With recent economic reform measures, Egypt seeks to pave the way for additional investments in its coastal shores after years of a standstill. Invest-Gate seizes the opportunity to have a thorough conversation with Chairman of the Ain Sokhna Tourism Investors Authority (TIA) Mohamed Roshdy. Roshdy also serves as board member of El-Sherouk Touristic Development, the real estate company behind the sought-after Laguna Bay in Ain Sokhna, along with Capital Developments. The conversation sheds light on the current investment climate of Ain Sokhna with the progress achieved and the obstacles within.
What was special about Cityscape this year?
Despite the declined flow of attendees compared to 2016, Cityscape 2017 featured serious buyers. Only those eager to invest came to the exhibition and actually purchased units across many projects located in Egypt’s major destinations.
In 2016, we could get those interested in investing in several projects but developers actually generating profit were debatable. This year, on the other hand, we received only the serious buyers who actually bought units during the three-day exhibition. We can say that Cityscape 2016 was stronger than that of 2017; however, this year, the exhibition was much more stable.
How so, with the economic conditions the country is suffering as well as price increases on all commodities?
The real estate market in Egypt, unlike that of GCC countries, for instance, is stable. It may suffer but never deteriorates. We say real estate can get ill but will never die. Illness entails that the market’s frequent price changes affects supply-demand dynamics, and that transactions lead to instability. But [the sector] will never die.
Yes, the living conditions of Egyptians suffer following the float and expenses have increased alongside skyrocketing prices, but real estate has become their haven. Your money is safely invested when put in properties.
This year, developers have made it even more attractive, with the feasibility of payment methods and installment plans.
Another important factor we must look at is bank’s investment certificates and deposits supplied by the end of 2016 known as Sisi Deposits (Wadaye El Sisi) with attractive interest rates reaching up to 20%. Those saving plans have now dropped to 14-16%; I found that this also triggered the property market. It diverted people’s attention back to real estate to save the value of their money. Real Estate is the only source to combat inflation.
Do you see 2017 more stable and would we see the flourishment experts and officials have been bragging about since last year?
Yes, I am very hopeful. Egypt’s current economic plan, strategy, and adjustments are correct; therefore, 2017 would be more stable and more promising.
Given the float, how challenging is it for real estate investors? Would the new laws help in any way?
It is very challenging indeed, with price increases on everything given reliance on imports. Most construction materials are imported, including steel, electricity wires, ceramics, or the materials used to produce ceramics, to name a few. Hence, prices of property units have increased. The market today is not yet stable; this is normal and should not scare us. With any new economic strategies, things get fluid and then they become stable. We are on the right track economically and everything would be increased compared to what was before but will eventually stabilize.
Again, if we analyze Cityscape this year, we would see only serious buyers attending unlike before as I said; and this is a very important sign of stability.
The new laws are good on papers but in application, they contradict one another leading us to obstacles and setting investors back. The whole legislative system needs a proper review and update to fit in today’s demands and pave the way for a prosperous future.
Speaking of Ain Sokhna, some people believe that supply in terms of projects is far more than the demand. What do you think?
This is by all means not true. As a matter of fact I see the total opposite — demand is far higher than the supply. Ain Sokhna is the coast of Greater Cairo for its closeness to the capital. It enjoys year-round beautiful weather and is a small coastal area in comparison to the North Coast. However, some believe that the numerous projects along the Ain El Sokhna shores are far more than that it actually encompasses.
Because of its small shores, the Ain Sokhna developments are already sold; there are no lands for future investments. It is a small area of land divided amongst already-established projects and those to be completed on a number of phases; those expanding I mean.
Is the Ain Sokhna Sector attractive to only locals? Or foreigners too? Can this “Coast of Greater Cairo” be open and active year-round?
It is already sold abroad…
But we do not see them?
Allow me to clarify… As Chairman of the Ain Sokhna Tourism Investors Authority, I can confirm that we constantly receive several requests from foreign investors of different nationalities aside from the GCC countries, including British, German, and Dutch to name a few. Their main objective in the area is to buy retirement homes by the sea. Investing in houses by the sea in Egypt can cost USD 50,000, which is equivalent to EGP 1 mn.
The British, for example, love Egypt and because of the political changes of recent years in addition to the negative propaganda used against Egypt, such interests were put on hold.
Today, the wheels have changed to our favor. Foreigners are coming back and are asking about Egyptian destinations as well as looking for ways to invest in the country, whether as corporates or individuals. I believe that, following President Sisi’s recent visit to the USA, we will receive more requests and see actual investments in the sector.
Now that USA declaring Egypt safe to visit, will we see Ain Sokhna on the touristic world map?
I believe so. The Cairo- Ain Sokhna Road along with the small city itself are safe. As a matter of fact, the whole nation is safe. The world is gaining Egypt’s trust back bit by bit on the security levels. I can confirm that Ain Sokhna has seen a flow of foreign tourism and this flow, we expect, will increase in the near term.
What is seen profound from the government to enrich Ain Sokhna?
We have the Industrial Zone of Ain Sokhna with a lot of foreign investments coming in, including the gigantic China Holding Company, Ford, and Siemens to name a few. This, I reckon, is the biggest advertising campaign for Ain Sokhna in Egypt. Let alone, the expats from all over Egypt and especially those residing in Cairo. Where will they go for short breaks rather than Ain Sokhna?!
For the record, most residential projects in Ain Sokhna are already occupied by some of the young foreigners working in Cairo. Following the events of 2011 up until recently, those people have left the country but none of them sold their units, unlike the case of Dubai. With its economic crisis, most expats sold and left the country for good, causing the suffering of its real estate industry. For sure, foreign tourism is coming back to Ain Sokhna.
Where is Clean or Renewable Energy taking place in Ain Sokhna?
One of the best decisions taken by the Tourism Development Sector is demanding 25% of the infrastructure of any project in Ain Sokhna to be based on clean and renewable energy. Ain Sokhna has two sources of clean energy: wind and sun.
Ain Sokhna has a wind plant as well as a solar one. We will incur costs for the development and implementation in the beginning, but at zero cost in the future. Our wind speed in Ain Sokhna is 25 kilometers per hour, making it an efficient wind plant on the Red Sea. Both sources of energy must be further enhanced and emphasized across the entire nation.
What are the challenges investors face in Ain Sokhna?
To have the “tourism” we see in other countries, investors have demands that are still not granted although Egypt has completely reformed its economic strategy. To have the International Tourism Bourse add Egypt on the map, there are a number of demands that have to be met now, including completing medical services in the area. Today, the closest hospitals to Ain Sokhna are those of Cairo and Suez — ambulance services are not available, in addition to a number of outdated and conflicting laws prohibiting investors from entering Ain Sokhna. The laws include upped land prices following the float of the local currency which hinders investments. In addition to the high land prices on offer and the accumulating interest rates following the float, the lands themselves are deserted and require infrastructure development, adding to further expenses and price increases on consumers.
With the sector’s high labor force, Ain Sokhna further lacks accommodation and means of transportation. Most importantly, the government with all existing laws up until this minute still fails to facilitate investments with its imminent legislation.
We need to have a number of hotels, schools, a university, and an international airport. These are all the facilities of a city; and that, by the way, I see coming with the new industrial zone and the Galala Mountain project by the Armed Forces Authority.
Are there not enough hotels already there or in the pipeline?
The International Tourism Bourse requests a number of rooms (approximately 3,000 rooms) in a destination to put you on the map and generate tourism. Today, we are way lower than what actually Egypt has to offer. The Ain Sokhna Tourism Investors Authority works directly with the Tourism Development Authority, whom I believe to be the best governmental entity in Egypt, dealing with local and foreign investors alike, resolving all their issues as well as perceived promises to deliver Egypt how we want it to be.
However, hospitality investments in Ain Sokhna are becoming a bit of dilema. According to the Tourism Development Authority articles, for every one residential unit in a touristic destination, the developer is to provide one hotel room.
How is that feasible?
It is not, because such a project requires a lot of investment capital with an unguaranteed frequent occupancy rate. Hospitality investment requires around 50-70% occupancy at a very frequent rate to generate targeted profit levels within the first eight years. This cannot be applied in Ain Sokhna. TIA has been studying and submitting proposals to the tourism development sector, among which “Vacation Homes” and the Spanish Riviera is our best example.
Spain is one of the top worldwide tourist destinations, providing around three mn vacation homes and a lower number of hotel rooms. To ease the pressure on developers in Ain Sokhna, we find it best to adopt the Vacation Homes method in Ain Sokhna too.
Other suggestions are to include a number of neighboring residential developers on the Ain Sokhna shores to jointly develop one big hotel serving their projects, and also the common running trend nowadays is having serviced units within our existing projects. We need to think out of the box.
We are also working on another proposal , the “Good Citizen”, to present to the government soon aiming to have private investors work in alliance with the governmental authorities to speed up such public and infrastructure developments meeting the International Tourism Bourse criteria.
According to the New Administrative Capital plan, is it to acquire an international airport serving Ain Sokhna too. Is this not enough?
Not at all. Yes, the New Administrative Capital is a great project for redesigning Egypt as a whole and an international airport by all means is a plus; however, it is not enough to serve Ain Sokhna as a main hub for the flow of tourism we seek to achieve. Ain Sokhna needs its own airport and its own city. Already, residents of Laguna Bay are residing permanently in Ain Sokhna. The way I see it is that because of its closeness to Cairo and now with the New Administrative Capital, Ain Sokhna is becoming a habitat for many and so it needs its facilities.
Your Laguna Bay project… What makes it special among the many developmental projects in Ain Sokhna?
Well, Laguna Bay is a fully-serviced community on the shores of Ain Sokhna and this, I believe, is social security. Its uphill-leveled design gives all units equal sea views at wider angles too. It features a one-and-quarter kilometer sea shore. Properties only consume 12% of the total land area, with rest is divided among courts, landscapes, and swimming pools.
We delivered six phases of the project already and are finalizing the seventh to be delivered in 2018.
Are you hopeful?
Investors are fighters and we are all Egyptians. With the economic reform Egypt has finally set, we are hopeful to change all laws limiting the investment climate in general. Egypt is on the right track and we are amending the obstacles. This is bound to happen everywhere in the world and we believe in the prosperity that is to follow. There is change within the government, who are–for the first time– listening, open to suggestions, and taking some actions as a start.