Invest-Gate sits with ARDIC for Real Estate Development and Investments’ CEO Ashraf Dowidar to get an overview of the Egyptian economy in general and the real estate sector in specific. Dowidar also shares details about his latest projects, as well as, marketing strategies in the holy month of Ramadan.
How did you see the performance of the real estate sector in 2017?
Following the floatation of the Egyptian pound in November 2016, the real estate sector passed through a tough phase. Some people were shocked by the price hikes and did not know what the future will hold; they were expecting the US dollar and prices to decline again. However, they started to adapt to the new prices when neither the US dollar nor the prices went down, but this took a lot of time. The devaluation also affected the real estate companies’ sales, leading some developers to exit the market, but major heavyweights managed to continue operating, started to deal with the issue, and adapt to the new changes. They did so by offering longer payment plans and units with smaller sizes ranging from 80 to 120 square meters and developing a new future vision for upcoming projects. The market is coping with the new changes and so are developers.
What is your forecast for 2018?
This year, the market should improve and see a rise in sales. However, if the government raises electricity and fuel prices in July 2018 as planned, people’s purchase power will decline again. On another note, some developers started to take loans from banks despite high interest rates to fund the projects they already started working on before the EGP’s floatation to be able to deliver them as scheduled. Developers’ cash flow declined after payment plans were extended from four to eight years, yet their revenues did not decline as they raised their prices by 50%, while others –such as our company- increased them gradually.
How do you see the investment climate after reforms?
Developers do not have problems with the investment climate, yet their main issue is with the affordability of mortgage finance, as people do not take out loans due to high interest rates so developers try to fill in this gap to attract buyers. Developers still face challenges when trying to obtain a ministerial decree or a license for their projects, but there is improvement.
Where does Egypt stand on the map of real estate exports? Did the government take steps towards increasing our share in this market?
Egypt does not have a large share in real estate exports. To export real estate, we need to participate as a country in international real estate exhibitions to market our products. Minister of Housing, Utilities and Urban Communities Mostafa Madbouly has already started to promote investment opportunities in Egypt through participating in foreign exhibitions such as the international property event MIPIM, which was held from March 13 to 16 in France. Egypt also entered into negotiations to have a pavilion next year in the exhibition. We need 600,000 units per annum, while the actual supply is around 300,000. The government should also revise real estate regulations for foreign developers to attract them to participate in bridging the gap between the supply and demand.
What do you think of the new investment law?
The new investment law will be in the interest of the investor and will facilitate the procedures and legislation for the investor, which contributes to attract investment and the recovery of the economy in the long term.
What do you think of current land pricing structure?
Land prices are high since the state is the only party that sets the prices and controls the whole cycle. The government should allow the private sector to provide lands with facilities and infrastructure, and offer them for sale. The competition between the public and private sector will lower the land prices. Land prices currently represent around 40-50% of the project’s total cost while they should represent around 15% so the developers can gain a satisfying profit margin.
Where do buyers invest?
The A class prefer to buy second homes in well-known areas such as the North Coast and Ain Sokhna, while the A- and B+ classes search for first homes for their children mostly in east Cairo, Giza, Alexandria, and Marsa Matrouh so there is a mix.
Why did you choose Al Mostakbal City to build your latest project? And what do you have in the pipeline?
Al Mostakbal City is close to New Cairo and overlooks the Suez Road, and this raises its value. We have Zizinia Al Mostakbal, which will be delivered in 2020. The construction of the project is 20% completed and we sold 55% of the project’s total units. As for our latest projects, we entered into a partnership with Polaris Al Zamil Industrial Park (PZIP) to develop 5.5 mn square meters of industrial area in the Suez Canal Axis and also an integrated urban development in Menya.
How did you see Cityscape Exhibition this year?
Cityscape was very successful for most developers as it saw high demand and good sales, reflecting that people started to accept the new prices; people waited for so long and monitored the changes in prices till they stabilized before pumping money in new purchases.
What does the foreign investor still need to pump new investments?
What any foreign investor looks for is a safe environment to invest in. The government should facilitate for the foreign developers all the procedures related to buying lands, obtaining licenses, and transferring money to their homelands. As for the foreign homebuyer, the state should offer more incentives.
What are your marketing strategies in the holy month of Ramadan?
Ramadan is a low season in terms of purchases because most people are busy with spiritual practices and gatherings, yet there is an exception if a good project is launched. People usually start purchasing units after Ramadan, lured by Ramadan TV ad campaigns. Summer is also a low season for first homes as most people opt to buy units in the North Coast. However, there is a good opportunity in the World Cup period to have a presence through setting up booths, where people gather to watch matches. As a promotion for sports, we will also hold an international squash tournament, bringing together international players. It is a very tough sector to build a name in due to the high competition, yet it is rewarding. We usually bring a marketing director from outside the sector to bring in new ideas and think out of the box. We do not invest much in TV commercials and press ads; we mostly target people on social media as it is currently the most important marketing technique. The client needs to feel that the developer has a big name to feel proud, secure, and pump in