Will the “3% Mortgage Initiative” Lead to A Promising Market Shift?

Will the “3% Mortgage Initiative” Lead to A Promising Market Shift?

To finance its housing program across the low- and middle-class segment of the Egyptian society, the government has set the “3% Mortgage Initiative” proposal. This long-term loan program of up to 30 years with a low-interest rate that does not exceed 3%, could be a turning point, shifting the market from rent to property ownership. Invest-Gate looks into the initiative and how it will affect the Egyptian property market.

The government continues to provide for the large segment of society by encouraging people to own houses and deal with banks. In a previous interview, Deputy Governor of the Central Bank of Egypt (CBE) Gamal Negm, said that this initiative’s volume worth is EGP 100bn and is subject to increase in the future. Installments are to be made monthly and quarterly.

We conducted a few surveys to examine this hypothesis to get to bottom of this and the rise of ownership trend in Egypt and how this proposal is accepted among the general public.


New Culture of Ownership on the Rise:

Our results reveal that 98% agreed that the mortgage finance initiative with 3% will shift the market trend from rent to buying. The MarQ Communities Developments Amr Badr somewhat agrees with the participants of the survey but he believes that not all clients will go to owning instead of renting “as some customers have some fears of dealing with banks and they also do not prefer the dilemma of the required documents when it comes to banks as a fundraiser,” he explains. Badr also sees that this will develop the market and it will let the developers do their work efficiently like other countries globally.


“3% Mortgage” Influence on the Market:

Examining its impact, this initiative, as is believed, is to increase the demand for buying residential and commercial properties. 64% agree that the market will shift from rent to buying with this financing program. Our study shows that 42% agree that the rental market will decrease following the adoption of this initiative.

Speaking of influence, Osama Saad Eddin, CEO of the Real Estate Development Chamber, says that this new initiative will shift the market into what we call “Leasehold Property”, and this will decline the renting percentage in the Egyptian market. “Likewise, this will have an influence on the market and it will definitely reduce the rent value,” he affirms.

3% Mortgage Initiative Impact on Prices:

By facilitating payment terms and conditions as such, 58% believe that the current market prices and purchasing power are likely to change. They expect unit prices to increase.





Rent Future in Egypt:

Rent as a culture in Egypt will not go anywhere but 50% of participants believe that such initiative is likely to end this trend for many people as Egyptians prefer to own rather than rent. Omar Oteifa, chief commercial officer at Amer Group agrees with that too, stressing that with the 3% mortgage initiative, unit ownership will increase versus rentals “keeping in mind also that it is the normal evolution of the real estate market. Mortgage & real estate funds are the future of the Egyptian market,” he comments.

Renting is an Egyptian culture indeed but with this new initiative this habit may change. Oteifa sees that the new Egyptian urban development will turn the country into a trading hub for the Middle East and encourage foreign investment. That in turn, means an influx of ex-pats will boost the rental sector across the country. “So, the rent will not vanish but it will just turn to different segments of customers,” he highlights.

Testing The Waters:

The more payment is facilitated especially with the down payment, the current purchase power is likely to increase. 98% will go buy only if further financing options are offered especially with their down payments.


Previous Public Incentives to Support Housing:

This is not the first time the government launches housing incentives. Back in 2014, the Egyptian government launched the CBE initiative with an initial EGP 10bn disbursement, aimed at tackling the shortage of affordable housing. Then, the CBE added another EGP 10bn to its program, making it EGP 20bn in total.

In 2019, the CBE incentive was updated with some reforms and new measures, including the eligibility of those seeking a mortgage. Mortgage finance was for those who meet the CBE conditions via the banks’ resources, allowing interest rates of 5-7% to the low-income segments on a maximum period of 20 years without providing treasury bills as a guarantee, according to an official statement back then.

Bottom line, the Egyptian real estate market is constantly being modified and providing proper housing to all Egyptians is the government’s priority… the effect of such initiatives and how they shift one trend over the other is what is highly anticipated.






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