Working Papers Egypt s Real Estate Industry Jan. 2012
Outline An Arabic summary 1. Introduction.6 2. History of the real estate sector in Egypt..6 3. Types of real estate.8 4. Market analysis 9 4/1.Market structure...9 4/2. Demand..9 4/3. Key players 9 4/4. New establishments...10 4/5.Size...10 4/6.Real estate sector in the Egyptian Stock Market 11 5. Legal Issues 12 6. Feeding Industries.12 7. SWOT analysis...14 8. Outlook..14 9. Recommendations.15 10. Conclusion.15 Appendix References 2
ملخص يعد القطاع العقاري المصري واحد من القطاعات االقتصادية الھامة التي شھدت العديد من التحوالت في العقود السابقة وتأتي أھمية ھذا القطاع نظرا الرتباط نشاط اإلسكان و االستثمار العقاري عامة بالعديد من القطاعات االقتصادية المغذية له سواء بصورة مباشرة ) كقطاع مواد البناء و المقاوالت) أو بصورة غير مباشرة ) كاألجھزة المعمرة و المعدات الكھربائية) لھذا فان القطاع يعتبر أحد المحاور الرئيسية لحركة أى اقتصاد. ھذا وقد شھد القطاع العقاري في مصر انتعاشة كبيرة منذ بداية عقد الثمانينيات وحتي بداية عقد التسعينيات مدعوما بتحويالت المصريين العاملين بالخارج وارتفاع معدالت التضخم وانخفاض أسعار الفائدة المصرفية وانكماش النمو االقتصادي وغياب فرص استثمارية بديلة وقد تركزت اإلنشاءات في المدن الجديدة التي كان من المفترض أن يوجه اإلسكان بھا إلي الطبقات الفقيرة والمتوسطة إال أن التوسع العمراني في ھذه المناطق اعتمد في أغلبه علي الوحدات السكنية عالية التكلفة مع التركيز علي المناطق الراقية في القاھرة مثل المعادي ومصر الجديدة اعتمادا علي تقديرات خاطئة حول الطلب علي ھذا النوع من الوحدات لينشأ فائض في المعروض من ھذه الوحدات بالمقارنة بالطلب عليھا مع وجود نقص حاد في الوحدات المتوسطة مما أدي إلي دخول القطاع في ركود تدريجي خالل الفترة من ١٩٩٦ وحتي ٢٠٠٢ متأثرا بعدة عوامل مثل انخفاض متوسط نصيب الفرد من الدخل القومي و بالتالي ضعف القوة لشرائية وظھور عدة أزمات محلية (مثل األزمة المصرفية) وعالمية ) مثل األزمة المالية األسيوية في ١٩٩٧) مما أدي إلي ھذا الركود والذي كان من نتائجه ھبوط أسعار الوحدات السكنية الفاخرة مع استقرار نسبي ألسعار الوحدات األقل تكلفة. استعاد النشاط العقاري عافيته بعد ھذه الفترة مع زيادة معدالت النمو االقتصادي بشكل تدريجي وزيادة التدفقات النقدية من دول الخليج التي حققت فوائضا مالية كبيرة في السنوات األخيرة باإلضافة إلي دخول كيانات اقتصادية كبيرة محلية وعالمية إلي السوق المصري أمال في تكرار تجربة دبي في مصر وتميزت ھذه الفترة أيضا بزيادة مشروعات اإلسكان الفاخر وظھور مصطلح " الكومبوند" وھو مجمع سكني متكامل أشبه بالمجتمعات الصغيرة مع ارتفاعات متتالية وغير مسبوقة في أسعار الوحدات السكنية واستمر الحال علي ذلك حتي ضربت األزمة المالية العالمية السوق المصرية لتقود السوق إلي حالة من الركود استمرت حتي اندالع ثورة الخامس والعشرين من يناير التي عمقت من جراح السوق العقارية في مصر نتيجة تدھور األوضاع األمنية وتورط العديد من كبار رجال األعمال في قضايا فساد بعضھا مرتبط ارتباطا مباشرا بالقطاع العقاري وبروز مشكلة احتمالية بطالن تعاقدات الدولة مع كبار المطورين العقاريين بخصوص مساحات األراضي الشاسعة التي حصلوا عليھا في المدن الجديدة والقاھرة بالمخالفة لما جاء في نص قانون المناقصات والمزايدات مما أثر بالسلب علي القطاع المصرفي باعتباره المقرض األول لھذه الكيانات. إال إنه حتي اآلن لم يشھد السوق انخفاضا في أسعار الوحدات المعرو ضة نظرا لعدة أسباب مثل الطبيعة الخاصة للعقار حيث أنه ال يوجد له تاريخ صالحية وصيانته قليلة التكاليف مقارنة بتكاليفه األساسية وزيادة أھمية العقارات كمخزن للقيمة خصوصا مع ارتفاع معدالت التضخم وزيادة تكلفة البناء في السنوات القليلة الماضية بما اليدع مجاال للمالك أو المطورين للبيع بأسعار ال تغطي ھذه التكلفة العالية وبھامش ربح مرضي. بالنسبة لھيكل السوق تنقسم شركات التطوير العقاري العاملة في مصر إلي أربع فئات : شركات القطاع العام وشركات القطاع الخاص المصرية والشركات المتعددة الجنسيات باإلضافة إلي األفراد الذين يتولون بناء منازلھم بشكل منفرد. سيطرت الشركات المملوكة للدولة على القطاع العقاري في حقبة ما قبل التسعينات حتي تم تطبيق برنامج 3
- - الخصخصة في بداية عقد التسعينات مما زاد من الحصة السوقية للقطاع الخاص حتي استحوذ علي النسبة األكبر من أعمال البناء. وبالنسبة للطلب يشھد الطلب علي العقارات في مصر زيادات مستمرة نظرا لزيادة معدل الزواج إذ ارتفع عدد عقود الزواج ليسجل ٨.٨ عقد لكل ١٠٠٠ مواطن في عام ٢٠٠٨ مقارنة ب ٧.٦ في عام ١٩٩٠. عالوة على ذلك فإن إجمالي عدد سكان الجمھورية قد شھد عدة زيادات متتابعة خالل السنوات الماضية حتى وصل إلى ٨٤.٥ مليون في عام ٢٠١٠. أما بخصوص حجم األنشطة العقارية في مصر فقد شھدت القيمة المضافة التي تولدھا ھذه األنشطة زيادة مضطردة منذ العام المالي ٢٠٠١/٢٠٠٢ لتسجل ١٣.٩٢ مليار جنيه مقابل نحو ٣٤ مليار جنيه في العام المالي ٢٠١٠/٢٠١١ مع زيادة الوزن النسبي للقطاع الخاص ليبلغ ٩٥.٧ في ٢٠١٠/٢٠١١. وعلي صعيد أداء القطاع العقاري في البورصة المصرية ھبط قطاع العقارات بالبورصة المصرية خالل ال ٨ اشھر التي أعقبت الثورة بنسبة ٥٣.٣٢% (٧٢١ نقطة) بعد أن كان ھذا القطاع المالذ اآلمن للمتعاملين داخل البورصة المصرية نظرا لما يتمتع به القطاع من أداء جيد ومالءة مالية كبير باإلضافة إلى تحقيق شركاته أعلي نسبة ربحية على مدار العام. وبالنسبة لألسھم كانت أسھم الشركات التي أتھمت قياداتھا بالفساد أكثر تضررا من غيرھا مما دفع العديد من حاملى األسھم نحو البيع العشوائى على ھذه األسھم.وتصدر سھم بالم ھليز مقدمة األسھم األكثر خسارة على مدار ال ٨ أشھر تاله سھم شركة السادس من أكتوبر للتنمية واالستثمار (سوديك) وجاء فى المركز الثالث بين الخاسرين سھم مجموعة طلعت مصطفى. وفيما يتعلق بالتوقعات المستقبلية فإنه يرتبط أداء أي قطاع اقتصادي باستقرار البيئة األمنية و السياسية واالقتصادية والقانونية المحيطة به بيد أنه من المتوقع أن تستمر االضطرابات السياسية والقالقل األمنية حتى االنتخابات الرئاسية والمتوقع إجراؤھا في يونيو ٢٠١٢ لذلك ستستمر حالة الترقب الحذر ألوضاع السوق مع وجود ركود في حركة البيع والشراء واستقرار نسبي في األسعار مع انكماش في نشاط السوق حتي تستقر األوضاع القانونية لألراضي التي بحوزة كبار المطورين العقاريين وعودة الثقة المفقودة من جانب المطورين العقاريين األجانب. أما على المدى الطويل فتختلف التوقعات وفقا لنوع العقار وذلك كما يلي : الوحدات السكنية : من المتوقع ألسعار الوحدات داخل القاھرة والمحافظات األخرى أن تشھد استقرارا بالنسبة للوحدات الفاخرة والمتوسطة على حد سواء. بالنسبة للمناطق التي تقع خارج القاھرة فإنھا قد تشھد استقرار مماثال في األسعار عدا مدينة ٦ أكتوبر التي قد تشھد انخفاضات طفيفة نظرا لزيادة المعروض بھا أما الوحدات الفاخرة في ھذه المناطق فلن تسجل أسعارھا زيادات أخري كما حدث من قبل نظرا للتحديات الكبيرة التي تواجھھا شركات التطوير العقاري التي قد تلجأ إلي خفض أسعار وحداتھا من أجل حل مشكلة السيولة وقد تؤدي ھذه الخطوة إلى موجة من االنخفاضات. وطبقا لبيانات للجھاز المركزي للتعبئة العامة واإلحصاء فان التقديرات المستقبلية الحتياجات السوق من الوحدات السكنية في الفترة من ٢٠٠٧ وحتي ٢٠٢٢ تبلغ حوالي ٧.٥ مليون وحدة. القطاع السياحي : وتزيد حساسية ھذا القطاع من تعقيد األمور مع تراجع األمن والشكوك المثارة حول خطط التيارات اإلسالمية تجاه ھذا القطاع لذلك فإنه من المتوقع إن تنخفض أسعار الوحدات المرتبطة بھذا القطاع وخصوصا الراقية منھا علي غرارما حدث في نھاية التسعينات. 4
جدير بالذكر أنه قد أعلنت الحكومة المصرية بأن الدولة لن تسحب أي أرض من مستثمر أقام عليھا مشروعا حتي ولو بالمخالفة وبشكل خاص في مناطق السادس من أكتوبر والعاشر من رمضان والتجمع الخامس و طريقي القاھرة - اإلسكندرية والقاھرة - اإلسماعيلية الصحراويين مؤكدة أن الدولة ستسترد حقھا كامال خاصة في حالة تغيير النشاط المخصص لھا من خالل دفع الفارق بين ثمن األرض المخصصة للزراعة وثمن تخصيصھا إلقامة المنتجعات. 5
Egypt s 1. Introduction The real estate industry is the process of establishing different types of real estate by individuals, companies and governments on prepared pieces of land. This sector has gone through different stages since the eighties of the previous century gaining an increasing importance for the Egyptian economy stems from its strong relation to many other economic activities, directly to its feeding industries like steel and cement and indirectly to complementary industries like furniture and electric devices which reflects the significance of this sector in providing a wide range of job opportunities in the local market. However and after the 25 th of Jan. Revolution, this vital sector is currently experiencing a recession no one can expect when it may end. 2. History of the real estate industry in Egypt (1981-1995) The Real estate industry in Egypt started to dramatically change since the beginning of the eighties of the previous century. This era was featured by a boom in the sector in general for high, medium and low-end properties leading to continuous increases in the prices of land, construction materials and labor force for the following reasons: 1.The beginning of the Open-Door Policy adopted by Al Sadat with the ambitions of the Egyptians increase supported by financial transfers coming from Egyptians working in the gulf area. 2.The increase in Egypt s population leading to a more demand. 3. The lack of investment opportunities other than real estate investments. 4. High inflation rates that increased the importance of real estate as a store of value. Construction was concentrated in : 1.New cities like 6th of October, 10th of Ramadan and Borg Al Arab that were basically directed to medium and low class citizens who were supposed to be attracted to the industrial and agricultural projects there ; however, they turned into cities of luxurious properties. 2. High-class areas inside Cairo like Maadi and Misr Al Gadida. This expansionary trend of building high-end properties relied on wrong estimates for the actual needs of the Egyptian market for such properties creating a surplus in this type of real estate. 6
(1996-2002) This boom started to retrieve because of : 1. International crises adversely affected the Egyptian economy like the Asian Financial Crisis in 1997. 2.The harsh slow down in the economic growth rate leading to a decline in the purchasing power of Egyptians. 3. Credit crisis the Egyptian banking sector faced at that time harmfully influencing the total demand especially for high-end properties 4. The increasing surplus of high-end properties. 5. The need for a flexible regulatory framework deals with different changes in the sector s performance. 6. Depending on speculative pricing as a base for marketing and selling strategies. This period witnessed a recession in the real estate sector in Egypt with a collapse in the prices of high-end units with a marginal effect on the middle and low-end properties. (2003-2010) Since 2003, the real estate development has regained its momentum due to : 1. Increases in the GDP real growth rates exceeding 7% in 2007/08. 2. continuous increase in oil prices motivating investors form the gulf countries to direct their financial surplus to the real estate sector in Egypt in addition to the entry of giant companies in the Egyptian market like Emaar hoping to repeat Dubai s experience in Egypt. 3. The war in Iraq forced many Iraqis to move to Egypt in order to escape from the bloody situation in their country. 4.The new rent law NO.6 for 2001 that reevaluated the value of rent in many areas contributing to increase the value of real estate there. 5. The entry of new non profitable entities to the construction field like labor and professional syndicates. 6. The introduction of the Mortgage Finance Law No. 140 issued in August, 2001 that opened new funding channels helped increase real estate activities in Egypt. Unfortunately, this boom was hit by the Financial Crisis in 2008 leading the market to a long recession till the break out of the 25 th of Jan. Revolution. Post Revolution The 25 th of Jan. Revolution had a negative effect on the real estate sector in Egypt that is already suffering from a recession due to : 1.The political unrest and the uncertainty about the future in Egypt which negatively affects new consumption and potential investments. 7
2.The decrease of the number of tourists visiting Egypt due to the lack of security and skeptics about the views of the religious parties about that sector raising questions about the future of this sector and construction related to it. 3.The shortage in liquidity as banks refuse to lend real estate companies. 4. The legal contestation of land contracts runs the risk of delaying projects, criminal charges against the owners of construction firms and the continued tarnishing of the industry s reputation. All these factors led to a great pause in real estate market transactions and with a relative stability of prices.this prompted the real estate companies in Egypt, especially small and medium enterprises, to adopt new marketing strategies depend on the reduction of the amount of money required in advance to the lowest possible level and provide payment facilities with less interest rates in order to break the stagnation in the market. Some of these offers were represented in reducing the first payment required to 5-10% instead of 30%, in addition to the possibility of increasing the number of installments and repayment period to more than 7 years. However, prices did not go down as lots of people expected due to: 1. The special nature of the property as it does not have an expiry date and its relative lowcost maintenance compared to the original cost of building it which makes it a suitable store of value especially with the inflation the Egyptian economy suffers from and the continuous depreciation of the Egyptian pound. 2. The high cost of construction and the increases in the prices of land in the last few years would not let owners or developers to sell at prices do not cover this high cost and a satisfactory margin of profit. 3. Optimistic expectations about the future of the sector and hopes to witness other increases in prices. 4. The cultural importance of owning a house compared to have one rented. 3. Types of real estate Real estate can be divided into many classifications as follows: Residential real estate investments are properties such as houses, apartment buildings and townhouses. Commercial real estate investments consist mostly of office buildings. Industrial real estate investments consist of factories and different industrial units with various sizes. Retail real estate investments consist of shopping malls and other retail storefronts. Compounds refer to a cluster of buildings in an enclosure, having a shared or associated purpose. The compound can be considered as small communities where different facilities must be provided. Hospitality investments related to the tourism sector contain hotels and resorts. Real Estate Investments also include administrative, cultural and educational buildings in addition to hospitals and other buildings. 8
4. Market analysis The analysis of the real estate s market in Egypt investigates its dynamics that include the structure of this market, the demand for real estate, the market s key players, newly established companies working in that field, the market size and the performance of this sector in the Egyptian Stock Market comes at the end of the analysis. 4/1.Market structure Real Estate developers operating in Egypt fall into four categories: public sector companies, private sector Egyptian companies, multinational companies and individuals build their own houses. Before1990s, the sector was dominated by state-owned companies but this has changed with the introduction of privatization program in the 1990s that has made the private sector take the highest share of production. 4/2. Demand The total demand for real estate in Egypt is always increasing for many reasons as the average rate of marriage in Egypt witnessed an increase recording an average of 8.8 marriage contracts for every 1000 citizens in 2008 compared to 7.6 contracts in 1990. Furthermore, the total population inside Egypt consecutively increased through the past years until it reached 84.5 mn. in 2010 representing the constant demand for new units every year. (Central Bank of Egypt) 4/3. Key players State-owned companies Arab Contractors The activities of the Arab Contractors have been extended to many fields vary among infrastructure, governmental buildings, Hotels and touristic buildings and industrial plants. Moreover and regarding housing, the company was the main developer of national projects targeted low and middle classes like the Desert Hinterland villages project, Mubarak Housing Project for Youth and Family Housing Project. 9
Private sector Egyptian companies 1 Orascom Construction Industries Amer Group Talaat Mostafa Group Sixth of October for Development and Investment Co. (SODIC) Palm Hills Me mar Al Morshedy Smaller companies whose projects concentrated in new cities, new areas in Cairo and other governorates like New Cairo, New Beni Suef and New Menya with different types of real estate built. International companies 2 Emaar Misr for Development ( the largest foreign direct investor in Egypt s real estate sector with an investment portfolio of EGP 43.3 billion working in Egypt since 2005.) DAMAC Deyar Development Kingdom Holding Company Diar Real Estate Investment Co.( the real-estate arm of the Persian Gulf country s sovereign-wealth fund, signed a $543.8 mn. contract with Consolidated Contractors Co. to develop two projects in Egypt.) Individuals This segment of developers builds residential units based on their limited financial abilities like money transfers from Egyptians working abroad. This type of real estate has boosted in the recent few years with the introduction of Ibny Betak project, includes distributing pieces of land in new cities for average citizens with lower prices to build on them. 4/4. New establishments In August 2011, the construction and real estate sector came in the third place after the services sector and the manufacturing sector concerning the number of new establishments with new 70 companies entering the market and total issued capital of these establishments amounting to LE 129.4 mn. 4/5. Size The value of real estate activities in Egypt has witnessed continuous increases since 2001/02 when it recorded LE 13.92 bn. reaching about LE 34 bn. in 2010/2011 with 12.6% growth rate that year. The activities of the private sector have always represented the highest share of the total activities with a percentage amounted to 95.7% in 2010/2011. 1&2 The attached appendix includes a table for the projects of these companies. 10
(Central Bank of Egypt) Nevertheless, the value of these activities as a percentage of GDP had a downward slope starting by 3.9% in 2001/02 and ending up with 2.6% in 2010/11. (Central Bank of Egypt) 4/6.Real estate sector in the Egyptian Stock Market Real estate companies listed in the Egyptian Stock Market represent a significant share of the trading volume and value in the stock market. The real estate sector was the safe haven for clients in the Egyptian Stock market due to its great performance and the financial solvency of its large companies in addition to achieving the highest profitability. This sector was heavily affected by the revolution and legal challenges face its development forcing it to go down by 53.32% ( 721 points) over the 8months came after the revolution. Stocks belong to companies owned by businessmen accused of corruption were the most affected prompting many shareholders to sell these shares randomly. Palm Hills stock recorded the highest loss for the 8 months, losing about 68.98% of its 11
market value,followed by ( SODIC )that lost 57.56%.Talaat Mostafa Group shares came in the third place with a total loss of 53.32% in their market value. 5. Legal issues This paper mainly focuses on "The Law NO. (89) of the year 1998 for Tenders and Auctions" because of the famous cases related to that law. The law says that government's contracts to get services like construction businesses have to be done through public auctions. Talaat Mostafa Group had the most famous case with its giant project Madinaty after accusing the group with violating the law through getting the land the project was built on by a direct order form the government and not through a public auction. The Egyptian government had to modify the contract obliging the group to pay an extra amount of money and the Egyptian court finally ensured the validity of the new contract in Nov. 2011. This had negative implications on the performance of the group through the first 9 months of 2011 when its profits amounted to LE 493.7 mn. Compared to LE 863.6 mn. in the same period of 2010. The Egyptian real estate group Palm Hills, the second case with similar circumstances, posted a net loss of LE 99.1 mn. in the first 9 months of 2011 compared to a LE 345.1 mn. net profit in the same period of the previous year due to the legal challenges the company faces concerning land plots it owns and the accusations of its Chairman Yasseen Mansour and former housing minister Ahmed el-maghrabi with corruption leading to many cancellations in the reserved units. The company is threatened with scrapping some of its land plots' contracts and it announced it would return some plots of land to help manage its cash flows. The third case belongs to (SODIC) as its owner Magdi Rasekh and Ibrahim Soliman, former Minister of Housing, are accused of allocating pieces of land to Rasekh by the direct order with low prices. The company recorded a net loss of LE 38 mn. in Q3 2011 and had cancellations valued at LE 290.3 mn. It s worth mentioning that the Egyptian government has recently announced that it will not withdraw any pieces of land from the investors even if they violated the law while establishing their projects on land allocated for agriculture specially in the areas of the Sixth of October, Tenth of Ramadan, New Cairo and Cairo - Ismailia and Cairo- Alexandria Desert roads. However, the government has asserted that violators will pay fines represent the difference between the price of pieces allocated for agriculture and others allocated for establishing resorts. 6. Feeding Industries The real estate development is directly related to cement and steel industries produce the main components of any construction process. For steel, prices have witnessed continuous 12
increases since the year 2000/01 when they recorded LE 876 per ton reaching its peak in 2006/07 and 2007/08 posting LE 4800 and LE 4723 respectively 1. (CAPMAS) However, this upward trend was reversed after the financial crisis with its price decline to LE 3130 per ton in Oct. 2009 but they rebounded again recording LE 4994 in Oct. 2011 due to the increses in the international prices of the billet, steel before converting it to its final products, as the main producers claimed. Cement prices had a similar trend as they also continued to increase reaching LE 483 per ton in 2008 instead of LE 260 in 2004 before being hit by the financial crisis and the governmental decision of banning the exportation of cement from July 2009 till Oct. 2010 resulting in a series of decrease in its prices amounted to LE 470, LE 358.2 and LE 484.2 in Oct. 2009, 2010 and 2011 respectively. 13 1 These prices are the official ones, but they are different than the actual numbers as prices reached about LE 8000 per ton in 2008.
7. SWOT analysis Strengths 1.The large gap between supply and demand. 2.The average 1% increase in the population which creates a constant demand. Opportunities 1. The resuming of money transfers from Egyptians went back to Libya after the end of the war there. 2. Optimistic ambitions about the reflections of the Egyptian Revolution on the local economy and the renaissance such change in the society can achieve. Weaknesses 1.Weak economic growth that negatively affects the purchasing power of individuals and decrease investment opportunities. 2. Lack of security. 3.Ambiguity about the adopted economic policies by the coming regime and whether they would be in favor the market economy or not. 4.legal challenges face largest developers and its negative on their performance. 5.Scarcity of land and laws limit the height of buildings and determine a specific percentage of the land plots to build on. 6.The concentration of construction in Cairo, Alexandria and touristic areas ignoring deprived areas like Upper Egypt. 7. Lack of proper means of transportation to the new cities and difficulties in delivering facilities to these cities like electricity, water and sewage systems. Threats 1.Higher prices of cement and steel after the expected removal of subsidies on energy. 2. The continuity of the legal challenges threaten the work of real estate companies especially with Dr. Kamal Al Ganzory, the Prime Minister, withdrawing 21 mn. meters from investors in the west of the Gulf of Suez and fears from not differentiating between serious investors who are hit by the current conditions and other unserious investors. 3.Slow down in the global economy that may negatively affect the Egyptian economy indirectly and lessen the multi-national firms investments in the real estate sector in Egypt. 4. Reluctance of banks to lend real estate companies especially large ones face legal challenges. 8. Outlook The performance of any economic sector is strongly related to the stability in the political and economic environment in a country. In Egypt, the political unrest is expected to last until the presidential elections expected to held in June 2012 as General Hussein Tantawy declared. Till that moment, the cautious observation for the current situation will continue with a recession in the real estate market and a stability in the prices. On the long term and after the hoped stability expectations will vary according to the type of the real estate: Residential units It s expected for the prices of units inside Cairo and other governorates to be stable for both middle and high end properties. For areas outside Cairo middle end properties will witness a similar stability in prices except the 6 of Oct. city where properties may witness slight 14
decreases because of the high supply there, but high-end properties in these areas will not experience new increases as before because the problems developers face like lack of fund and legal challenges that if continued, they will have to decrease the prices of units they have to solve the problem liquidity it suffers from and this step may lead to a wave of prices decrease. According to CAPMAS 1, the estimated future needs for housing units during the period (2007-2022) are about 7.533 mn. units 2. After the revolution, the Egyptian government has launched the National Housing Project aiming to provide 1 mn. residential units through 5 years in 22 cities across the country with the continuity of the gap between supply and demand that would not let prices of middle-end properties to go down. Hospitality sector The sensitivity of that sector will make things more complicated especially with the decrease in the level of security Egypt was always famous for and doubts about intentions of the Islamic power expected to form the majority in the next parliament. Therefore, it s expected for the prices units built in this sector to decrease similar to what happened at the end of 1990s for the reasons mentioned before. Commercial and retail real estate This sector can regain its momentum with the expected increasing economic growth rate in the coming years and new investments may enter the market of the country with one of highest population in the region. 9. Recommendations 1.Turning to the construction of low and middle-end properties to fill the gap between supply and demand for this type of consumers. 2.More attention should be given to the cities of Upper Egypt that have always suffered from severe neglecting. 3.Legal solutions should be found to solve the current problems of large developers and future contracts. 10. Conclusion The real estate sector has been always considered as an important sector in the Egyptian economy. However and after the 25 Jan. Revolution, this sector was hit by a harsh recession due to many factors that will mainly affect high-end properties. This recession 1 Central Agency for Public Mobilization and Statistics 2 This number was estimated according to : The estimated increase in the number of families resulting from population growth. The conventional reserves, about 8% of units required. The replacement and renewal, which is estimated at 1% of units required. 15
may last for a longer time because of the legal challenges companies face and risks of lack of fund. These adverse factors are opposed by other elements can help boost the activities of that sector like high demand and optimistic views about the effect of the revolution on Egypt turning it to a more developed country which may open new horizons of investments. 16
Appendix 17
Main Real estate Projects in Egypt Developer Project name Location Type ORASCOM Development Holding El Gouna Hurgada Resort and leisure homes Taba Heights Sinai Peninsula Resort and leisure homes Amoun Island Aswan Resort and leisure homes Berenica Ras Benas (Red Sea) Resort and leisure homes Riyadh Resort Hurgada Resort and leisure homes Haram City 6 th of Oct. Mid. Residential units Al Fayoum Al Fayoum Mid. Residential units Talaat Mostafa Group Palm Hills Development SODIC Me mar Al Morshedy Madianty New Cairo High residential units Al Rehab 1 New Cairo High residential units Al Rehab 2 New Cairo High residential units Al Rabwa El Sheikh Zayed High residential units Palm Hills 6 th of Oct. High residential units Palm Parks 6 th of Oct. High residential units Village Gardens 6 th of Oct. High residential units Palm Hills Katameya New Cairo High residential units The Village New Cairo High residential units Village Gardens New Cairo High residential units Village Gate New Cairo High residential units Palm Galleria New Cairo Retail CASA Cairo-Alex. Road High residential units Palm Hills Boatnica Cairo-Alex. Road High residential units Hacienda Bay North Cost Resort and leisure homes Hacienda White North Cost Resort and leisure homes Palm View New Cairo High residential units Palm Gamsha Gamsha(Hurgada) Resort and leisure homes Westown West Cairo High residential units Middle Income West Cairo Mid. Residential units Residential Project Eastown New Cairo High residential units Kattameya Plaza New Cairo High residential units Beverly Hills Sheikh Zayed High residential units Forty West West Cairo High residential units The Strip West Cairo Retail Degla Palms 6 th of Oct. Mid. residential units 18
Amwaj North cost Resort and leisure homes Al Ahly Real Estate Piacera Al Ain Al Sokhna Resort and leisure homes development The Square New Cairo - New Giza New Giza 6 th of Oct. High residential units Amer Group Emaar Misr DAMAC Qatari Diar Porto Marina North Cost Resort and leisure homes Porto Sokhna Ain Sokhna Resort and leisure homes Porto Cairo New Cairo High residential units Meeting Point 6 th of Oct. New Cairo Retail Uptown Cairo Down Town High residential units Marassi North Cost Resort and leisure homes Cairo gate Greater Cairo Retail Mivida New Cairo High residential units Park Avenue New Cairo High residential units Hyde Park New Cairo High residential units Centre Ville New Cairo High residential units Gamsha Bay Gamsha (Hurgada) Resort and leisure homes Nile Cornesh Down Town - Unknown Sharm Al Sheikh Resort and leisure homes * It s noticed that most of these projects are concentrated in the 6 th of Oct. City, New Cairo and touristic areas and they mainly target higher classes of the society. * High residential units refer to complete communities, what is so called Compounds include different facilities. 19
References Central Bank of Egypt Central Agency for Public Mobilization and Statistics (CAPMAS) www.idsc.gov.eg www.arabcont.com www.palmhillsdevelopments.com www.talaatmoustafa.com www.emaarmisr.com "Qatari Diar to invest $543.8m in Egypt projects." www.zawya.com. Zawya, 24 Oct. 2011. Web. 8 Jan. 2012. <http://www.zawya.com/marketing.cfm?zp&p=/story.cfm/sidzawya2011102403 1221/Qatari_Diar_to_invest_5438m_in_Egypt_projects>. "Egypt Investment Monitor, Monthly Report." www.investment.gov.eg. N.p., August 2011. Web. 10 Jan. 2012. Disclaimer The information contained in this publication is based on sources that AlexBank believes to be reliable and accurate. But the bank does not make any guarantee to the accuracy or reliability of such information. All opinions and estimates included in this report are subject to change without prior notice. Nothing herein constitutes an offer, solicitation to the purchase or sale of any products, services or conducting any investments. AlexBank shall not be liable for any losses or damages incurred or suffered as a result of using its publications and in using the Website's contents and functions. The data and/or information in the publications are not considered official document in any disputes or conflicts reviewed by security or regulatory authorities. The Bank keeps all the literary and moral rights on its information and analysis and no part of this publication or excerpt of its content may be redistributed, reproduced or conveyed in any form, written or oral, to any third party without a prior written consent of AlexBank and also referring to the source. 20