Although the purchase power of Egyptians locally has declined following price hikes in post-devaluation Egypt, the opportunity arises for Egyptians abroad to purchase property at home, where land has become far cheaper than in the past for those earning an income in FX. Hence, the government’s project, Bait Al Watan, which targets Egyptians living abroad and aims to raise USD 15 bn within four years, is yet another attempt to raise foreign currency and reduce the state budget deficit.
“Egyptians abroad have the luxury of not going through government regulations or public lotteries to purchase these lands; therefore, they will feel that the state is providing a special service in return for foreign currency,” Head of Parliament’s Housing Committee Alaa Waly tells Invest-Gate.
The Bait Al Watan project’s floor plans range from 350 to 800 square meters and are suitable for construction of small- and medium-sized properties.
“Bait Al Watan has several advantages, including upping foreign currency inflows and decreasing USD demand amid the current FX shortage, leading to spike in the USD:EGP rate on the parallel market,” Real Estate Consultant at ERA Egypt Mohamed Yehia tells Invest-Gate.
The lands spread across new cities including New Cairo, New Minya, New Damietta, Sheikh Zayed, and Badr City. Thus far, Egyptians abroad have reserved 7,000 land plots suitable for real estate projects in Bait Al Watan, according to the Ministry of Housing, Utilities, and Urban Communities announcement last month.
The first phase of the project included 7,685 land plots; the second phase was offered in Q1 of 2016 with 3,505 land plots, whereas the third phase contains 4,789 land plots allocated in eight new cities, according to the ministry.
The lands in 6th of October City and New Damietta are expected to increase in price per square meter. The price is to reach over USD 500 compared to USD 400- 450 of previous years.
Eligible consumers are to transfer payment in USD, obtain an Egyptian nationality, and be at least 21 years of age. Each applicant is solely allowed to reserve three desired land plots in each available city throughout all phases of the project, according to a Ministry of Housing statement.
Conditions also indicate that consumers provide a downpayment of 25% of the land’s total value and pay the remainder over five years from the date of purchase, whereas those who pay full payment for the land are instantly given a 15% discount on the selling price. Almost 1% of the value of the land will be given to the Social Housing Fund.
Yehia adds that foreign currency availability from the lands will benefit real estate companies, as companies will be able to commence renting and selling their own projects located in prime areas that were previously rented in USD but are now put on hold due to the perpetual FX shortage.
On a less positive note, consumers have complained in recent months about sudden price hikes to the project, according state-owned Al Ahram. The price increase occurred due to administrative fees and upped interest rates, which raised overall land prices by 35%, and later, by at least 50%. Following the float of the EGP, consumers faced other challenges, according to Waly, as the New Urban Communities Authority (NUCA) was unable to submit refunds in USD, the currency of payment, to those who requested it.
“This problem has created fears among potential buyers. It doesn’t need permanent legislation to be resolved, but rather, stability of the local currency, which will inevitably occur through time,” added Waly.
Other obstacles included the lands lacking facilities such as electricity or water lines that have been delayed by contractors; however, “These problems have been tackled and lands within the first, second, and third phase have been delivered to citizens,” confirms Ministry of Housing Assistant for Technical Affairs Khaled Abbas.
Yehia suggests other means to drive foreign currency to the country other than Bait Al Watan, stating that “the government could work on providing more lands or factories dedicated to foreign companies and encourage a facilitated purchase process for foreign investments to aid with Egypt’s economic reform,” he explains.
Another measure to attract foreign currency inflows includes promoting local production of real estate and lands through consoles and embassies abroad. “A practical task assigned to the Ministry of Investment or the General Investment Authority, will raise the costs for local consumers in the case of high turnout from Egyptians abroad,” Waly affirms.
“The government could spur foreign currency in the country through other suggestions than Bait Al Watan, including providing various designs of fully-finished units through contractors or private companies supervised by the ministry,” says Waly.
Foreign derivatives to the country has been a great motive to private companies and the government amid devaluation of the local currency, leaving the door open to imaginative solutions to attract foreign investments, which will greatly contribute to Egypt’s economic recovery.