Egypt’s economists and real estate experts are praising new amendments to legislation, allowing foreigners to receive a one-year residency in Egypt in return for owning properties worth USD 100,000; and expecting it to boost the national economy and the country’s real estate industry. Invest-Gate explores more of this newly drafted law and how it should serve the real estate sector.
“The new draft law would provide the country with much-needed hard currency, bolster the national economy, reinvigorate the Egyptian real estate market, and make it a large contributor to the gross domestic product,” Chairman of the Real Estate Development Chamber affiliated to the Federation of Egyptian Industries (FEI), Tarek Shoukri, tells Invest-Gate.
As the Chairman and CEO of Arabia Group Developments, Shoukri expects that after the law goes into effect, the government could generate USD 4-5 bn in revenue within a one-year timeframe. He also forecasts that parliament and the President will approve the law within two months. “Such an approach would help lessen USD demand in the local market and boost the country’s foreign reserves,” he says.
In coordination with the Ministry of Housing and the country’s security apparatuses, Shoukri proposed such amendments to make way for foreign entrepreneurs to start their businesses, following their official one-year residency and building their lives in Egypt. “Granting residency is safety to foreigners…Now they can start doing business in Egypt,” he notes, adding that Egypt has a great chance to capitalize on this by increasing the value of properties required to receive a residency.
According to this newly drafted law, foreigners seeking five-year residency are required to invest a minimum of USD 400,000 in the real estate market. The draft law stipulates that the money should be transferred from abroad to the Central Bank of Egypt (CBE), which would convert it into EGP. Then the bank will give the money to the foreign investor or businessman, who will buy properties in Egypt. If ratified by parliament, the draft law would have to be approved by the President before it comes into force.
Fathallah Fawzi, CEO and Chairman of MENA group, points out that apart from injecting hard currency into the state’s coffers, the newly drafted law would push up sales of real estate companies, create more job opportunities, increase housing projects, and further stimulate Egypt’s property market.
“An uptick in the real estate market will take place, especially amid growing intention by Arab residents in Egypt to buy properties. This would create a state of stability for them, encourage the injection of additional investments in the Egyptian economy, and create more jobs for the country’s youth,” Fawzi also asserts.
Real estate investors have expressed optimism about Egypt’s property market after the CBE floated the local currency in November last year, stating that the float has led to a more stable operational environment and created opportunities for well-capitalized and experienced companies.
“The EGP floatation has encouraged those with USD savings to increase their investments in the country’s property market. Now, the investment appetite has become greater and people will start looking at the opportunities given to them,” Head of Saudi Egyptian Construction Co. (SECON) Darwish Hassanein tells Invest-Gate.
Hassanein adds that the new amendments to the residency law will encourage many foreigners to invest in real estate “as for them, USD 100,000 and USD 400,000 is not a big deal and getting a residency for USD 100,000 is not much compared to other countries,” he comments.
On May 4, the cabinet approved amendments to the draft legislation. Previously, the suggested amount totalled just USD 50,000. Given the current value of the Egyptian currency, the parliament decided to double it. “The new amendments would still encourage foreigners to buy residential properties in Egypt, as well as, cope with price hikes in the country’s real estate market,” the cabinet’s statement read.
Globally, programs allowing foreigners to legally purchase citizenship or a residency permit in return for investment has been booming in recent years. Last year, the International Monetary Fund highlighted the rapid growth of this trend, suggesting that in the current geopolitical climate, people are looking for “political and economic safe havens.”
Although they have recently been spread, these programs have been in place in several countries for decades. The dual island nation of St. Kitts and Nevis, for instance, has had one since 1984. Such programs can be found in Canada, the United States, Australia, Turkey, Singapore, and New Zealand, whereas the European Union grants residency permits to foreigners owning properties worth EUR 500,000.
The USA and the UK have had systems in place since the early 1990s. In the US, a seven-year residency costs USD 500,000 while a six-year residency in the UK is granted to the GBP 1 mn property owners. The cheapest option is in the Dominican Republic, according to a BBC report published back in 2016. Foreigners are granted citizenship following their USD 100,000-investment (plus fees) and an in-person interview.
All in all, the proposed new law is expected to enhance the appeal of investing in Egypt’s real estate sector, with developers encouraged to start new residential projects and expand local businesses.