Interview with Fathallah Fawzy: Egypt Sees Unprecedented Urban Expansion

Interview with Fathallah Fawzy: Egypt Sees Unprecedented Urban Expansion

Although the Egyptian real estate sector has been holding steady, as the government exerts extensive efforts to push urbanization growth nationwide, prospects are mixed for developers’ performance in the upcoming period amid the weakened purchasing power. For this reason, Invest-Gate meets Fathallah Fawzy, founder of MENA Group and vice-chairman of Egypt Businessmen’s Association (EBA), to know his insights on the housing market’s current and forthcoming activity, while discussing positive indicators popping up in the industry.

How do you evaluate the real estate market’s current performance?

The property sector saw an eminent activity in the past few years, owing to the rapid and unprecedented urban development underway, with the emergence of new fourth-generation cities, including the New Administrative Capital (NAC), New Mansoura, and New Alamein.

This is mainly attributed to some factors such as the availability of land and increased ease in the process of their provision by the government, which have been luring investors to implement more projects. Now, developers can obtain plots of different land-use in less than a week.

On the other hand, some listed real estate companies reported a slowdown in their performance, especially in sales, based on their Q2 financial statements. Yet, we cannot ascertain until we make sure if this slowdown is proportional to last year’s results or initial estimates.

Generally, there is an increased activity and an intense rivalry in a market widely open for all companies, which all compete to deliver new, innovative, and competitive products.

What did Egypt garner from participating in foreign exhibitions so far? How can we build upon such gains?

In the recent period, and for the first time, both the government and private developers started to jointly partake in foreign exhibitions such as MIPIM, an international property event hosted in Cannes, France last March. The country’s honorable participation was well received and I consider it a commendable starting point for the global entryway of Egypt, along with its diversified real estate portfolio, as an investment-friendly destination.

We still have to regularly participate in similar events to demonstrate to the world our horizons and potentialities. However, the type of products offered has to be put into consideration; participating developers should always be prepared by having serviced and fully-finished properties that meet international standards and foreign buyers’ needs. We also look forward to seeing such homes being operated by specialized facility management companies, having regard to second-home owners who do not dwell in their residences all year round and are often looking for long-term rental yields.

Globally, Egypt has a competitive edge in terms of unit prices, which represent 25-35% of the value of similar products offered in the same region. So far, most residences are bought by Arabs. Furthermore, before the government prohibited non-Egyptian land ownership in Sinai, international investors, especially from the UK, used to heavily invest in Sharm El Sheikh. Meanwhile, Red Sea governorates such as Hurghada and Marsa Alam started to see foreign purchases of finished and serviced properties.

To sum things up, we need to participate more in foreign exhibitions to showcase our real estate products, and thus, boost our property exports.

Recently, Egypt started to arrange promotional tours of potential investment for foreign investors to explore the country’s various opportunities. In your opinion, how fruitful are these trips?

In June, EBA organized a five-day visit for a delegation from the National Real Estate Committee at the Council of Saudi Chambers to Egypt, hosting a total of 51 KSA-based companies. The program included trips to New Alamein, Galala City, and NAC. Besides, lucrative meetings were held with Minister of Housing, Utilities, and Urban Communities Assem El Gazzar and Minister of Investment and International Cooperation Sahar Nasr, during which both sides discussed possible investment opportunities.

Moreover, the delegation was impressed by Emaar Misr’s Marassi project on the North Coast; deals for 10-13 units were sealed during the stay. This also reaped prolific outcomes for one of the Saudi investors bought a land area to carry out an expansive development in Egypt, with more details to be announced soon.

We should continue arranging visits for foreign delegations thrice a year at least. EBA is currently working on getting in touch with organizations operating in the real estate sectors of the UAE and Kuwait to organize tours for them after summer, just as we did with the Saudi delegation.

Is there a specific season when the real estate market performs at a higher pace than in other times of the year?

The housing industry usually gets remarkably active during the heatwave and developers make the highest sales in two months, namely July and August. One reason is that expats usually fly back to Egypt with their foreign savings from the Gulf during summer, in particular, as the season marks an ideal time for them to search for residential units – whether primary or secondary – and draw an analogy between the various products on-ground.

What are the challenges currently facing the housing sector?

The most challenging obstacle is buyers’ low-income levels, especially after the EGP devaluation, as opposed to overpriced units amid increasing land costs.

The Central Bank of Egypt (CBE) already announced its plans to reintroduce subsidized mortgages worth EGP 50 bn for middle-income individuals, with preferential interest rates starting from 8% to prospective homeowners and unit prices of up to EGP 3 mn.

I expect this initiative to boost the market in the coming period. The introduction of such measures should be continuous to stimulate buyers’ purchasing power, and thus, trigger off real estate sales.

How do you find the state’s recent proposal to involve the private sector in social housing projects? When do you think this will be activated?

The government discussed with private developers the possibility of their engagement in the implementation of social housing projects to meet the country’s high demand for real estate.

I guess this may attract the interest of some property firms, yet negotiations are still underway on agreement terms and other related specifications so that developers can indisputably participate in these projects and avoid wasting time on the issuance of licenses and ministerial decrees. I anticipate we will start to see this initiative effective by early 2020.

What is your forecast for the property market in five years?

As long as we have the raw materials available (i.e. land), there will always be an active motion in the market. Currently, real estate is one of the most vigorous sectors in Egypt, thanks to the ongoing rapid urban expansion via the establishment of new cities, which was not seen in the past 30 years. Therefore, the government plans strive to increase the current inhabited areas, estimated by 6% of the country’s total area, in a bid to absorb the growing population, offer new job opportunities, and transform coastal cities such as the North Coast to all-yearround destinations.


Fathallah Fawzy’s interview is featured on pages no. 22,23 at Invest-Gate’s September issue


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