Real estate development companies in Egypt have extended instalment periods to make property purchases more accessible amid economic pressures and financial constraints. By offering longer payment plans, developers attract more buyers by reducing down payments and monthly instalments, allowing individuals to afford properties over an extended period. Long-term instalment offers have dominated the real estate market recently, following Palm Hills' announcement of a 12-year instalment plan across all its projects. Other companies have extended payment terms to nearly 16 years. This trend, coinciding with relative price stability, raises questions about its underlying reasons, potential further surprises from major developers, and its connection to concerns about a slowdown in sales. According to real estate marketers speaking to Daily News Egypt, instalment periods vary based on project status. Completed and ready-for-delivery projects typically have shorter payment plans, particularly for previously retained unsold units. In these cases, shorter instalment terms provide developers with immediate liquidity to fulfill obligations for other ongoing projects. Sales professionals attribute the rise in flexible instalment plans to three key factors. First, a slowdown in real estate sales in the last quarter of 2024, driven by the government's success in stabilizing the Egyptian pound's exchange rate. This stability reduced the number of investors purchasing property as a hedge against inflation or for high returns. Second, real estate companies anticipate lower interest rates and stable construction material prices, reducing project costs and enabling developers to offer extended payment terms while ensuring project completion. Third, the slowdown in mortgage financing in Egypt has prompted developers to introduce extended payment plans as an alternative to bank loans, effectively making them financiers. Developers now offer cash payment options with discounts ranging from 40% to 50% on unit prices. Ahmed Kadry, CEO of SAK Developments, highlighted that developers face challenges beyond construction, including supervision, management, and maintenance. Many establish subsidiary companies to oversee the management and operation of completed projects. To sustain sales and financial stability, developers are offering instalment plans of up to 8 or 10 years. Kadry emphasized the need for a more active role from the banking sector in real estate financing, as its current involvement does not match the market's size and strength. He pointed out that only 2% of real estate sales in Egypt are funded through bank loans, while 98% rely on direct financing from customers and developers. This contrasts sharply with other countries, where bank financing plays a dominant role despite those markets lacking Egypt's level of stability and resilience. He urged the government to revise existing policies and introduce new legislation to facilitate financing for both developers and buyers, enhancing state-private sector collaboration. Ayman Sami, Country Head of JLL Egypt, said that instalment-based systems significantly impact the resale market, particularly for newly launched projects. Extended payment terms make it difficult for existing owners to resell their units, as buyers prefer purchasing directly from developers with longer payment plans rather than paying lump sums in the resale market. Despite these challenges, Sami affirmed that demand remains strong for well-developed areas and high-demand projects. He dismissed fears of a market collapse, emphasizing that Egypt's real estate financing structure ensures sector stability despite ongoing changes. Ahmed Ehab, CEO of Madaar, said that housing prices in Egypt far exceed the global average. While home prices in most countries range between three to five times a buyer's annual income, Egypt's ratio is significantly higher, making homeownership less affordable for many. Ehab cited rising land costs, bank interest rates, and construction material prices as key factors preventing developers from lowering unit prices. Developers have already sacrificed profit margins to maintain sales and retain customers, leaving them with flexible payment plans as the only viable solution. To alleviate the financial burden on buyers, developers are extending instalment periods to reduce monthly payments, helping sustain demand. Ehab stressed that in current projects, developers cannot lower unit prices, making flexible payment methods essential. For future projects, he called for government intervention to regulate pricing in land offerings and ensure stable interest rates. His company has introduced a nine-year payment plan with a 5% down payment, extending instalment terms to align with buyers' financial capabilities. He described this approach as a practical solution to current challenges in Egypt's real estate market.
