Approximately 2,000 to 2,500 acres of land will be offered in the new Administrative Capital, said Mostafa Madbouly, Minister of Housing, Utilities, and Urban Communities, during a press conference dubbed ‘The Real Estate Debate’ held on Sunday.
The conference tackled several issues, including legislation governing real estate projects, projections on real estate prices, government tenders, challenges facing the real estate sector, the foreign currency shortage, and the supply of utilities.
Madbouly began his keynote address by announcing updates on the new capital city as well as other government plans, and emphasized the importance of the role played by the New Urban Communities Authority (NUCA).
“A total of 10,500 acres are being finalized in the capital city and will include modern features, such as streets as wide as 120 meters and 30,000 units in each neighborhood,” Madbouly said.
He added that the new lands will be offered with incentives to encourage developers to build, saying land prices will be announced soon, following experts’ studies.
“Developers and private companies did not take part of the capital city from its start because the basic infrastructure was not developed yet. The government sought to develop it as fast as possible to meet the needs of companies’ projects,” Madbouly said.
Madbouly also emphasized NUCA’s role, saying the authority’s main objective is to supervise the quality and rate of development. However, he noted the authority has taken on a greater role in developing communities and urban planning through the social housing program, from which it shared the revenues with the ministry.
He concluded his speech by saying that affordability is one of the sector’s key challenges, as the middle class is currently unable to purchase new units because there is an oversupply in high-end properties — units which also present challenges in resale.
“I urge developers and private companies to consider offering 100 to 150 square meter units and to facilitate payments for the upper and middle class, [in addition to the ministry] developing social housing units dedicated for these classes. I also urge private companies to participate in the Dar Misr projects,” he added.
The Real Estate Debate
A public debate followed the minister’s speech, including developers, the Housing Ministry’s spokesperson, and the Chairman of Mortgage Finance Fund, to discuss future public-private partnership (PPP) plans, developers’ perception of the state’s role, risks of a real estate bubble, boosting economic growth, challenges in expanding luxury properties, and the deficit in foreign currency reserves.
Participants in the debate all agreed that there are several factors that determine the prices of real estate, such as the use of state assets, price of lands, prices of building materials, the interest rate for financing set by developers, and supply and demand in the market.
“Real estate selling prices and even the financing rates that are given out are not always accurate and are always subject to change, as they are based on a combination of the given financing rate set by the bank, the mortgage fund or authority, and developers,” according to Sherif Samy, Chairman of Egyptian Financial Supervisory Authority.
Challenges and Developments
Some, such as architect Hisham Shoukri, Executive Present & CEO of Rooya Group, agreed that developers could make use of the current challenges and dynamics within the sector to their advantage. Current levels of overpopulation result in the creation of new segments that can be involved in the real state sector, he added.
“There are several ways we could make use of the current situation and encourage real estate investment, including increasing hotel units in North Coast to accommodate tourists all year, restructure pricing of land and offer land in partnership with the private sector,” said Khaled Abbas, Assistant Housing Minister for Technical Affairs.
A real estate bubble could be avoided if developers, investors, and the state make good use of the current dynamics that include facilitating real estate legislation, increasing the rate of construction, and providing good financing options via mortgage, which could allow buyers to pay in installments over 20 years, according to Ahmed Shalaby Managing Director of Tatweer Misr.
In efforts to tackle affordability, the Mortgage Finance Fund usually receives part of the financing from the Central Bank of Egypt, usually earmarked for housing projects, such as its EGP 5 bn initiative to build homes for middle income citizens.
“We can tackle affordability through the funds we offer; however, the size of funding does not meet the demand for real estate properties,” Mai Abdel Hamid, Chairman of the Mortgage Finance Fund, told Invest-Gate.
Partnership between State and Private Developers
Both the state and private real estate developers are affected by the nature of the sector, including the project revenues, down-payment and allocation of resources, and prices of lands, according to Tarek Abdel Rahman, CEO of Palm Hills.
“Because these types of partnerships are considered crucial, Palm Hills has partnered with NUCA to develop 500 acres in New Cairo and 6,000 acres in 6th of October City,” added Abdel Rahman.
One advantage of such a partnership is ensuring the affordability of projects in the face of increasing prices of building materials, which could only be resolved by such a partnership, according to Ayman Ismail, Chairman of the New Administrative Capital.
Plans to Enhance Developers’ Performance
Several developers at the debate asked for updates on the real estate bylaw, which is currently under review by the Cabinet, and also asked for the development of a new lease rental law where developers could make use of the rental revenue to develop more projects and use rent payments to pay for construction costs.
“The ministry is currently examining the real estate bylaw and is also drafting the Union of Developers law that should be released in the first quarter of 2017,” Khaled Abbas, Assistant to the Minister of Housing for Technical Affairs, said in response to the questions.