Struck by the triple blow of the recent pound flotation, the value-added tax, and increasing customs tariffs, the real estate sector, like many others, has recently been teetering on a thin precipice between its previously buoyant performance and a potential bubble. Companies have employed different strategies to face an increasingly market, with many revisiting their entire sales and investment plans to reevaluate prices. In efforts to build a collective front, the recently-established Real Estate Development Chamber has been lobbying the government for facilitations and incentives, in the face of stringent economic reform.
Established in 2016 and consisting of several real estate developers and contractors who seek to collaborate with government in reviving the real estate sector, the chamber plans to work on partnership initiatives with government, pass newly suggested legislations to parliament, and consolidate a stronger investment climate through reviving the Egyptian real estate sector, according to Tarek Shoukry, the Head of the Real Estate Development Chamber.
Several real estate developers have decided to increase their prices as a result of the recent pressures, boosting them by between 15% and 30% due to the rising prices of building materials. They have also demanded government for compensation of their losses. The Ministry of Housing, Utilities, and Urban Communities recently approved the extension of the period of construction and lifting penalties on delayed projects. However, developers are still challenged by several factors.
Well-established developers and rising developers face several challenges today including major problems such as covering the costs of their projects, maintaining real estate wealth, and undergoing slow bureaucratic procedures. One of the liaisons between government and developers, the Real Estate Development Chamber was originally formed to help communicate developers’ issues to government.
The chamber branches from the Federation of Egyptian Industries and was established in 2015 in efforts to focus on the real estate sector, and is currently led by Tarek Shoukry, CEO of Al Arabia for Real Estate Investments. The chamber’s main goals and roles include encouraging a positive real estate investment climate, cooperating with the state in achieving government goals in real estate, increasing real estate projects locally and internationally, according to the chamber’s official statement.
The Real Estate Development Chamber is also responsible for setting policies with government that ensure development, enhancing the registration process required to implement real estate projects, informing developers about the available investment opportunities in the real estate sector, protecting developers and initiating a suitable investment climate for them, and increasing competition among other countries. The chamber hosts regular conferences that discuss partnerships, suggest development ideas, and propose legal amendments.
Chamber’s Current Activities
Speaking to Invest-Gate about the chamber and the challenges faced by developers, Shoukry stated that one of the main goals the chamber is focusing on is forming a new committee that will work cooperatively with the Housing Ministry.
“The committee will be responsible for tackling problems of Egyptian developers through analytical and legal studies of each issue separately, and cooperating with the Housing Ministry to become a permanent entity within the chamber” added Shoukry.
In efforts to resolve developers’ obstacles and issues, the chamber is currently formulating the committee, to focus on receiving complaints, analyzing them, and later providing the chamber’s administration with an analytical study of important issues. Minister of Housing Mostafa Madbouly has previously ordered the creation of the committee, whereby he ordered representatives from the Ministry of Housing, Utilities, and Urban Communities, lawyers, and technical officials to contribute within the planned committee in reaching resolutions.
Plans with Ministries
The Ministry of Housing recently signed a protocol with the chamber declaring a partnership between both parties to resolve recent issues in the sector, as well as obstacles and challenges faced by real estate companies.
Following Shoukry’s election as the chamber’s head, several priorities were set as the chamber’s current targets, including organizing the sector through tackling several aspects such as categorizing real estate companies, discussing legislations related to the sector, facilitating the acquisition of building licenses, and increasing foreign investments through an updated database that cites valuable opportunities.
“The chamber is always interested in prioritizing two targets which are also considered challenges awaiting developers, including promoting modern construction that meet demands of potential buyers and reducing costs of construction while maintaining attractive designs,” Shoukry told Invest-Gate.
The signed protocol aims to strengthen ties between ministry and private and public developers and turn the committee responsible for addressing developers’ issues into a permanent structure within the chamber.
Further, falling under the partnership plans with the Housing Ministry, an upcoming initiative is set to assign consulting firms registered with the Engineers Syndicate to handle building and construction licenses in efforts to speed up and facilitate construction permits for developers and provide updates on government decisions towards construction projects.
The chamber also seeks to sign contracts with the Ministries of Investment and Tourism in efforts to implement a joint collaboration for sustainable development.
The chamber also signed a protocol with the Ministry of Industry to launch a similar committee in efforts to resolve problems in the sector, alongside contracts with agencies and centers such as Investment Support Unit which is part of the Administrative Supervisory Authority which will also resolve developers’ problems through the enforcement of existing contracts, Shoukry added.
A number of real estate developers and contractors, including tycoon Samih Sawiris, have recently expressed concerns regarding the government’s commitment to upholding contracts, and maintaining fair terms between all parties.
Moreover, real estate stakeholders will also be included in the chamber’s development agenda to discuss problems and visions for overcoming those obstacles.
Shoukry previously suggested resolutions that could be held by the chamber, including the launch of real estate funds that would speed up the pace of work and investment through financing developers and contributing to the sale of units. The profits from such funds are projected to reach 15% in the Egyptian market compared to the 5% achieved in the European market.
Despite the fact that funds will benefit and spur real estate investments, it may face legal obstacles; therefore the chamber seeks to coordinate with the Egyptian Financial Supervisory Authority to implement the funds in efforts to attract local and foreign investments in the upcoming period.
The chamber also attempts to coordinate with several agencies to facilitate the enforcement of contracts relevant to the real estate market. It is also currently seeks to modify the Mortgage Finance Law with regards to interest rate and administrative procedures in efforts to encourage banks to finance junior developers.
Despite the chamber’s numerous goals in amending laws, it aims to particularly focus on certain legislations that will be passed to Parliament, including a unified construction law that will introduce different construction techniques that are considered safer and more suitable, and formulating laws that will protect Egypt’s real estate wealth.
“Preserving real estate has become today’s major problem as owners are not obliged to pay regular maintenance fees which leads to wasting several properties. In efforts to tackle this issue, the chamber seeks, through new laws, to assign specialized maintenance companies to implement regular maintenance on properties,” said Shoukry.
He also stated that the chamber urged the New Urban Communities Authority (NUCA) to provide legitimate disciplinary measures through order, organization and supervision of areas located in new cities, rather than assigning local neighborhood watches to undertake the task, which Shoukry believes has previously led to building violations in areas, such as those in Nasr City and other areas.
One of the chamber’s vivid goals is that it seeks to provide small-medium enterprises with international experience to qualify them for investment opportunities through affirmative financial and technical abilities. The chamber has also previously announced that it plans to discuss several laws with the Housing Committee in the parliament regarding preserving properties in new cities across the country.
“We are very interested in the new investment law; however it will not function solely as it needs a good investment climate which is currently poor for small businesses as they struggle with bureaucratic procedures, therefore the Investment Ministry should cooperate with other ministries to create committees that would tackle slow procedures that every developer has to face,” added Shoukry.
The Chamber also seeks to attract more foreign investments through collaborating with the Housing Ministry in real estate exhibitions which Shoukry thinks is one way to attract investments, especially Gulf investors who always seek a partnership with local Egyptian companies because they lack experience in undergoing Egyptian regulations and laws in the market, therefore a partnership is always preferable.
In a conclusive light the real estate development chamber will always initiate goals under a unified attempt of resolving developers’ problems, amending existing legislations if needed, and protecting real estate investors.