Cairo Reimagined was the concept and the marketing campaign that took the entire capital by a storm, highlighting life in the glorious Cairo, as it should be. Featuring a home for every family, Invest-Gate explores the world of Madinet Nasr for Housing and Development (MNHD) in the hands of CEO Ahmed El-Hitamy. In a friendly conversation, El-Hitamy discusses his vision on the real estate market in Egypt today and showcases what MNHD has in store for young couples or young families.
How do you assess the real estate market throughout 2017 and up until today?
2017 was a good year for the real estate sector and especially for MNHD. We managed to reach our growth target of 38% and are moving forward. I am sure medium- to small- sized enterprises had to suffer given the harsh economic reform plan. Some developers suffered with the long timeframe of installment plans on offer and to keep up with their clients’ affordability of their products.
What was the severe effect of such reform plans on the market?
It definitely increased the construction cost and project expenses and that was the major obstacle for most developers, leading them to restructure their business model and correct their strategies. It affected the affordability of the clients as well. On a positive note, it attracted Egyptian expats, given this cheap market, to invest in real estate back home. MNHD remained fortunate within this aggressive market competition given the affordability factor. We have two main projects in attractive locations in east Cairo- the booming location today- and another in west Cairo. Those two locations enabled us to serve two different price points. To give you an example, we launched Taj City early 2016 with EGP 9,000 per square meter. By end of 2016, prices escalated to EGP 13,000. We, then, launched Sarai with EGP 9,000 per square meter. Those who missed the initial price launch of Taj City, could still own a property within the same price range in Sarai City. This market segment could still find another product of MNHD made affordable to them. This was a great advantage and a boost to us. We are also the most efficient company in unit designs. The Gross to Net in MNHD can reach 12%, which is typically around 25%-30%; and this means that a- two – bedroom apartment in the market can be about 150 square meters, while we provide the same dimension and space but within 110-120 square meters. We make use of wasted space. Having said that, MNHD also stood out with its payment plans. Land acquisition comes to our advantage too. We don’t need installments to pay for land. We buy the land first, allowing us to offer more flexible payment terms. However, we care to maintain our present value of our products. Mind you, this is why we introduced the zero-down payment back then when this was considered a strange move. We found this to be the best strategy to overcome the situation.
Some believe that those extended payment plans are to allow room for delayed deliveries and not meet the original deadline. What is your comment on that?
Well this might be an advantage that comes along to some developers but to MNHD this is never the strategy or plan. With our payment plans and the “zero down payment”, our delivery target for 2017 was to handover 500 units yet we fully delivered 650 units instead. Taj City delivered 1500 apartments. We never fell into this trap and I don’t think we will ever!
Do you see the current government imposing some challenges or obstacles on developers?
Well it depends on the governmental entity you are dealing with. It differs from the Governorate of Cairo Authority to NUCA for instance. However, in my opinion, I find the current government with all its entities is seriously working on the development of Egypt on all aspects and not just where real estate is concerned. Of course, one might bump into some inefficiency but those I find fixable and are currently improving. Partnerships with the private sector are a great step and a perfect example to answer this question in addition to the massive lands on offer and the infrastructure and facilities upgrade today. One might argue that such lands are very high priced but this is to cover for the government’s expenses. I see that there are some issues that need to be resolved; however, the government, where real estate is concerned, is constantly improving.
Speaking of state development, now that the government is producing new cities, MNHD sees which is the next booming city for real estate development?
The New Administrative Capital is an obvious call. To our benefit, Sarai City lies on the outskirts of the new capital. Aside from the new capital, New Assiut City Alexandria, and the New Delta, in general, come in the front run and where I think real estate investments will come in heavily.
Why those locations in particular Assiut, Alexandria, and Delta, as you mentioned?
They are underserviced. There is basically no one there. Up until today, the locals of those cities demolish old building to build new constructions but they lack serviced projects like those Cairo-based. There are also no lands offered for expansions. As we speak, the government is to grant Alexandria about 14,000 acres of land to expand its borders, which by default opens up room for developing companies to come in and reconstruct the city. Mansoura, too, is among the list of cities that are soon to be developed. They have high disposable income with no investment opportunities at the moment.
How do you foresee the real estate market in 2018?
I see it very positive. In 2018 the interest rate and inflation rates will drop. Some of the Suez Canal certificates and those of Al Ahly Bank will mature, giving the government a lot of surplus cash. So the market will see more demand on investment opportunities. We are expecting to see a lot of new players in the market, leading to more aggressive competition, which I believe would be very challenging. However, whether the market will meet this increasing demand that result from the expected cash surplus in 2018, remains to be seen. We will see, also, some other inflation re-factors by mid 2018, including oil and energy, but it will not be as drastic as last year.
What does MNHD have in the pipeline in 2018?
MNHD today enjoys premium locations and we are looking into expanding our brand in new places to secure our growth.
What are the market trends in 2018 in your predictions?
I see us moving towards the norm like everywhere else around the world. Our market will see more smaller – sized units offered like in Europe. The ratio between buying and renting will, too, go back to normal like in any other country. Once the current inflation subsides within the next two to three years, once we have single digit inflation and single digit interest rates, mortgage will be more evident, leading the buying activity will go back to normal. It will be more of a governing trend rather than real estate market trend that will take place in 2018 and the following years that would eventually affect the real estate market trends. Real estate trend is currently affected by the social trend of independence and the ever- changing marital status, increasing the demand but on smaller sized units. We see today smaller – sized units are in favor. Rentals are in favor, too.
Do you see exporting real estate trending?
Yes and that’s why developers seek international exhibitions to showcase their products, but is this enough to prosper this new market trend that’s the question?
Well no. I find this a very good step moving forward yet a lot more needs to be done in that regard. Developers alongside any organizer need to work closely together to organize and market such exhibitions in a more efficient manner to boost international or foreign real estate investment.