By Eman Ibrahim

Translation: Muhammad Khalid

The first half of 2023 brought many challenges for the global economy, disrupting the international supply chains due to the continuation of the Russia-Ukraine war. These circumstances caused a wave of inflation that hit various countries of the world. The impact of inflation rippled through various economic sectors, worsened by the central banks’ tight monetary policies seeking to curb it.

The Egyptian real estate sector has been hit by some of these factors, including the noticeable increase in the prices of its inputs prompting the Egyptian government to hold many meetings with manufacturers. During these meetings, the government discussed its proposals and issued several decisions and initiatives in an attempt to mitigate the negative effects on the industry and to maintain the continuity of activity and momentum in the strategic sector.

Real estate export was on top of those decisions to attract many foreign investors while targeting higher segments of investors and strengthening the position of the foreign currency.

In this article, Invest-Gate monitors key decisions and initiatives that the government has taken to support the real estate sector in the first half of 2023, as well as anticipating what is expected for the rest of the year.

Committee to Revitalize the Sector

In January 2023, Prime Minister Mostafa Madbouly held a meeting with officials of the Central Bank of Egypt (CBE), the Ministry of Housing, Utilities, and Urban Communities, and real estate developers, in which he directed the formation of a committee to prepare an integrated program to promote real estate financing activities. The new committee was also tasked with developing a clear vision to boost real estate exports as a source of foreign exchange.

Last February, the Council of Ministers approved the request by the Ministry of Housing to deregulate the sale price of its residential projects and offer new units in New Cairo in Cairo Governorate, Bayad Al-Arab in Beni Suef Governorate, Hurghada and Safaga in the Red Sea Governorate, and Damanhour in El Beheira Governorate. This is according to decision No. 3/20/2023 by the board of directors of the Social Housing and Mortgage Financing Fund.

Land Allocation Facilities in New Cities

At the end of last March, the Egyptian Cabinet approved another proposal by the Ministry of Housing for facilitating the land allocation to service and investment projects, mentioning that the New Urban Communities Authority (NUCA) has approved granting various facilities to the investors despite all the current changes as a result of the global situation.

These facilitations included extending the implementation period for all service, investment, and construction projects by 20%, over the original implementation period. This is for the underway projects, as for the projects that have been or are being granted a grace period against compensation, they will be granted the same percentage of this grace period.

Moreover, the facilitations also included granting real estate developers a 50% discount on the interest applied on the installments due, during that 20%-implementation granted period, with a maximum of one year, starting from 2023. This is the state’s contribution to supporting real estate developers confronting economic obstacles.

For those who reserved at Beit Al-Watan Project (the 8th complementary phase), NUCA’s Board of Directors decided to provide them with alternatives to the payment plans, as well as other facilitations in case of immediate payments.

In this case, if the immediate payment for the allocated land plot is transferred from abroad and in USD, there will be a 15% discount for full payment. However, if it is paid in installments, there will be two alternatives; the first one is to determine the land’s price in EGP and pay in USD, while the second is to determine the price and pay it in USD.

Digitization and Investment Attraction

The Prime Minister directed all ministries and competent authorities to take fast and necessar y procedures to start digitizing all their assets, whether lands, real estate, or otherwise to achieve governance, ensure efficient management of state-owned assets and put an end to encroachment.

In May 2023, the cabinet approved a draft presidential decree on the agreement to eliminate double taxation for income taxes and the prevention of tax evasion and avoidance, which was signed between Egypt and Qatar, and included various sectors, real estate is one of them.

Real Estate in Exchange for Nationality

In March 2023, the Official Gazette published the Prime Minister’s decree amending nationality applications. The amendment allowed granting citizenship to applicants in four cases, including the purchase of a property owned by the state or other public legal entities for at least $300,000 to be transferred from abroad according to the rules applicable in the Central Bank or has entered the country through official ports and has been documented at customs.

What Does The Sector Need in H2 2023?

Osama Ragab, Executive Director of the Real Estate Development Chamber, says: “The Egyptian government has striven in the first half of this year to launch many initiatives, in an attempt to revitalize the sector. We are seeking to put forward proposals and laws in cooperation with the state to bring prosperity back to the sector and not just overcome obstacles.”

Ragab revealed What the sector needs and expects can be limited to five points that will support its growth in the second half of 2023.

First, tightening control over the manufacturers and producers of construction materials for the sector, to maintain a steady supply and  stable prices so that developers can limit their operating expenses and unit prices.

He continued: “Second, progress must be made concerning real estate financing, as developers need liquidity as soon as possible to deliver  units in a shorter time to accelerate the cycle of their projects, and to avoid unexpected increases in construction prices. Customers may not be able to provide liquidity in the short term, so financing companies must undertake this task in the coming period to bridge the gap between the customers and developers.”

Furthermore, the executive director of the real estate chamber noted that the third point is urging the state to mitigate the consequences of the EGP devaluation for the real estate sector, by providing facilities and launching initiatives such as those launched to support the industrial and agriculture sectors.

As for the fourth point, Ragab stressed that real estate export has not been given the attention it deserves so far, although it may constitute a real breakthrough for the prosperity of the Egyptian real estate market, and provide a good source of foreign currency for the country. He added that this point requires the concerted efforts of a group of ministerial portfolios and government agencies, along with the Chamber, to establish working mechanisms for real estate export, which would send a positive image of the Egyptian real estate market abroad.

“If we succeed in this, it will be like discovering gold mines for the Egyptian economy, which is rich in human capabilities and lands ready for real estate development,” Ragab commented. “The fifth point, which may cut expenses for developers, is fixing land prices for three years at the regional level, which will create at least a single fixed element in the industry. That will help developers set prices that suit customer needs and maintain stability in the sector”, he concluded.