The Katameya Residence was developed by Al Ahly for Real Estate Development. (Dana Smillie for The National)
The Katameya Residence was developed by Al Ahly for Real Estate Development. (Dana Smillie for The National)

Optimism on Egyptian property



CAIRO // A year after the revolution, Egypt's property market is showing signs of recovery.

But as analysts are noting a trickle of sales, they say a transformation of the market is under way as the country's biggest developers continue to face legal cases.

The fall of Hosni Mubarak from the presidency uncovered a string of scandals in the property industry relating to land ownership.

Major developers such as Talaat Moustafa, the country's biggest publicly traded property developer, and Palm Hills Developments, the second biggest, have been among the hardest hit. Despite this, early signals of a revival suggest investors' confidence has begun to improve as Egypt works slowly to resolve a messy transition to democracy. A president is expected to be elected in June, helping to cement a new government.

Ahmed Sabbour, the managing director of Al Ahly Real Estate Development, said that at the end of last month and the beginning of this month, there were clear signs of the property market improving. "We did pretty good, considering, but still far from what would really keep us happy," Mr Sabbour said.

A series of positive developments have slightly lifted confidence in the market. For one, the government decided to use property as a way to diversify its funding sources and narrow its deficit. The housing ministry this month announced the release of 8,000 land plots in new cities around Cairo for Egyptians living abroad to buy, aiming to generate about US$3.5 billion (Dh12.8bn) of foreign currency.

Closure on several legal cases has also offered a boon to the sector.

The decision of an Egyptian court late last year that Talaat Moustafa had legal title to land in its Madinaty residential project was a major positive signal, said Ayman Sami, the head of property consultancy at Jones Lang LaSalle in Egypt.

The $3bn project had been caught up in a legal dispute since last year over the purchase of land directly from the state instead of by public auction.

"I think the government has realised that they had to resolve them. These were the people that were driving the real-estate market," Mr Sami said.

A different approach to the property market in Egypt has also begun to play out, as property companies focus more on affordable apartments that cost on average 500,000 Egyptian pounds (Dh304,315), shifting away from luxury villas.

"This segment is saturated," said Hisham Khalil, the chief executive of Haski Real Estate Development. "Everyone that can afford [a villa] has already bought one."

Egypt's severe housing shortage means it needs 500,000 homes every year at a price that does not exceed $100,000, or about 600,000 Egyptian pounds.

"We're working on a community compound at the moment that does this," he said. It is a 150-unit compound, with a pool, and each apartment costs 600,000 pounds.

This move to the affordable segment has opened the possibility of small and medium-sized property developers taking a bigger share of the market. In the meantime, foreign direct investment in the market, particularly from the Gulf, is continuing.

"You'll see that a lot of the United Arab Emirates and Qatari plans have gone on as before. These companies are first to market, have stock and are ready with builders," Mr Sami said.

Majid Al Futtaim, a developer based in Dubai, said it had picked two Egyptian banks to arrange a loan worth about $500 million, to fund construction of its Mall of Egypt project, Reuters reported this month.

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Why it pays to compare

A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.

Route 1: bank transfer

The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.

Total cost: Dh567.25 - around 2.9 per cent of the total amount

Total received: €4,670.30 

Route 2: online platform

The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.

Total cost: Dh74.10, around 0.4 per cent of the transaction

Total received: €4,756

The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.

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