The Egyptian real estate market stands out as a compelling investment hub within the Middle East region, leveraging Egypt’s strategic geographical location, rising real estate demand, and attractive incentives for investors. Noteworthy for its substantial contribution to economic growth, the real estate sector boasts a labor intensity of approximately 14% of the workforce in 2022 and accounts for about 20% of the gross domestic product (GDP) in 2023.
Recent years have witnessed significant shifts in Egypt’s real estate landscape, marked by the advent of diverse projects tailored to cater to a wide array of investors. Growing interest in prime real estate investment opportunities in Egypt mirrors the country’s economic upswing and governmental initiatives aimed at fostering real estate investment and urban development. The investment in the total number of residential units constructed in 2022/2023 surged to EGP 262.1 billion, marking a significant rise from the previous year’s investments totaling EGP 143.5 billion in 2021/2022, as per data from the Central Agency for Public Mobilization and Statistics (CAPMAS).
Under the National Tourism Strategy in Egypt, efforts are concentrated on enhancing the supply side of the Egyptian tourist sector by augmenting inbound airline seats and hotel accommodations. This strategy aims to accommodate the targeted influx of tourists and elevate the overall tourism experience to meet industry objectives, culminating in an anticipated 30 million tourists by 2028. The revival of the tourism sector serves as a pivotal driver in invigorating the real estate market, positioning it as a key catalyst for growth.
Tourism Boom in Egypt
In the first half of 2024, Egypt saw a surge in tourism, welcoming 7.069 million tourists, surpassing the previous high of 7.062 million from the same period in 2023, as reported by the Ministry of Tourism and Antiquities.
This marks a marginal 0.1% uptick from 2023 and a notable 2.4% rise from 2010, a pivotal year for tourism in Egypt. The increased tourist traffic has also translated into a significant rise in the number of tourist nights spent in the country, totaling 70.2 million during the initial half of 2024. This figure surpasses the 67.6 million nights recorded in 2023 and the 65.7 million nights in 2010.
Notably, the tourism sector’s revenues amounted to $6.6 billion in the first half of 2024, reflecting a 5% increase from the $6.3 billion generated during the corresponding period in 2023 and an impressive 18% growth from the $5.6 billion recorded in 2010.
Egypt’s tourism industry witnessed an unprecedented surge in 2023, setting a new milestone with a historic influx of 14.906 million visitors.
Government Initiatives Drive Accelerated Investment in Hotel Room Expansion
During the weekly meeting on July 24, 2024, chaired by Prime Minister Mostafa Madbouly, the government greenlit the final version of the document outlining requirements, determinants, and mechanisms for implementing a new tourism sector support initiative. This initiative, funded by the Ministry of Finance, is designed to spur investment growth in hotel room construction within the tourism sector, bolstering support for productive sectors.
At the meeting, key aspects of the new initiative to bolster the tourism sector were deliberated upon. These aspects, mutually agreed upon by the Ministries of Finance, Tourism and Antiquities, and Investment and Foreign Trade, include stipulations such as determining the available credit for each company based on its business size and adhering to banking regulations. Notably, the maximum financing limit for an individual customer is set at EGP 1 billion or EGP 2 billion for a single customer and related parties, facilitated through a maximum of two banks within the initiative’s framework.
The allocation for this new tourism initiative, capped at a maximum of EGP 50 billion, is earmarked for companies operating in the tourism sector, subject to prior approval from the Ministry of Tourism and Antiquities. The funds are intended for the construction and operation of new hotel rooms, encompassing expansions in existing projects or the acquisition of closed buildings for conversion into hotel facilities. Additionally, any necessary construction, equipment, or finishes for these establishments can be completed within the initiative, provided that the building does not already possess a hotel operating license.
Rooms financed under the initiative are to be situated in the following regions in order of priority: Luxor, Aswan, Greater Cairo, Red Sea, and South Sinai, specifically Sharm El Sheikh, Taba, Nuweiba, and Dahab.
The application process to benefit from the initiative is set to commence within one month of its launch and will span a 12-month period. The maximum withdrawal period is capped at 16 months from the first withdrawal, with a final withdrawal deadline of June 30, 2026. A subsequent 6-month window is allotted from the end of the withdrawal period to secure an operating license (be it final or temporary) to ensure swift operation and the entry into service of hotel rooms.
The meeting underscored that the return on investment from creating new hotel rooms would significantly bolster the national economy. Approximately every 15,000 hotel rooms are forecasted to generate revenues ranging from $1 to 2 billion annually, along with an estimated EGP 1.5 to 2 billion in value-added tax. This economic impact extends beyond direct revenues to include benefits such as increased employment, commercial and industrial profits, and the creation of around 45,000 new direct and indirect job opportunities upon the operationalization of the rooms.
Outlook Remains Positive
Experts maintain an optimistic outlook on the continuous growth of Egypt’s tourism sector and its influence on the real estate market. With the government’s persistent endeavors to position the country as a premier tourist destination and allure substantial foreign investments, exemplified by the Ras El Hekma deal with the UAE, the industry’s prospects remain upbeat.
Amr Elhamy, Chief Executive Officer of TSFE Tourism, Real Estate, and Antiquities Subfund, underscored the significance of the Ras El Hekma deal for the Egyptian economy and its reverberations in the market. Elhamy anticipated substantial investments in diverse tourist locales within the real estate market. He noted the historical lack of significant investments in the North Coast but highlighted the current shift, presenting a favorable opportunity for private sector collaboration with foreign investors in hotel apartments and other real estate ventures. Furthermore, Elhamy emphasized the fund’s aim to attract European investors and Gulf investment funds, emphasizing that such investments play a crucial role in bridging the foreign currency deficit.
In conclusion, the revival of Egypt’s tourism sector has emerged as a powerful catalyst for growth in the country’s real estate market. With government efforts to bolster tourism infrastructure and attract foreign investors, the outlook for the real estate market remains decidedly positive. The substantial increase in tourist arrivals, hotel occupancy, and tourism revenues has translated into heightened demand for various real estate assets, from hotel accommodations to residential properties. As the tourism industry continues to thrive, the real estate market is poised to capitalize on this momentum, cementing Egypt’s position as a compelling investment destination within the Middle East region.