By Julian Nabil
The Central Bank of Egypt (CBE) has recently launched initiatives to support the country’s real estate and tourism sectors, providing low-interest loans with long maturity periods. Invest-Gate demonstrates such incentives that are to attract further investments to the country.
Long-term Mortgage Financing for Low-, Medium-income Housing Units
The CBE allocated EGP 10 bn to provide long-term mortgage financing for low- and middle-income housing units, offering a maturity period of 20 years at a low lending interest rate, according to an official statement released in February 2014.“The initiative aims to stimulate mortgage financing provided by banks as well as revitalize the real estate sector,” a source (who wishes to stay unnamed) at the National Bank of Egypt (NBE) tells Invest-Gate.
Prior to the initiative, people faced a lot of problems like registration and higher compound interest rates, which stood at 18-19%, according to the source.
Under the initiative, mortgages, targeting low-income citizens, are set at an annual interest rate of 7% while middle-income financing options carry an 8% annual interest rate.
Low-income citizens will be eligible to the 7% interest but the CBE does not specify a particular monthly income, leaving that to be determined by the mortgage fund. Mortgages with an 8% interest will be available to middle-income individuals, earning more than EGP 8,000 per month and families earning EGP 10,000 per month, allowing them to purchase homes worth up to EGP 500,000.
However, the CBE amended some of the terms of its initiative back in February 2016 to increase the number of beneficiaries, adding a new segment of low-income individuals earning less than EGP 1,400 at an annual interest rate of 5% instead of 7%. Down payments have been cut to EGP 12,000 instead of EGP 15,000, with governments providing an incentive to banks to finance income brackets that may have difficulty obtaining proof of income through insurance policies.
The amendments also included providing mortgage financing to a new income bracket under the name “average distinctive income” at an annual decreasing yield of 10.5% per year available to finance housing units worth up to EGP 950,000. The maximum monthly income of the beneficiary should be no higher than EGP 15,000 per individual and EGP 20,000 per household, with the maximum loan provided for this bracket standing at EGP 950,000. Invest-Gate attempted to contact Head of the Mortgage Finance Fund Mai Abdel Hameed but she was not available to comment on the initiative.
“The initiative is very effective and most applicants get the loans they want if all conditions are applicable,” NBE’s source adds. The Ministry of Housing is actively and continuously launching units; for example, it will launch three-bedroom social housing units that are fully-furnished worth EGP 200,000 soon, with a 20-year payment plan and an EGP 25,000 down-payment, they also note.
The ministry already offered affordable units for low-income citizens in various governorates such as New Qena, New Assiut, Ismailia, Obour, Al-Shorouk, and New Cairo, the source says.
As for the middle-income segment, the government launched the Dar Misr housing project in Obour, Damietta, and 6 of October City, with prices ranging from EGP 400,000 to EGP 600,000 for areas ranging between 100 and 150 meters. The first and second phases are sold out, with the third phase to be launched in August, according to the source.
The ministry will reportedly offer 17,000 units in the New Administrative Capital to the public in August, it says in a statement, adding that banks will provide loans, under the initiative, for applicants to finance the purchase of these units if they meet all conditions.
Egypt is expected to see an annual expansion rate of 18.9% in mortgaged households in 2017, with expectations that about 300,000 households are to be sold through mortgage plans this year, according to a report published by global market intelligence publisher Euromonitor International.
CBE Fund to Renovate Hotels, Floating Hotels, and Tourism Fleets
In February 2017, the CBE launched another initiative to support the hospitality sector in particular and tourism sector in general through funding the renovation of hotels, floating hotels, and tourism fleets that have become worn out as their owners were unable to refurbish them in light of the tourism downturn.
The CBE launched this initiative to help troubled hotels, thus boosting the hospitality sector, which has been suffering in the past period, the NBE source explains. However, the industry started to regain momentum in the last three months.
Under the initiative, banks secure EGP 5bn with an interest rate of 10%, extending over a maximum period of 10 years. Banks finance 75% of the total cost of renovation and renewal, while clients bear the remaining 25%.
The main purpose of financing is for renovation and renewal of hotels, floating hotels, and tourism fleets, and clients seeking funding must also be proven to be committed in repaying their loans, according to the initiative.
The initiative stipulates that local components be used in 75% of the renewal process, thus encouraging the local industry, CBE says in a statement.
With launching such initiatives, the government is stepping up its efforts to support the real estate and tourism sectors, thus strengthening Egypt’s economy on the short and long terms and making its resilient against any current or future challenges.