Real estate experts believe that the launch of real estate investment funds in Egypt will encourage more individuals and developers to invest in Egypt’s property market, especially amid rising prices of residential units and the declining funding capacity of the banks. Invest-Gate explores the existing real estate investment funds in Egypt and their impact on the market.
“The Egyptian market is a fertile ground for the growth of real estate investment funds,” Managing Director of Naeem Real Estate Investment Fund Al-Sherif Wahdan, tells Invest-Gate.
Wahdan adds that Egypt’s real estate sector has always been a safe haven for investment whether by individuals or corporates, pointing out that real estate funds diversify the investment channels by enabling investors to seize shares in commercial shops, residential units, and shopping malls.
On April 6, Egypt’s Naeem Holding, one of the largest growing investment firms in the Middle East and North Africa region, announced the start of a private placement for a real estate fund worth USD 65 mn. It said that it targets investment in rented properties at a total value of EGP 1 bn.
The Naeem fund is the country’s first real estate investment fund that gets the approval of the Egyptian Financial Supervisory Authority (EFSA). Its private placement took place over one month and was followed by an initial public offering at the end of May.
The fund’s duration is three years and it is expected to make a targeted profit of at least 26% per year. The minimum investment for the private placement is EGP 10 mn and EGP 50,000 for the public offering. The firm also announced that it plans to launch another real estate fund before the end of this year.
“The real estate funds offer individuals and companies an opportunity to invest in assets and properties of high value and revenues, which they may find hard to invest in due to their limited budgets,” Wahdan says.
He adds that real estate funds are the best choice for individuals and corporations willing to diversify their investments and increase their returns as they are expected to provide higher interest rates which cannot be found in other types of investment, including bank certificates, the stock market, and gold.
Egypt also has another real estate investment fund affiliated to the Egyptians Abroad Company for Investment and Development, targeting investment in under-construction land plots and projects. There is also a third real estate fund belonging to the Housing and Development Bank but it has not yet been put into effect.
Real estate experts expect that there will be a huge demand from investors whether individuals or corporates on emerging real estate investment funds in Egypt, which made strides in other countries all over the world, especially in a number of Arab countries, including Saudi Arabia and the United Arab Emirates.
According to a study released by American independent investment management company Invesco, Middle East sovereign funds have been focusing on income-generating real estate this year after having missed targeted returns last year.
Interviewing 97 fund managers, who manage about USD 12 tn of assets, Invesco states that there has been a general growth in allocations towards real estate, which currently stand at about 11% in the Middle East, compared to 5% elsewhere.
According to a CNBC report, global real estate funds are expected to turn in double-digit performance results this year. Such an expectation was based on the fact that housing prices in Europe and Asia are finally surging after years of being hammered.
Likewise, Fathallah Fawzi, Chairman and CEO of MENA Group, says that real estate funds can be a big success in Egypt amid soaring prices of housing units and the inability of banks to accommodate funding the increasing number of housing projects.
“An individual may find it hard to buy a residential unit worth EGP 1 or 2 mn. However, he or she may be able to afford investing a minimum of EGP 50,000 in real estate assets – a kind of investment that real estate funds provide. Such a channel can encourage many individuals to inject their money into the country’s real estate sector,” Fawzi tells Invest-Gate.
According to real estate portal in Egypt and Saudi Arabia Aqarmap, Egyptian real estate posted a 9% increase in housing prices in November following the EGP floatation on November 3. The portal’s data also showed that housing prices in Egypt rose by 35% during the first quarter of the current year.
It seems that real estate funds can make headway in Egypt by capitalizing on the rising housing prices and the high demand by real estate developers to start more housing projects in the country.