After years of turmoil, Egypt has proved itself resilient to headwinds and started to reap the fruits of economic reform. Believing that Egypt has the potential to attracting more investments, Invest-Gate met up with Ian Albert, Colliers International Middle East & North Africa regional director at Cityscape Conference, which took place on March 12 and 13, for an in-depth discussion about the investment climate in Egypt and the real estate market.
How do you view the investment climate in Egypt?
Ian Albert: The investment climate is progressing; capital repatriation issues have been lifted so that gave a lot of consumer and investor confidence. We see that reflected in the newly found interest coming from Gulf States, which have always been heavily investing in Egypt in areas ranging from real estate to industry and that is set to continue. Generally, there is a renewed interest in Egypt. Egypt has achieved political stabilization and is currently heading to economic stabilization as well.
What do developers need to invest more in Egypt?
Ian Albert: Any developer needs clarity in terms of the marketplace. There should be a clear data of what has been built and where, as well as, what is in the pipeline. The government should create a platform for developers to provide them with data and master plans for all areas across Egypt. For the foreign investments to come into Egypt, it is really all about the stabilization of the economy. The Interest rates and inflation levels should also come down.
What are the challenges facing developers?
Ian Albert: There is an issue with consumer finance in terms of mortgages and developer finance within the marketplace. Some developers have been offering long-term payment plans because there is not enough finance for the consumer to come in. When consumer gets finance, developer gets finance too. Developers are taking all the inflationary pressures and risks; they have a lot of issues in terms of cash flow as they have to wait for the revenues to come through before moving to the next stage. Cash flow is very important for developers to continue in the market. Heavyweight companies may not have this issue with cash flow but middlesized operators need finance. When interest rate and inflation come down, there will be a great availability of finance in the marketplace.
What are the challenges impeding Egypt from taking a large share in real estate exports?
Ian Albert: There has been a massive upswing in terms of interest in the Egyptian real estate market in the last two years obviously due to the currency devaluation. It became massively attractive for Egyptians living overseas to invest in a property in their homeland. Devaluation generally encouraged residential investors to pump cash but this was not the case for international investors because of the high interest rate on debts. If Egypt wants to spread beyond the expats, long-term stability is the key in terms of finance market, as well as, the decline of interest rate and inflation to single digits. I am waiting for the balance to take place.
How can we attract foreign homebuyers to invest in Egypt?
Ian Albert: Heavy swings drive international investors away; dramatic shifts such as the EGP devaluation and its consequences of prices increasing by 43% in a year are not usually good for some investors. Although investors have taken advantage of the devaluation, they could not get their cash out of the country due to restrictions. However, restrictions are now lifted in terms of capital repatriation and we are looking thoroughly for stabilization.If the investor cannot guess how the investment environment will be like over an intermediate time horizon, they will not come. Once you get the economy stable, it will be much easier for investors to take a view; any investor, especially a developer, is constantly looking for a time period of five to ten years. Stabilization of the economy will attract any investor to come. Egypt passed through stagnant economic times, but last year was better than the previous years and this year is expected to be way better.
What is your outlook for the Egyptian real estate market and the economy in general?
Ian Albert: The real estate market will smoothly move forward. Egypt may have some localized oversupply in certain areas; too many apartments are being built in more locations in New Cairo. For the economy, annual growth rate will hopefully reach 25% over five years, provided that inflation and interest rate come down.