Due to the current decline in purchasing power amid the depreciation of local currency and a large supply, the Egyptian real estate market could potentially be heading towards a bubble, Chairman of Orascom Development Holding Samih Sawiris said.
Speaking to reporters at the sidelines of the American Chamber of Commerce’s conference titled “Sustaining the Real Estate Industry in Egypt,” Sawiris said the real estate sector is currently at a relative standstill and could decline if inflation continues to rise and homeowners become wary of potential losses. Homebuyers could be deterred from buying and could even turn to selling if real estate is no longer perceived as a sufficient hedge against inflation and devaluation.
Sawiris moreover decried, during his opening remarks at the conference, the state’s involvement in the real estate market, saying “To have the government enter the real estate industry as an investor is a disaster.”
Prior to the 2011 revolution, the government allowed developers to acquire land for free or at low rates in return for allocating significant amounts of their projects to low-income housing, he continued, noting that this model was more sustainable, allowing developers to provide low income housing and infrastructure at no cost to the state.
He further contended that the new investment law is “a non-priority,” provided that the state cannot first assure investors that contracts with the state will be respected.
Sawiris also maintained that the absence of a viable rental law hinders a vital solution to the current housing shortage. He described the number of unused real estate units as “astronomical,” stating that the reason behind this is the absence of legal recourse to secure landlords’ rights in cases where tenants violate their contracts, making it virtually impossible to evict tenants. This contributes to the increasing number of unused units across all segments, which could be crucial to addressing the housing gap.