As we kick start with 2019, Invest-Gate sits with Deputy Minister of Housing, Utilities, and Urban Communities for National Projects Khaled Abbas to chitchat about Egypt’s real estate market status and where it is going.
Generously, Abbas openly discusses all doubtful issues on the table, presenting the complete picture with the latest updates on the market and government’s development plans, and sharing his positive outlook for the new year.
When Will the residency-for-property ministerial decree be effective?
Now. Passports, Emigration & Nationality Administration and the Interior Ministry have approved it. By the time this interview is out, the decree will be in effect. Consider it exclusive breaking news for Invest-Gate as we start the New Year.
What is your forecast for 2019?
I am very hopeful for this country’s real estate market, which is huge. Some of its segments might slow down, but in general it will continue to be a stable market. I have no fear over this market at all. It survived the unstable years with the uprisings in 2011 and 2013, so now it will continue to grow as the country is moving forward -maybe not drastically as within the past few years, which is normal.
We have seen -due to the price increase in everything- that the trend or demand has shifted to smaller sized units. Even if there is still demand on villas, the offered sizes are not as big as before. Developers no longer offer big land areas with large units. This trend will continue to be dominating in 2019.
The market is very competitive. Some areas are oversupplied with units while others are left neglected. The focus maybe is on the newly developed areas more than the rest and that’s maybe why some people are skeptic about the market activity in some areas but we have demand that needs to be met in total market activity.
The market’s slowdown is also a positive condition for correction; I mean for those who weren’t working properly or haven’t been studying the market well and its norms. We won’t have recession but a slowdown, which will showcase the integrity of the developing companies. And that’s why we see the big names are the main players of the market and their results reflect a steady growth.
The resale market on the other hand is not moving that much and this performance will continue for some time because of the flexible buying terms of the first-hand units. Now all offer long-term payment plans, which are convenient to the homebuyer, from eight to over ten years. The resale market has to be for a specific real demand, as it requires immediate cash payment, which is not handy today.
What is the expected price increase for 2019?
Prices will not increase much. It will be just the normal annual increase of around 10% unless we saw any new factors that affect the local currency or the oil and gas sector. This might change the rules of the game but so far I don’t expect any drastic changes in terms of prices.
Is there a mechanism to control the gap in prices among developers? We see one raising prices by 15% while the other by 3%?
The government can’t interfere in the differences of the real estate market prices or put a ceiling to the price hikes by private developers. However, it only can put regulations.
Previous governments have tried that before and such approaches were doomed to a big failure. Each developer has his own calculations based on costs and size of the project, and accordingly each one sets different prices for his units.
The varying prices rely too on the introduction of new comers. In recent years, Egypt’s real estate market has been seen very profitable, so we see many entering the field and making attractive offers to gain ground and be able to compete with the big names, who are already established and have their reputation and the clientele base.
At the end, it is the buyer who makes the decision of who to go to, where to invest, and in what according to his or her budget and bares the risk.
What is the housing ministry’s plan to boost real estate export?
Real estate export should never be the government’s strategy but we took the lead to motivate the market. The government made some major decisions, which I find beneficial for this market to grow, such as the modified residency law, which saw a fruitful collaboration from all governmental entities to make it happen and effective. We also created an Egyptian pavilion at all the big real estate exhibitions worldwide and have invited in the developers, who are keen on the international marketing. And this is the maximum that the government can do in this area. We want to move as a nation to showcase what Egypt has to offer.
Exporting real estate will never see light unless the country as a whole is well displayed outside and marketed abroad. When the Ministry of Housing partakes in international exhibition, we are keen on demonstrating the fundamentals of Egypt to attract the foreign investor. The participating developer must do this marketing strategy as well rather than promoting a certain project in the country, which the outside world know nothing about and what it has to offer. This is what all have to do.
We are always addressing one another, thinking that the world outside knows who we are but this is not the case. Some might know of Egypt but you rarely find those who actually want to invest in or find a product to buy here. If some developers have made some sales abroad… Well, they won’t shape the market and we can’t determine that Egypt is exporting real estate based on them. These are only individual cases.
You need to present Egypt first with its culture, nature, security, and economy, basically everything before you present your product. It is only then that the home buyer will look into the offered products and determine what, where, and how to buy. And that should be the role of developers and the government alike.
At this stage, I see the most profound way to embark on such journey, whether the public or private sector is “The Presence” at international exhibitions and conferences to promote the country in general then the products through presentation of Egypt and its developments.
How are you catering to the middle-class housing given its current high prices and given that it is also expected to further increase?
This is the core of our work. We presented “Dar Misr” project, which is now known as “JANNA” that caters to this segment of society and we made its price 20-30% less than what is offered in the private market. This is the biggest segment of the Egyptian society and this is the real demand.
Developers only focus on Greater Cairo while this segment is distributed all over the nation and we are fulfilling their demand in most governorates as we see a real demand outside Cairo. If you look into El Minya, for example, you will see a new market with a real interest. We have offered in El Minya specifically over 500 units and all were sold in no time. Therefore, developers should look into such new markets and not just Cairo in the coming period for the proper growth of real estate sector.
You can say that this is where the government steps in to monitor or have control over prices. We invite all developers in to have a market share in these areas. They might come in with new developmental ideas or plans that are maybe better than us, and the room is open for them to meet the high demand.
So, you advise them to cater to the middle class now?
Yes, as I find it the biggest segment with the highest demand. In Egypt, today, the volume of middle class individuals can’t be determined. We can’t even categorize them by income.
What is the minimum and maximum income to determine this segment?
The range in this class is very wide and it is the dominating segment of society today. Having said that, the class can be cut into a lot of classes to cater to them all. And given that the trend today is downsizing units then why not branch out of the capital to meet the real demand of this huge segment of society? I believe that the market will shift outside the capital soon.
We now offer lands for developers so they can come in to build residential buildings for example.
So far mortgage and funding continue to have high interest rates… What is the government’s plan to make them more appealing and affordable to the average home buyer?
We give mortgage finance to those in need; it can’t be opened to everyone. It caters to the lower and middle classes, who can’t afford to buy homes. We started off by providing financing with varying lending rates of 10.5% for units worth EGP 950,000 for example. And even if the ceiling is raised to more than that, mortgage finance will still go to those who are actually in need.
At this stage, financing low- and middle-class housing –which is limited- costs the government EGP 4 bn to every 1% of the state’s mortgage finance fund so I wonder how can it be open for everyone with a higher ceiling?
Will there be operational new cities in 2019? And what are the updates on them?
We have strict orders from the president that all newly developed 14 cities are to be operational by June 30, 2020. The first phase in every city has to be delivered regardless of the cost. So we have no city in priority list. The spotlight goes on one over the other by the developers or media for marketing purposes, but we are to develop all 14 cities together and have the first phase of each delivered in the same timeframe mentioned.
Equally to those in spotlight, New Alamein and New Mansoura, we are working with the same pace in West Qena, New Nasser, to name a few.
What is the government’s strategic plan for 2019?
By the first quarter of 2019, you will see the new capital taking shape. The Central Business District will be built with its skyscraper that is the highest in Africa. We are to see new developments in the construction field; many new techniques that are new to us are adopted.
Also to be announced soon is our partnership with the biggest name in hospitality, Raffles, which will manage the skyscraper at the new capital. Raffles provides the elitist services and have only around 12 locations worldwide. This will be their second project in the Middle East after Dubai.
We are keen to have downtown Cairo a piazza like that of the old European cities as we relocate the administrative entities of this country outside at the new capital. We want to revamp Cairo and bring it back to its glory.
Having said that, the new capital, as per our constitution, will not replace Cairo and become the official capital of Egypt. Therefore, Cairo will forever be the capital of Egypt.