Hesham Shoukri, chairman and managing director of Rooya, said that the problem is marketing. “We don't know how to market ourselves. An example is that is in Egypt, the per capita ratio of class A offices is around .04 meters squared per person in Egypt, which is lower than other developing countries. “There is a huge demand for office space and people abroad aren't aware. We have to market this so investors are more interested in funding,” said Shokry. At the end of the session the participants were asked about proposed solutions. “Banks need to bridge and fuel this sector; they need to relax conditions preventing investment in the real estate market, so investment flows into the sector. No one in Egypt has lost money recently in the real estate market, this needs to be utilized,” said Ashry. For his part, Sedky said, “Developers and investors should orchestrate a value chain to attract foreign investors. It will take a couple of brave people with deep pockets to pave the way, just like in the retail market; they are now making a lot of money.” “You need to bring in ideas about types of debt banks could supply. Whatever the reasons are that domestic investors have not already invested here, they need to be worked out before shifting to international investors,” Jolly concluded.
