Egypt’s Ministry of Housing is currently studying other alternatives for the state’s limited mortgage finance system, taking into account the initiatives and suggestions proposed by some real estate developers, including launching a fund to support the interest rates of real estate’s finance, in addition to other funds in order to modify the current initiative, Invest-Gate reports.

“The banks operating in the Egyptian market have run out of the EGP 20 bn [fund] earmarked for the Central Bank of Egypt’s (CBE) initiative for low- and middle-income categories, launched in February 2014. This proves that the CBE has succeeded in promoting such funds in Egypt, with a large segment of the population benefiting from the initiative,” Deputy Minister of Housing for National Projects Khaled Abbas said on the sidelines of Invest-Gate’s Branded Residences and Hotel Apartments Roundtable on January 30.

However, according to some property developers, predicament has occurred, and not because the CBE’s mortgage finance initiative was restricted to low-income categories, but rather because it was supposed to expand to include financing other strata of clients.

CEO of Amlak Finance and Real Estate Investment Hatem Amer told Invest-Gate that the real estate mortgage sector is facing certain challenges, including high interest rates, as well as the lack of awareness among Egyptians regarding the importance of real estate funding.

Amer added that the CBE’s initiative to support mortgage finance has succeeded in its purpose, noting, “The mortgage finance companies have to innovate new methods to compensate limiting the state’s mortgage to low-income people.”

He elaborated that the amount of fund allocated for middle-income and upper-middle-income customers was EGP 950,000, which was very low compared to current units prices.

Meanwhile, CEO of Iwan Developments Waleed Mokhtar revealed that restricting mortgage finance fund to low-income people did not affect real estate companies’ sales because the initiative targets financing lower categories of housing, which the developers do not offer.

Mokhtar said that the initiative was mainly directed to low-and middle-income social housing projects, elaborating, “We have not been affected by the limiting of real estate finance and exclusion of middle-income people because financing this segment  does not exceed 2-3% of all real estate companies’ projects.”

Founder of Mena Group Fathallah Fawzy agreed with Mokhtar’s standpoint that real estate companies will not be affected by the limitation of the mortgage finance, explaining that after the EGP floatation, prices of real estate hiked significantly due to price spikes in building materials, and therefore, companies can no longer offer units at these low-set prices.

The CBE has launched the mortgage initiative with the aim of providing long-term financing up to 20 years, with an interest of 5-7% for low-income and 8% for middle-income housing, before introducing an upper middle category with an interest of 10.5%. The bank allocated EGP 10 bn for the initiative’s first phase and then brought the total financing to EGP 20 bn, after adding an additional EGP 10 bn.