There are a few big names in the Egyptian real estate world that stand out today, not only because of their big projects, but also because of their thorough study of the market and their perpetual efforts to improve the sector. Invest-Gate speaks with one of these names, Rooya Group’s Chairman and CEO Hisham Shoukri, who talks in-depth about the country’s investment climate and real estate sector, as well as, providing ideas on how Egypt can market its real estate abroad and how to benefit from the country’s coastal destinations not only in the summer, but in the off season too.

How do you view the investment climate in Egypt?

I believe that the current economic climate is the best since 2011 due to the economic measures undertaken, although they were hard, such as the floatation of the currency and cutting subsidies which burdened the budget, as well as, introducing the new investment law. As a result, we are witnessing a state budget that has a surplus in FY 2018/19 for the first time. Even if some might say that the debts on loans have increased recently, we know exactly where this money is going; it is being spent on infrastructure and development.

Another important aspect to the improvement in the economy, which is related to real estate, is the huge boom in the infrastructure projects. I believe the infrastructure projects carried out in the past four years alone are equal to those executed in the past 40 to 50 years. This is very important because no country can achieve economic development without developing its infrastructure, be it ports, airports, electricity, roads, water networks, and everything else.

We used to have an enormous shortage in electricity, but now we are self-sustainable and the country is discussing exporting electricity, we also have the new Suez Canal and new ports such as the East Port Said Port, new airports as the airport in the New Administrative Capital and Sphinx Airport, west of Cairo. I believe the infrastructure boom contributed to the country’s growth and creation of job opportunities.

….And how has this improved economic climate affected the real estate sector?

It is also common that, whenever a country develops its infrastructure, the first sector to benefit from this is the real estate sector. The government started selling a number of lands, whether for commercial, residential, and industrial projects, widely available to developers.

To everyone who keeps saying that the real estate sector has become overcrowded and a bubble is being formed, this is not true as we need around 1 mn housing units annually, plus the services and facilities to benefit these units. It is expected that by 2050, Egypt’s population will almost double, thus, from now until then, the country’s inhabited area should increase from 7% to around 12% by then, just to maintain the increasing population. In my opinion, Egypt’s true raw material is its land and we should utilize and develop it efficiently.

How can Egypt export its real estate abroad and can it effectively compete with other regional real estate markets?

In the international market, the two most exportable real estate types are second homes and projects that generate permanent income, such as educational and medical real estate projects which attract real estate investment trusts (REITs). The question is can Egypt compete in both markets? The answer depends on the presence of fundamentals, which have to exist as a precondition, and variables, which can be created. Egypt’s fundamentals allow it to compete in the second home market. For starters, prices of second home units in Egypt are a quarter of the prices of international market and we also have the highest return on investment (ROI) compared to the nearby markets of Turkey, Cyprus, and Greece. Most importantly, anyone who buys a second home unit abroad wants to utilize it for the maximum time possible and, in the case of nearby countries, they only utilize it for an average of three months, but in Egypt, regions as the Red Sea can be accessed and enjoyed all-year-round.

As to what attracts REITs, there is a huge gap between what people want and what actually exists in regards to retail, offices, and healthcare real estate as they constitute 0.04 meter square per person, almost one tenth of other comparable markets such as Rio De Janeiro. There is a huge shortage and, thus, a huge potential to the market.

….and what about variables related to exporting real estate abroad?

Variables, on the other hand, are not entirely on our side, but they can be changed and improved. Some variables are already being improved such as granting a residency to foreigners who invest in real estate in Egypt. A recent draft law stipulates that foreigners who purchase real estate worth USD 200,000 will get a three-year residency, while those who purchase units worth USD 400,000 or more will receive a five-year residency. This is very good as a first step. Another variable, which is currently being addressed and fixed, is easing the registration of real estate units as foreigners do not understand initial contracts, widely used in Egypt. The third important variable that should be controlled is the fact that we do not know how to market ourselves; no one is really familiar with the Egyptian real estate market, we are not widespread. In international conferences, we find real estate that is significantly inferior to what we have in Egypt, but they have a big propaganda surrounding it, so they sell more and are better known. Both the government and developers are to blame for the shortcomings of marketing.

So how can we market the Egyptian real estate market abroad?

To begin with, we have to be permanently present in at least four to five international real estate exhibitions annually with an Egyptian pavillion, that comprises both representatives from the government and developers. This is a long-term strategy, buyers won’t flock to buy real estate in Egypt the next day.

There should always be a buzz about Egypt’s real estate in media. We should start an advertising campaign that can reach the target audience -the foreign homebuyer- through TV channels such as CNN, and international real estate platforms. This is how Turkey managed to raise its real estate revenues from foreign homebuyers from a negligible amount in 2009 to its current over USD 20 bn annually. They became very widespread in real estate magazines, with articles on their summer homes and their retail projects, as well as, being present in the major international real estate exhibitions. We should also work closely with real estate service companies such as JLL and Colliers International to show a positive image of Egypt in their international reports, especially that they are popular among REITs.

I believe that if a comprehensive plan is put together and everyone works cohesively to execute it, we can generate an annual real estate revenue of around USD 20 bn in a matter of four years. That is four times higher than the revenues of the Suez Canal, which is currently Egypt’s highest source of income.

How can coastal areas in Egypt become an all-year-round destination?

The issue of having areas to become all-year round destinations is a problem facing the entire world, and not just Egypt. Greece and Cyprus are facing the same problems; you will find their coastal areas very crowded in the summer, and completely deserted in the winter. But France’s Cannes was able to solve this problem, they discovered that hotels are at 100% occupation during the festivals and conferences so they hired a company to organize events throughout the year. This caused hotel and rent prices in Cannes in the midst of winter to be higher than those in the summer. I believe that each city has its own identity, and the New Al-Alamein City, currently under construction, should be marketed as a center for conventions, exhibitions, and festivals.

What is, in your opinion, the next big tourist destination that the government and investors should focus on developing?

I believe that Marsa Alam has little attention and should be focused on more. It has a good weather all-year-round, a brilliant sea, many water activities such as diving, and its desert side houses a number of nature reserves, that can drive the country’s ecotourism. I believe that Marsa Alam can be the next boom to Egypt’s tourism sector, and can even be a more popular destination than Sharm El Sheikh.

Moving on to Rooya’s projects, how do you distinguish yourselves from other compounds in your projects Telal Sokhna and Telal Sahel?

Our slogan has always been “Building Communities” and I do not consider our work just building compounds, selling them, and moving on to the next big project. We continue to manage and be involved in our projects beginning from our very first resort, La Vista Sokhna which we handed over in 2002, and everything else that followed. We continue to develop and spend money out of our own pockets on our handed-over projects, out of a deep belief that the money we spend on maintaining these projects helps in advertising for all of our new projects. I believe that maintaining our old projects and keeping them in the best shape possible is the best advertising we can do for future projects; it is better and more impactful than spending money on billboards or TV commercials.

We also build communities in our projects through creating food and beverage (F&B) areas where people can hangout without the need to leave the compound, by signing in with venues and creating a hangout hub. Another aspect to our vision of “Building Communities” is sports; we started a new concept of “Sports is for Everyone” by creating courses as well as weekend tournaments for all kinds of sports. We are also introducing sports tournaments for the 50+ age category. We have also introduced an icommunity program, a platform that creates communication between us and our residents; it communicates all news and updates to residents and allows them to send us suggestions or maintenance issues that need to be addressed.

What is next for Rooya?

We are currently finalizing the paperwork for an extension of our Telal project in the North Coast, we will hopefully launch it after the summer. As to Telal in Ain El Sokhna, we are also finalizing the paperwork for a marina there, which we consider it as part of our “Building Communities” strategy as we expect it to be a commercial and retail hub not only for our community, but for the entire Ain El Sokhna. As to our project Stone Residents in New Cairo, we are almost done with it and will start delivering units in 2019.

Concerning our new projects, we are working on two connected retail and office space projects in New Cairo, Stone Street and Stone Towers, and we will start constructing the 600,000 square meter projects by the end of this year. A new concept we are introducing in this retail project is a two kilometer long pedestrian street passing through restaurants, cafes, and piazzas. We are also starting a new project in Marsa Alam, with construction starting early 2019, on a 1.5 mn square meter land, close to the airport. We are also looking into developing two new lands with the government in New Cairo.