Confident that Egypt foresees its future and is capable of combatting obstacles along the way, Invest-Gate meets with real estate tycoon Eng. Hussein Sabbour. In an illuminating discussion with the property market guru, Sabbour gives a comforting view on Egypt’s economic reform strategy and its developmental plan in progress. Generously, he shares his firm’s future endeavors in Egypt and across the MENA region.
How do you view the Egyptian economy today?
Throughout my 60 years spent in the real estate market and construction, we have come through many economic obstacles and what we witness today is not as harsh as those of the past. We always manage to overcome problems. This is not Egypt’s first drop and, by all means, not its worst.
Take the 1967 War, for instance, during Nasser’s reign, he said, “No voice is louder than the sirens of the battle,” meaning that all of the country’s capital is to fund and serve the Egyptian army to end the Israeli occupation of Sinai and the Suez canal’s eastern cities of Port Said, Ismailia, Al-Arish, and Suez. Back then, like many young engineers and developers, I moved my business to Libya. You can imagine what a difficult time it was for all of us!
Today, I do not fear the future and am very hopeful that, for the first time, the Egyptian government is on the right track with a true development plan amid its drastic economic decisions. Previous governments used to ignore problems to keep on going, but no reform was ever put strategically until the problem escalated to what we face today. Now, we are facing the problem – yes we are suffering – but I believe it will pay back in the end. I am confident in the Egyptian crisis management and its reform strategy that is put in affect now. I am very optimistic about the future and do not fear of what is to come.
How do you view the investment climate in real estate?
The Egyptian real estate market is, nonetheless, the most guaranteed type of investment regardless of the economic condition unlike many developed countries. USA’s economic crisis back in 2008 hit the US real estate market hard for its dependency on mortgage plans unlike what we witness in Egypt today.
To our benefit, our national banks never buy international bonds, especially, those of super powers. Economic drops at any country can affect some Egyptian industries like manufacturing, for example. In recent years, the economic drop in the south East Asian markets, along with their currencies, attracted many businessmen in Egypt to import Asian goods and sell them here for their cheap prices despite average quality. Importing from Asia was somewhat cheaper than manufacturing and supplying Egyptian goods in the market; and this affected the production business of Egypt and raised competition.
I am not worried at all about our real estate market because of the ongoing high demand given the country’s demographics. We have an estimated 800,000 marriages each year, especially in the big cities, and of course, all seeking first homes, which are about 400,000 units each year in spite of the size and location.
Aside from marriages, we still have the demand on residential units from residents of demolished old buildings, and Egypt’s commuting workforce, who seek homes close to their source of income. So, the demand is there and will always be there. We only need to study the market well and determine its needs every now and then, putting into consideration the economic status and the average income of individuals. This business can drop at times, but there will always be a demand on real estate.
Developers always work on supplying classes A and B while class C is left to the government. Is there a way developers can help the government to meet the demand of class C?
Honestly speaking, we only focus on classes A and B to generate revenues and flourish businesses. Classes A and B purchase first and second homes among other units for future investments instead of depositing it at banks. The value of the real estate in Egypt is way higher and at a frequent rate than any bank’s interest rate.
Of course, class C is in need of shelter and given the conditions, not today, but throughout years of neglect by consecutive regimes, it had become unaffordable until recently.
Today, the government is focusing on meeting the demands of this class with its ongoing urban development projects that are spread all over the country; and to make this happen, the government called in the private sector to take part.
Now, many lands across new cities are offered to the private sector at cheap prices in spite of its true value to provide multi-use neighborhoods that include residences, retail, and public services.
I find that this is an excellent move by the government and hits two birds with one stone as they say! The government guarantees its fulfillment of its role in serving its people, the private sector are racing to own massive lands to expand their businesses, and the people are to benefit, too, by obtaining proper living conditions at reasonable costs with low installment interest rates.
And is this what Sabbour did in the New Ismailia City?
Not at all… New Ismailia City is the government’s project and the Sabbour Firm is only the consultant for the project, but not the developer. We supervise the project, but are not to own land or build projects.
Are those newly amended regulations by the government part of its ‘One Million Units A Year’ project?
No. The ‘One Million Units A Year’ project is a solely governmental plan.
Do you believe that the government is capable of supplying one mn homes a year?
Of course not… Neither previous governments nor the private sector have ever achieved such number. And even if both collaborated, this number is too high to achieve annually.
What do think of the megaprojects of the SCZone and New Administrative Capital?
I believe that the SCZone is the most important project for Egypt. Previously, the revenue of the Suez Canal was USD 5.2 bn at a time when a small country like Singapore, for instance, could generate around USD 30 bn from its seaports.
I can determine that unlike previous regimes, this government is starting to utilize the Suez Canal area in a proper manner. Today, the development plan of the Suez Canal Industrial Zone is to have the international pharmaceutical center in the region. China, too, is to develop its industrial zone as part of the SCZone development and Sabbour is named its consultancy and contracting firm of the project. China is to develop a motorcycle factory, and also another one for car parts.
However, I still see that a lot could come out of this project. We have the world’s sought-after seaport between the Far East and the West, why not call on shipping countries to export their products in pieces and we assemble them here, given Egypt’s low currency value! The producing countries will cut costs and we will generate more income and create more jobs. If Japan, for example, is shipping its computers to Europe, why not let Japan send its products in pieces and the Egyptian workforce assemble them here and ship to Europe. This is one of the ideas that can utilize the canal better.
Egypt never made a proper use of the world’s most strategic and dynamic port, which is the -200 km-long- Suez Canal. Cargo ships never get fuel or maintenance here, for example, due to the lack of service facilities along its – 400 km – banks.
If those 400 km are put in proper use, we can develop ship production, containers, or even have maintenance and service facilities for those containers. At this stage, Egypt is signing investment contracts with its counterparts, but I believe that a door should open soon for the private industrial sector as well.
And as for the New Administrative Capital…
The New Administrative Capital is a great expansion out of the condensed city of Cairo. The government is keen on completing this project and has recently offered many land plots to private developers given its reasonable prices, which again a number of developers are racing after. Among the government’s plans is to include a number of universities at the new capital as well. Egypt has set a new standard for all new universities, which is that any new establishment is to partner with a top ranked university from around the world. A lot of people have pursued to open universities there, already, at this stage. So, I can say from what I am seeing today that most – if not all – highly trust this project.
Is Sabbour taking part in the new capital?
No. However, our partner, Al-Ahly Bank, has bought a land plot for development and for sure we will play a role. Also, we are currently in talks with a number of developers, requesting our services as engineering consultants in their projects.
If we are to analyze the government’s reform plan, especially its development plan, what are the hits and misses?
The government’s hits include housing, developing slum areas, and urban development. The spread of slum areas has grown tremendously in recent years that it has occupied half of the population in a city. Another hit is the government’s land reclamation and development plan; in addition to infrastructure projects that are across the country.
The only miss I see, today, is ignoring manufacturing, factories, and production.
How do you view the North Coast’s urban development plan? And how can it put Egypt on the touristic world map and be accessible all year round?
Again this government, unlike its predecessors that ruined the North Coast, is aiming at reviving the Egyptian coasts. The government, today, is working on attracting foreign tourism to our Mediterranean shores and stop focusing only on locals. According to the plan I know of, the North Coast is to be divided in clusters starting by its shores, moving backwards till the middle of the desert. The first cluster is to include international hotels to open directly on the coast. The second part is to include entertainment and retail facilities. The third part is to feature permanent housing followed by acres and acres of agricultural lands. Mind you, European wheat was planted all over Egypt’s North Coast during the ancient times as it depended on rain. Today, studies are made to sanitize seawater for North Coast agriculture fields; and of course currently negotiations between Egypt, Great Britain, and Germany are taking place to get them to clean the desert from the remaining minefields of the Second World War and prepare lands for agriculture. For the first time, the North Coast is being scientifically studied and developed.
Given the development plans in Ain Sokhna, can it attract first home buyers next year as market experts anticipate?
If we approach Ain Sokhna in a scientific manner, as is the case with the North Coast today then it can happen. We need to attract foreigners, have conferences, and exhibitions hosted there, for example, to divert the interest to Ain Sokhna. As for locals, given its proximity to Cairo, yes it can be a first home to many, but we have to take care of the city itself by providing services and facilities.
Still the government is targeting Egyptians abroad to invest in our real estate market. What is your comment on that? And how can we attract foreign investors?
With the low value of the pound today, Egyptians abroad can afford to own good to high-end homes in Egypt. Here, the government has offered two services to its people living abroad. First, it guarantees revenues in foreign currency and have it available again inside the country; and second, it offers cheap residences for Egyptians abroad so why invest elsewhere!
For foreign developers, Egypt has become profitable for them as people here invest in real estate. A number of foreign companies have invested in Egypt like Emaar, for example. As for foreign homebuyers, we have to look at our past experiences, namely in Sharm El-Sheikh. Half of the units were sold to locals of Sharm El-Sheikh and to the -not- so- privileged Europeans, as their second home, for its cheap cost relatively speaking to their currencies and this helped with the tourism flow and foreign real estate investments in the country. So, I believe we need to update our marketing strategy, today, given all the developmental projects in the country that are currently taking place.
What does Sabbour have in the pipeline in Egypt and abroad?
We are currently working on a deal in Saudi Arabia. The Saudi Ministry of Housing has signed a contract with Sabbour to develop a major project in Saudi Arabia. Aside from that deal, Sabbour is to partner with a Saudi developer to consult and develop a residential project of 100,000 units, entitled Baladein, in Dammam and Al-Kharj.
We are also planning to expand in Algeria. Algeria is a rich country but lags behind in many things. The Algerian Council of Commerce has invited Sabbour for future developmental projects. Among our pending projects in Algeria, is a partnership with a Russian developer on a real estate project.
In Egypt, Sabbour’s sales revenues in 2016 reached EGP 3bn. This year, we are to extend beyond EGP4bn. In the North Coast, we are completing and delivering our project Amwaj and embark on another one that is to be announced soon. Furthermore, Sabbour is in talks with a governmental entity on a major project that is to be revealed soon as well.