In spite of Egypt’s macroeconomic headwinds, the country’s real estate market has benefitted in recent months from steady demand and currency reforms, resulting in a busy pipeline of new projects and investment funds.
Bolstered by demand from the country’s 92m residents – and a housing deficit estimated to be as many as 3m units – several large developers have announced new or expanded plans for mixed-use projects.
On the sidelines of the Cityscape Egypt 2017 event, for example, local company Hyde Park Properties for Development announced a LE12.5bn ($692.3m) project to be built by 2023 on the north coast. The project, expected to break ground in July, will comprise around 1000 residential units, a hotel district and a commercial site located on 1m sq metres of land.
Similarly, ARDIC for Real Estate Developments unveiled a new phase of its LE1.2bn ($66.3m) Zizinia El Mostakbal project in New Cairo, which will have 45 buildings and 1800 units when completed in 2020.
A number of other mixed-use projects are expected to be announced in the near future, alongside larger developments such as the New Administrative Capital, a 700-sq-km city to be built east of Cairo with the potential to house 5m people.
In addition to new projects, the sector is benefitting from other avenues for investment being made available.
Earlier this month local investment bank Naeem Holding announced it had started a private placement to initiate a three-year real estate fund worth LE1bn ($55.2m) in two tranches. The fund is expected to launch an initial public offering by the end of May.
With an expected minimum investment of LE50,000 ($2760), the Naeem fund could enable those in middle- to upper-income brackets to invest in major high-value projects that might otherwise be beyond their reach.
To reduce risk, the fund is expected to focus on completed projects and will be marketed in the Gulf, where real estate funds already play a major role in the sector: in Saudi Arabia alone they are worth some $10bn, according to local press reports.
Another fund in the works is the Egyptians Real Estate Investment, which is backed by Misr Iran Development Bank and Arab African International Bank and has a target capital of LE2.5bn ($138.2m).
The rise in property activity comes amidst a difficult backdrop. With GDP growth down from 4.2% in 2015 to 3.8% last year and the government in the midst of an extended loan facility with the IMF, Egypt’s broader economic situation has been challenging.
However, a number of factors have helped support demand in the real estate market, according to Ashraf Dowidar, CEO of developer Ardic Zizinia.
“The first is that the government is pushing for investment in a lot of land in order to help develop infrastructure. Second, Egypt is a country with a large and fast-growing population, so there is significant demand for housing driven by this growth. And third, there are many investors in the current market that see real estate as a more secure location for their savings than the banks because of the instability of the local currency,” he told OBG last year.
Magued ElSharif, managing director of local developer SODIC, told OBG that the sector has also benefitted from a reputation as a safe haven for capital.
“Last year was a good year for developers, as buyers were anticipating the floatation of the currency and hurried to purchase property,” he said. “While activity has normalised since then, the belief that real estate purchases are a good way of storing value remains.”
Gasser Baghat, CEO of Madaar Development, reiterated this. “Egypt is now becoming a tempting destination for investment, and we are expecting a lot more interest from foreigners looking to buy real estate in the country, especially those from the GCC,” he told OBG.
The increased investment attractiveness comes in part from Egypt’s move to liberalise its currency. After years of dwindling foreign currency reserves, in March 2016 the government decided to devalue the local currency by 14.5% to historically low levels. This was done as part of a string of measures to rein in public debt, improve the business environment and increase the role of market forces in the economy.
Eight months later, President Abdel Fatteh El Sisi’s administration floated the Egyptian pound. The free float caused the currency’s value to plunge, thereby driving up inflation, including developer costs for imported construction materials. However, the move has widely been welcomed by real estate firms as a necessary economic adjustment.
“The impact of the currency flotation was mainly on construction materials, but overall it has been one of the best decisions for the economy,” Amin Serag, CEO of Hyde Park Properties for Development Company, told OBG. “We do not worry because we understand that in the long term the pound will come to a balance, and now our currency is attracting international investment.”
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