Experts List Reasons for Recession in Real Estate Resale; Modification of Banking Finance Named Best Solution

Experts List Reasons for Recession in Real Estate Resale; Modification of Banking Finance Named Best Solution

Translation: Muhammad Khalid

Egyptian’s views on properties have changed over years, as they see it as a safe investment, not just a place for residence. With the offering of many projects and the building of new cities, many opt for the resale of their properties to move to these cities as a long-term investment. Despite the development of purchases, real estate resale has faced some troubles including procedures for changing the registration of properties and the transfer of ownership.

Experts interviewed by Invest-Gate regarding their views on the reasons behind the recession in the resale market agreed that the main reason is customers’ desire to collect the price of properties in cash. Another reason is the long-term installment periods that developers offer for new units, along with mortgage initiatives focusing on units under construction. In spite of these obstacles, experts consider banks to be the best solution to revive the resale market which can be realized by developing conditions for banks’ initiatives to include bigger real estate segments.

Obstacles Facing the Resale Market

Ahmed Nasr, Chairman of Bousla Real Estate Development, says that customers’ shift towards resale in the real estate market comes due to low unit prices compared to new units. However, cash is still the biggest hurdle deterring the reviving of the resale segment, for customers always want to collect money to enter into new projects.

Nasr adds that among the obstacles is that most customers prefer units under construction to receive facilities from developers or banks’ mortgage services. Impediments also include relocation by a big chunk of customers to new cities, which is considered an investment with a longer term.

For his part, Head of the Egypt Office at the International Real Estate Federation (FIABCI), mentions that the reasons that push the resale segment into stagnation are the economic conditions, not just in Egypt, but globally, which urge some people to save liquidity as a hedge against adverse circumstances, weakening their purchasing power amid increased supply.

In that regard, Ashraf Dowidar, a developer, reiterates that most citizens resort to properties as safe investments and tend to resell their units. Should any obstacles face them during resale, customers would refrain from purchasing units for investment and opt for other methods and buy properties just for residence, he adds.

Dowidar remarks that the biggest hurdle facing resale is cash, as customers desire to collect the full unit price at sale while developers collect their dues in installments. Therefore, he explains, most customers choose underway units for discounted installments. Dowidar maintains that the property supply is always less than demand, which keeps prices high, but – under recent global economic crises – customers won’t pay all their savings in cash for a property due to uncertainty. For that reason, he elaborates, the long-term installment, guaranteed by mortgage initiatives, is the best solution for customers.

Resale Accounts for Less Than 10% of Sale Transactions

Abeer Essam, a board member at the Real Estate Development Chamber at the Federation of Egyptian Industries (FEI), says that the resale market, generally, does not suffer from stagnation in villages or cities, but more investors redirect their investments to new cities.

She claims that a customer who buys a property of up to EGP 5 mn in installments from a developer, would prefer to sell it in cash to enter into another investment, which should put pressure on buyers opting for mortgage initiatives that enable them to pay the price in installments.

Additionally, all property sales, Essam explains, don’t struggle, as several financing solutions and alternatives are now available. She says that challenges facing the resale market, which makes up only less than 10% of property sales, don’t impact the real estate market, which is manifested during the launch of any initiative whether by companies or banks that receive high demand from customers.

Recommendations For Revival

To revive the resale segment of the real estate sector, the Chairman of Bousla Real Estate Development calls for eased financing conditions and payments that allow the customer to pay a part of the unit price as a down payment and pay the remainder in installments.

Taha remarks that mortgage initiatives haven’t moved the real estate market largely in 2021, as their conditions don’t match with many offered projects, adding that the market doesn’t require decisions to recover but needs economic mechanisms that support growth and urge customers to purchase.

Taha notes that his company builds many property projects with solid infrastructure, and to boost their growth, investments should be pumped into the economic activities of residents to attract customers and boost sales. He highlights that the state’s projects for the rehabilitation of historical districts shed light on these areas which contribute to bolstering resale and attracting investment.

In a similar vein, Dowidar, comments that the resale market will be revived by banks through modification of the condition that units must be under construction which saves liquidity for customers and developers. It can also alleviate debt burdens for developers to enable them to launch more projects.


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