CAIRO: The market mechanism of supply and demand requires certain rules, procedures and institutions to be in place in order to operate properly, and the Egyptian housing market is an exemplary demonstration of the breakdown of this mechanism in the absence of the proper infrastructure. The housing market has an excess of supply; many vacant residential units exist. It has an excess of demand; there are plenty of young families looking for a place to live, and there are funds available to match the excess supply and demand; several financial institutions have expressed their interest in the Egyptian mortgage market. Yet the problem persists mainly because financiers have little confidence in their capacity to take hold of the property in the event of non-payment by the borrower-tenant. This problem is two-fold. First, the law requires that the mortgaged property be registered in the borrower s name with the government, or at a minimum the property should be registerable - this was a recent amendment to the law. However, the majority of property in Egypt continues to be unregistered. Mohamed Abdallah, president of Coldwell Banker Affiliates of Middle East and North Africa, explains that the establishment of a modern property registration system should be one of the main priorities of the government with respect to the encouragement mortgage finance activity. Abdallah, who is also the chairman of the real estate committee of the American Chamber of Commerce in Egypt, tells a gathering of the chamber that property registration takes an average of 149 days in Egypt, compared to one week in Turkey and three days in Jordan. He believes that 15 days is a realistic target that the Egyptian government should aspire to reach. Hala Bassiouni, co-chairperson of the real estate committee and chief executive officer of Egyptian Housing Finance Co., which is one of only two active mortgage finance companies in Egypt, adds that public awareness is another major obstacle. People need to know the benefits of registering property and the procedures for registration, says Bassiouni. The prevailing perception by the public is that registration does not convey a benefit and is costly and time consuming, adds Abdalla. Ossama Saleh, chairman of the Mortgage Finance Authority, outlines the actions that have been taken by the government to address these issues. The authority already has a Web site with explanations of the process to purchase and mortgage property. It has also recently set up a phone service to answer questions about mortgage finance and has begun making announcements in newspapers. Awareness is one of our main tasks now, says Saleh. In terms of registration, Osama explains that work is underway to implement a new system which will effectively make registration mandatory. At present, home owners have a choice of whether or not they wish to register their property. In the future, authorities will presume that property belongs to the individual in whose name it is registered and the onus is on the home owner to prove otherwise. The second part of the problem is that even if the property is registered, financiers need some assurance that the justice system will allow them to foreclose on the house or apartment if borrowers fail to meet their financial obligations. In light of the historic protection of tenants in Egypt, this assurance is unlikely to be truly fulfilled until several cases of foreclosure succeed in the courts. Osama says that the documents required to foreclose on property are clearly outlined in the law, and that the Mortgage Finance Authority has explained this to judges and emphasized the importance of enforcement. The authority has also approved a number of legal agents to handle foreclosure. These agents will work for the fair treatment of all parties, balancing the interests of the bank to recover its capital with that of the consumer to obtain any residual value following the sale of the property. There was general agreement on many of the points raised by Abdallah and Bassiouni during the discussion. One suggestion, however, met with fierce resistance from some members of the audience. We need to confine developers to building and to hand over financing to banks or mortgage finance companies, says Bassiouni. Until now, developers are our main competitors. Developers effectively finance home buyers by selling on installments. This reliance on developer financing increases systemic financial risk, retards the growth of the primary mortgage market and does not provide buyers with either choice or competition by lenders when seeking financing to purchase homes, says Abdallah.
