Egypt plans to expand in exporting its real estate and make the sector more attractive over the coming period. The country’s government is working on a plan to increase exports and facilitate the regulations of exporting the Egyptian real estate.
Over the recent years, Egypt launched around 40 new cities, in addition to the New Administrative Capital (NAC) at East Cairo. These new cities have added $500 bn worth of assets to the Egyptian state’s portfolio.
In this feature, Invest-Gate discusses this topic in depth with Professor Suzanna ElMassah, Economist, Public Policy, Professor of Economics and Sustainability (FEPS-Cairo University), College of Interdisciplinary Studies (ZU).
ElMassah says that the real estate sector represents around 25% of Egypt’s gross domestic product (GDP) and contributes to various related industries. The local real estate market is witnessing a remarkable recovery on the supply side, particularly in areas such as the New Administrative Capital (NAC), New Alamein, and Galala city. The global transaction value of real estate exports surpasses $200 to $300 bn annually, albeit Egypt’s share in this market does not exceed 0.1%.
Recently, the government of Egypt showed much interest in the idea of “Exporting Real Estate”. During the Egypt Economic Conference 2022, the government announced a roadmap to develop the real estate sector to boost foreign investment and open new markets to sell Egyptian real estate properties to foreigners.
Egypt & Real Estate Export: Fruitful Breakthrough
The idea of exporting real estate aligns with the surplus in the Egyptian local real estate sector due to the higher cost of production reflected in the market price. Not to mention the real estate tax requirements, which discouraged the local effective demand (ED) of the large segment of Egyptians, reveals ElMassah.
Egypt is a perfect destination for real estate investment; it enjoys moderate weather all the year-round and maintains high levels of security and stability compared to its peer countries regionwide. Given the $100 billion export declared target, the real estate sector has the potential to contribute to this milestone significantly. Proceeds from real estate exportation can push economic growth forward, increase the GDP level, reduce the burden on the trade balance, and attract foreign currency.
There are many types of real estate supply in Egypt, such as residential, commercial, office, and hospitality, with variable prices catering to different segments of foreigners, ElMassah states. She adds that the Egyptian state approved offering residency to foreigners when purchasing properties. Foreigners who own a property worth $100,000 can receive a one-year renewable residence. Owners of $200,000 properties are offered a renewable three-year residency, and others holding a $400,000 unit are granted a five-year residency.
Challenges of Exporting Real Estate
Although the local real estate sector is promising and attractive to foreign investment, particularly amid the urban development the state has been witnessing for the past seven years, some barriers lead to increased risk levels of foreign investment in Egypt’s real estate.
Among these barriers is the credibility/trust issues between the property seller and the foreign buyer. This is ascribed to the lack of regulatory bodies for the real estate sector in Egypt. Consequently, this complicates the implementation of the procedures required to register, license, and transfer property ownership. This process becomes much more complicated when purchasing off-plan properties.
The Egyptian government should process stimulus packages and incentives to successfully manage a good path in exporting Egyptian real estate developments to foreign markets. The alignment of legislative reforms would create a competitive advantage for Egyptian real estate compared to its counterparts worldwide. Accordingly, it is vital to establish a unified regulatory authority for the real estate sector as a reference for both the developer and the client. In addition, the authority would be the source of nationwide relevant data on property units. Moreover, it is important to establish an electronic gateway that includes all ownership transfer and registration procedures, ElMassah suggests.
Furthermore, real estate exports would increase by easing property registration and transfer procedures, especially off-plan units. Providing a category of property units that fulfills foreigners’ needs is also crucial. For instance, Arab and GCC clients prefer small, medium, and fully finished units in a fully integrated community. In areas such as the NAC, there is a high demand for commercial and office units, while in the areas of the North Coast and Alamein, there is a demand for chalets and villas. Hence, exporting real estate requires a comprehensive and in-depth study of the foreign market to determine the exact needs of foreign investors.
Moreover, it is essential to launch promotional and marketing campaigns showcasing the benefits of owning an Egyptian property, participate in international exhibitions, and use social media platforms to market the Egyptian product. Besides, banks can play a significant role in exporting real estate by offering real estate financing to attract foreign clients and receive payments in foreign currencies. These efforts should go in parallel with qualifying law firms, developers, and brokers to deal efficiently with foreign buyers throughout the transaction process and the after-sale issues, ElMassah concludes.