The mixed-use community, Cairo Festival City, in the heart of New Cairo, turns heads on the hands of renowned international property developer Al-Futtaim Group Real Estate. Invest-Gate sits with the group’s Managing Director Eng. Ashraf Ezz to showcase the latest of Al-Futtaim Group project, Cairo Festival City, in Egypt and presents his outlook on Egypt’s real estate sector in 2018. Ezz shares some insights as well on the investment climate and the future of the market on the long run.
How do you assess the investment climate in Egypt today given all economic reforms with its effects on real estate?
It is definite that the real estate market in Egypt has seen progress in 2017 when compared to 2016. The demand on real estate has risen to 80% last year, widening the gap between demand and supply and to us, developers… that is a privilege. The economic reform was a must to develop Egypt’s economy and that left us with higher costs on everything. The devaluation of the pound led to price hikes of 35%. But developers have managed to make ends meet, offering various flexible payment plans and unit size options to guarantee its affordability for every homebuyer and meet their needs. Throughout 2017, such marketing tools were on a constant update and correction to maintain the affordability of the client.
How do you view the mortgage plans and financial methods used today?
Well, we have seen some progress in that area. The only evident mortgage plans and financial funds come from the Central Bank of Egypt (CBE), yet they remain only devoted to the middle-and lower- middle classes; in other words those with limited budgets. The system, as a whole remains, unorganized; and we are in need of a diversified system that caters to all social classes. In regards to a proper financial fund program for all categories, this remains unavailable in Egypt. It is the developers, who create different payment methods, and financial loan plans to compensate this unavailable service. With the increasing demand we are witnessing and with the market growing, there must be a proper program set by the government. Mortgage and financial plans are a big challenge for us. With the increase of prices, homebuyers will need a feasible financial plan to be able to make their property purchase.
How do you foresee the real estate market in 2018?
With the progress we have seen in 2017 from 2016, I find 2018 will be better than the past years. The client’s behavior will change. I believe we will see true homebuyers, those who are keen on investing in new homes. Due to the high interest rate, real estate investors will seek other investment opportunities within the market, namely, commercial, and office properties. This is why we thought of diversifying further our offering and thought of launching The Podium, which is a new business park that comprises small- and medium office spaces offered for sale.
With the buying trend changing in 2018, will developers too change their development trend in designs and sizes, for example? Who do the developers cater to more?
The adjustments in payment methods and installments led us towards adjusting our developmental projects especially in the sizes offered. Al-Futtaim, for example, has designed smaller size units to its project, Cairo Festival City, to cater to the new market trends and to minimize the gap between the income and interest rate of installments and lifelong maintenance expenses. The main objective was to cater to a wider target group and respond to the market gaps.
What is in the pipeline for Al-Futtaim Group’s Cairo Festival City?
Our Cairo Festival City is a fully integrated city aside from the mall, which is our famous landmark in the country today. Our city includes of course residential units that vary in size from 150 to 800 square meters to cater to various needs. We also provide mid-rise buildings where apartments are to be handed over completely finished with central air conditioning and ready- to-move in during 2018. We are keen on giving different services to our clients than that available in the market today. In 2017, our villas were either standalone or twin houses. In 2018, we introduce a new product. This new product comprises four attached villas with a private garden for each. We give the buyer all features of a standalone villa but on a smaller size of land. We are also about to launch our office park “The Podium” introducing office spaces of 70 up to 40,000 square meters, depending on the size of the client’s company of course. So businessmen, entrepreneurs and investors now can locate their companies at Cairo Festival City to enjoy all facilities. Just like the residence, the offices too are to be delivered fully finished. The Podium will also offer businesses, that wish to do their fit-outs, core and shell space.
Is the integrated community of Cairo Festival City to move to another city in Egypt or will it stay only in New Cairo?
Our Cairo Festival City product again is fully integrated. We have residence, offices, entertainment, daily services, educational premises, and sports clubs. When Al-Futtaim embarks on a new project, we focus on three main things; services, location, and the city management to provide for a certain quality of life. Cairo Festival City can expand in any other location across Egypt given the second and third objectives we have; but the location, for the time being remains to be an obstacle. Our location in New Cairo is so unique and we still haven’t found any other place to expand.
Speaking of new developments, do you see El-Galala City vital to enrich places like Suez and Ain Sokhna?
The government is now working on developing new areas across Egypt’s major cities to encourage further investments and also help meet the real estate demand. However, I believe that El-Galala City will be a touristic destination but not for permanent residence unlike El-Alamein City or the New Administrative Capital.
Where exports are concerned, can we export our real estate market to the outside world and compete on the world map to attract foreign homebuyers?
This is done through our participation in international exhibitions as a start; within those exhibitions, there are several types of potential buyers we seek. First and foremost, we target the Egyptian expats. Given the devaluation of the pound, there income bracket has increased when converted to their home currency, allowing them a new investment opportunity in Egypt as it has become a more affordable real estate market today when compared to its neighboring countries. By nature, Egyptian expats are keen on buying properties in their hometowns. The political unrest in Egypt throughout the past years and the economic instability has driven foreign investors off the Egyptian real estate market and now is their comeback, I believe. I reckon that with all developments across the nation, and the projects of high quality available like that of Cairo Festival City, they are re-gaining trust back in the sector and are eager to purchase properties in Egypt. Foreigners are also a priority. Foreign homebuyers, in my opinion, are looking for a retreat and the quality of life when buying a home outside of their countries. Yes it is their second or even their third home but they are after maintaining their original lifestyle. You cannot just approach them with units that meet world-class standard only… you sell the city or country itself. Security, accessibility, traffic, daily facilities, and value of the investment come in play. Having said that, I find that touristic destinations across Egypt like the Red Sea, for example, attract them more and still such places need further enhancement. I do not believe that any foreigner would want to purchase a unit inside Cairo today maybe in the future when the conditions in Egypt as a country change.
Running a foreign developer as big as Al-Futtaim, how do you see other foreign investors entering our market? How can we win their trust back?
The investment climate in Egypt is progressing indeed but one must first meet the foreign investor’s needs. A foreign investor wants of course to profit and afterwards be able to return this profit to the mother company abroad in the same currency they entered with. Such guarantees are not entirely met today but Egypt is moving forward towards a more stable and comfortable investment climate. I believe that the New Investment Law has put us on the right track but we need to give the investors some time to gain this trust back.
2018 seems hopeful for the real estate market, what obstacles that you think might hinder its growth in 2018?
As a vital member of the Egyptian real estate market, I can say that all members or key players are always in the lookout for opportunities and trends that keep them going. What makes us worry is the surprises or unexpected circumstances that we often meet and quickly need to resolve to save our presence in the market with minimal losses. Everything originally is well studied and planned for long-term investments and project developments; but comes certain obstacles or challenges like price increase due to currency exchange, oil, electricity, land, and construction, or legislation – to put it simply- that sets us back for sometime until the issue is resolved. Sometimes the developer needs to start over, which costs us a lot of money. Unlike before, today, the government has been listening carefully to the investors’ needs and I see development going on so many levels. Yet I urge the government to address the above mentioned issues carefully for this sector to properly develop.