Slashing interest rate protects real estate industry from COVID-19

CBE's decision to cut interest rate by 3% is a very proactive step towards strengthening the economy, says Real Estate Development Chamber

Chairperson of Real Estate Development Chamber, and Arabia Holding Tarek Shoukry praised Central Banks of Egypt (CBE) decision to cut interest rate 3%, as a strong and distinct impetus for national economy, as it is proportional to economic changes that the world is witnessing during the current period.
Shoukry described the decision as a proactive step, as it was issued in an urgent meeting by the CBE to discuss repercussions of spread of the Coronavirus on the economy, noting that the decision is a positive step to support the local economy and maintain a balance in Egypt's Gross Domestic Product (GDP).
He explained the decision encourages and motivates all investors to borrow due to cutting interest rate that supports loans by investors in all economic sectors, preserving production cycle in all sectors.
"Real estate sector is one of economic sectors that benefit from this smart and successful decision, as it encourages developers to obtain loans and thus accelerate development rates in their projects and delivery to clients according to the announced schedules. The decision will contribute to boosting investments in the sector through encouraging investors to expand in launching new projects; besides, the CBE stimulates mortgage finance system due to low interest of mortgage loan," Shoukry said . "Accordingly, the decision is one of the additional incentives and encouraging factors to invest in real estate as a safe haven for investment as it has a greater profitability return, as the property no matter the size of challenges."
President of the New Cairo Developers Association and a member of the Real Estate Investment Division Mohamed Albostany said that the decision to cut interest rate would have a foremost role in stimulating sales of real estate companies during the coming period, by directing a lot of money of bank deposits to purchasing units for the purpose of investment.
He stressed that the bold decisions taken by the CBE recently will contribute to protecting the Egyptian economy from repercussions of the Coronavirus, noting that these decisions are a reassuring message for investors at home, and abroad.
He explained that the decision will revitalise real estate market and protect it from negative impact of the Coronavirus concerns that swept the world, pointing out that individuals will buy real estate again, especially with the rise in profitability factor, which has an inverse relationship with interest rates.
Additionally, the decision will lead to a decrease in flow of hot money on treasury bills, but in return, it will increase foreign direct investments.
New Plan Developments Commercial Director Ali Gaber said the decision will move stagnant capitals in banks and encourage investors to expand their projects during the coming period by obtaining loans to finance projects to take advantage of low interest rate. Along with individual investors to withdraw their deposits from banks and invest in various sectors, where one part will be directed to stock exchange and another part to industrial projects, and the largest share will be directed to investment in real estate through purchasing property, especially in light of the instability in the stock market and low gold prices.
He added that property is still a safe haven, the value of the property is constantly rising and never decreases, unlike value of money that decreases with high inflation rates because of high prices.
For his part, Ahmed Samir, commercial director of Al-Wadi Tourism Investment and Real Estate, considers that market will witness a great demand beginning of April in new urban communities, especially for properties are ready for immediate delivery rather than off-plan projects.
"Because of low interest rate, many depositors will withdraw their money from banks to convert them into financial liquidity to be pumped into savings vessels other than banks to invest and make profits. I think that this money will be invested in the property, in light of the fluctuating gold prices, which is in favour of real estate thanks to its increasing prices, as we have never seen decreasing in property prices," he elaborated.
Chairperson of Watad Capital Mohammad Al-Subaie said that slashing interest rate is one of the important political tools that the CBE is fluent to use, as it had previously used in 2016 to combat the largest rate of inflation that exceeded 30% and was able to restrain it until the inflation rate reached 2% in 2019 and 2020.
Al-Subaie added that the CBE uses the interest-cut tool to advance the economy with the recent changes that have occurred in the global economy.
It is a bold decision, he stated, adding it will contribute to directing a large part of the liquidity deposited in banks in form of certificates or deposits, to real estate investment pool that has proven its ability to overcome all obstacles that the country has gone through during previous periods.
"In light of this global crisis that has swept the countries of the world, we will find that real estate sector will remain standing compared to other saving vessels, such as bank deposits, gold and other minerals. Property has proven its ability to be the preferred saving vessels to preserve the saving value," he explained.
Chairperson of Jebal Developments Ahmed Aletr praised the recent CBE's decision to cut interest rate.
He said that the CBE resorted to this in view of the current conditions and global circumstances to maintain gains achieved by the Egyptian economy in conjunction with the economic reform programme.
He added that the decision would give a large positive vibes to local market, especially for those who want to buy different housing units, and who chooses to buy property to secure its savings.
Aletr further pointed out that interest rate cut will have a positive return on real estate sector, explaining that the CBE aims to stimulate local and foreign investments inside Egypt to facilitate companies to expand their investment plans during the coming period.
Real estate companies can achieve more sales of residential units for Arabs and foreigners due to depreciation of the Egyptian pound against the dollar, he concluded.