Tourism Momentum and Red Sea Investments Drive Value Creation
HC Brokerage issued an update on Egypt’s real estate sector, highlighting Orascom Development Egypt’s (ORHD) performance and reiterating its view that the company is well-positioned to unlock significant shareholder value, Invest-Gate reports.
According to HC, investments in the Red Sea region and the strong performance of the tourism sector are key value drivers that could offset a potential slowdown in primary residential unit sales in 2026e.
HC forecasts a four-year compound annual growth rate (CAGR) of around 20% for revenues, approximately 18% for EBITDA, and about 31% for net income, supported by higher residential selling prices, rising tourism revenues, and expanding gross profit margins.
Residential Sector Faces Challenges in 2026e
Commenting on the outlook, Mariam Elsaadany, Real Estate Analyst at HC Brokerage, stated that 2026e is expected to be a challenging year for the residential segment of Egypt’s real estate market. This is driven by several factors, including elevated real estate prices amid weak affordability, aggressive buying activity during 2023–2025 that resulted in higher market supply, declining interest rates that negatively impact customers’ ability to finance units through returns on certificates of deposit, as well as easing inflation and a stable Egyptian pound, which reduce the attractiveness of investment-driven demand.
Accordingly, HC does not expect a recovery in real estate demand before the second half of 2026, which could trigger a market correction, with developers offering limited price increases on new project launches. By 2H26, HC also expects the Central Bank of Egypt (CBE) to cut interest rates by a further 300 basis points, in addition to the 725 basis points already cut in 2025, which should help improve purchasing power for Egyptian real estate buyers.
Hospitality Exposure Provides a Strategic Advantage
Based on its sector view, HC Brokerage favors companies with exposure to the hospitality sector, as this allows them to navigate any potential slowdown in residential activity and benefit from the government’s focus on expanding tourism, particularly following the official opening of the Grand Egyptian Museum (GEM).
HC believes Orascom Development Egypt is well-positioned to benefit from Egypt’s growth story over both the short and long term. The growing interest in the Red Sea region, triggered by the announcement of Emaar Misr’s Marassi Red Sea project, is viewed positively for ORHD’s approximately 15 million square meters of undeveloped land in El Gouna.
HC’s valuation for Marassi Red Sea implies a net present value of EGP3,765 per square meter, which is expected to reflect positively on ORHD over the medium term, despite higher competition in the short term. The firm also highlighted ORHD’s strong international sales capability, with around 49% of El Gouna sales and 33% of O West sales sold abroad during 1H25.
Strong Hospitality and Real Estate Growth Outlook
HC Brokerage raised its hotel room rate assumptions to reflect improved hospitality operations, while normalizing growth expectations for residential selling prices. With Egypt’s ambitious tourism targets, HC expects ORHD’s hospitality revenues to grow at a four-year CAGR of around 20%, supported by an average gross profit margin of approximately 36% over FY25–29e, driven by average occupancy rates of around 75% in El Gouna and 40% in Taba Heights.
HC increased total revenue per available room (TRevPar) in El Gouna to EGP8,891 by 2028e, up from EGP5,713 in 3Q25, and in Taba Heights to EGP2,683 from EGP1,687. The hospitality segment is expected to contribute an average of around 22% of consolidated revenues over FY25–29e, with hospitality EBITDA projected to grow at a four-year CAGR of approximately 26%.
For the real estate segment, HC forecasts a four-year revenue CAGR of about 23%, representing an average contribution of around 60% of total revenues over FY25–29e.
Total real estate revenue recognition over the forecast period is estimated at EGP238 billion, including EGP43.3 billion from deferred revenues and EGP195 billion from new sales, with an average gross margin of around 36%. O West is expected to dominate new sales, as HC accounts for the entire project in its discounted cash flow valuation.
HC’s estimates include collections of EGP208 billion and CAPEX spending of EGP102 billion for real estate operations over the forecast period. The remaining approximately 18% of revenues are expected to come from the town management segment, with no land sales assumed.
Regarding leverage, HC noted that ORHD may increase debt to finance O West’s land liabilities, with estimated interest expenses of EGP9.73 billion over FY25–29e, partially offset by lower interest rates.