And Investment in Egypt’S Real Estate Sector

Market Watch Report

Government Policies and Investment in Egypt’s Real Estate Sector

www.invest-gate.me October 2016 /invest-gate /invest.gate_magazine Information in this report is based on official an- nouncements by both developers and the Egyp- tian government. All figures and facts obtained through news mediums have been confirmed from at least two different sources. This text is intended solely for general market evaluation purposes. Any decisions based on conclusions from this document are the sole responsibility of the reader. Reproduction of any part of this document is prohibited without written consent.

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Madbouly: Housing Ministry Allocates EGP 5,706 Units Offered for Rent for Low-income 37 B Budget to NUCA Citizens The Ministry of Housing, Utilities, and Urban Communities has Residential units were offered for low-income citizens start- allocated a budget of EGP 37 billion to the New Urban Com- ing October in several governorates and cities, according to munities Authority (NUCA) this year in a plan to attract new Minister of Housing, Utilities, and Urban Communities Mostafa investments and implement projects, Minister of Housing Mo- Madbouly, reported Invest-Gate. Citizens will be able to rent stafa Madbouly said in an interview with Daily News Egypt. the units within 10 governorate if their income is below EGP The ministry has moreover set policies that were considered 1,500. Residents will pay between EGP 300 and 410 with an controversial due to increasing the prices of lands in the Great- expected rent increase of 7% annually and a rental period of er Cairo area. Additionally the ministry committed to providing seven years, said Salah Hassan, Deputy Executive Director of more than 100,000 units in three phases to middle-income citi- the Social Housing Fund. In case of a large demand among zens through the Dar Misr Project while offering lands to Egyp- applicants, priorities are given to those living under more pre- tians living abroad through Beit Al Watan project to solve the carious circumstances. dollar shortage crisis. Ministry of Housing Studies Establishing Chinese Company Co-Finances New Middle-Income Compounds Administrative Capital The Ministry of Housing, Utilities, and Urban Communities has A Chinese construction company, China Fortune Land Devel- started studying a plan to establish compounds geared towards opment (CFLD), will invest $20 billion in Egypt’s New Adminis- middle-income earners, an official source told Invest-Gate. The trative Capital, reported Amwal Elghad. The company obtained plan is currently being studied, and follows from the great de- the right to develop and market the new capital within the sec- mand that met the Dar Misr middle-income housing project es- ond phase of the mega-project, according to Al Mal News. The tablished by the New Urban Communities Authority, the source contract was signed by Egyptian Minister of Housing, Utilities, added. The Dar Misr project revealed the great demand for and Urban Communities Mostafa Madbouly, Minister of Invest- such projects, prompting the government to take steps to build ment Dalia Khorshid, and the Chairman of CFLD, Tahrir News a comprehensive middle-income housing project, rather than reported. The new $20 billion investment adds to a previous separate residential units in different locations. The ministry is $15 billion agreement with China State Construction Engineer- studying the possibility of establishing an area within the coming Corporation (CSCEC) for a previous phase of the Adminis- pound to be dedicated to Egyptian expatriates working abroad. trative Capital, according to USA Today. NUCA to Finalize Electricity Station in New Egypt Partners with France to Develop Aswan in 2017 Sustainable Cities The New Urban Communities Authority (NUCA) has launched The Egyptian Ministry of Housing, Utilities, and Urban Commu- a new main power electricity station in New Aswan with two nities will partner with France’s Sustainable Cities Task-Force generators that will be completed next year, reported Al Borsa. to build a joint technical office designated for sustainable cities, The total cost of the project has amounted to EGP 60 million, reported Amwal Elghad. A protocol was signed by Egyptian according to Alaa Naseem, Executive Manager of Electricity Minister of Housing Mostafa Madbouly and President of the and Telecommunications in the NUCA. The new enhancement Sustainable Cities Task-Force Gerard Wolf, in Cairo. A total of will boost power from 10 MV to 50 MV, Naseem added, noting 160 French firms will participate in developing sustainable cit- that the total value of completed electricity projects in New As- ies. The office, operated by the New Urban Communities Au- wan recorded EGP 138.7 million, stretching over 635 kilome- thorities (NUCA) and the French task force, is to assess and ters within the city, while other networks are under construction implement projects related to sustainable cities in Egypt and to stretch over 333 kilometers. France, according to the ministry. Orascom Completes Al Masah Hotel in New Madbouly Discusses Possible Partnership Administrative Capital with UK Trade Envoy Orascom Construction has finalized construction on Al Masah Minister of Housing, Utilities, and Urban Communities Mosta- Hotel in the New Administrative Capital, in collaboration with fa Madbouly met with British trade envoy Jeffrey Donaldson the Armed Forces Engineering Authority, reported Al Borsa. to discuss the possibility of partnership in a number of fields, Further developments are being constructed around the hotel, reported Al Mal News. Among the proposed projects for co- which is owned by the Armed Forces. The hotel will be built operation were building low-cost developments and potential on 10 acres, and several contracting companies are construct- residential units in the New Administrative Capital and other ing water and power facilities for the building. The total cost of new cities. Madbouly also discussed the New El Alaimen City, the hotel ranges between EGP 700 million to EGP 900 million as well as future developments, noting that a large budget has due to a recent surge in prices of building material. Orascom been allocated to New Urban Communities Authority (NUCA) is responsible for developing the area surrounding the hotel, to build the basic foundations and public services in the new while the New Urban Communities Authority (NUCA) will be cities as soon as possible, according to Al Shorouk News. constructing on site facilities. 3 LATEST INDUSTRY UPDATES

HCCD Subsidiaries Sign EGP 3 B Worth of NUCA Partners with GAFI to Offer 345 Lands Contracts The New Urban Communities Authorities (NUCA) has agreed Subsidiaries of the Holding Company for Construction and De- with the General Authority for Investments and Free Zones velopments (HCCD) have signed contracts worth EGP 3 billion (GAFI) to offer 345 land plots, reported Al Brosa. Both parties for projects to be completed in a year and a half, according are expected to agree on the conditions of the offerings, ac- to Mohamed Hegazy, CEO of HCCD, reported Amwal Elghad. cording to Tarek El Sebaey, Supervisor of NUCA’s Commercial The company has received orders from the government to work and Residential Sector. The lands will be targeted for multiple on national projects, including the New Administrative Capital. purposes in new cities with some being offered for residential The company expects revenues of EGP 600 million at the end projects to citizens with low-income. The total cost is EGP 4.7 of the current fiscal year as a result of the increasing business billion, EGP 3.5 billion of which will be dedicated for lands that conducted by the company. Works is expected to commence will include public services, while EGP 1.2 billion will be allocat- on the New El Alamein City and Toshka projects. Construction ed for land plots that will include social housing projects. works recorded a total of EGP 11 billion last year. Madbouly: Construction of 216 Units Com- Government Postpones Land Offering for pleted in New Qena Residential Development in Fayoum A total of 216 residential units have been completed out of the The Fayoum Housing Directorate has postponed the offering of total 4,892 units within a housing project located in New Qena, 158,000 square meters earmarked for residential and service according to Minister of Housing, Utitlities, and Urban Devel- projects to 2017, when all facilities on site have been construct- opment Mostafa Madbouly, reported Invest-Gate. Facilities are ed, reported Al Borsa. Currently, only 60% of the facilities have also being constructed in the project, including a hospital with been built on site, according to Ali Zain Al-Abdin, Representa- 175 beds that will be built on land measuring six acres in area tive of the Housing Ministry in Fayoum. The governorate is also of Al Nawadi, located north of the first district, as well as sever- considering revoking the construction contract from Al Sadeek al other buildings, according to Ahmed Arafa, the Head of the Contractors and offering it to other contractors, as the company New Qena Development Authority. violated its contract with the governorate, since facilities were scheduled to be completed last month. Al Sadeek Contractors 5 Contractors Appointed for Asmarat Project preciously received EGP 41.5 million to commence work on building the project’s facilities. Five contractors will start construction on the third district of the housing project in Al Asmarat that will replace informal settlements, according to Ahmed Taymour, Deputy Governor of NUCA Installs Monitor Control Devices in New Cairo, Amwal Elghad reported. The project is funded by the Cities Tahya Misr Fund and is set to be constructed on an area of 80 The New Urban Communities Authority (NUCA) will supply and acres, where the third district costs EGP 500 million and will be install 315 electronic remote street lighting, monitoring, and finalized in 2017. The third district will include 7,440 housing control devices within new cities, reported Daily News Egypt. A units, as well as several amenities. Around three schools were school is also expected to be constructed in New Nubaria City also built in Al Asmarat district that aim to service the new res- with 33 classrooms, as well as a kindergarten building and a idents who will move in to the area, according to state-owned new market. New Minya will also launch a tender to construct Al-Ahram. a road that will link the army road with the residential area and expand the Minya-Assiut road between the army road and NUCA Drafts Conditions for Purchase of Dar Al-Safa checkpoint. Additionally, more facilities will be imple- Misr Units mented, such as sewage and electricity. The New Urban Communities Authority (NUCA) has completed the drafting of the conditions for the purchase of over 50 Acres Allocated for Social Housing in New 10,000 units offered next month in the second phase Dar Misr Fayoum project, targeting middle-income citizens, reported Al Borsa. The New Fayoum Administration has announced the availa- The NUCA is also expected to finalize the procedures to offer bility of 50 acres dedicated to social housings in a statement 11 land plots in the first phase of the Dar Misr project , as offi- sent to New Urban Communities Authority (NUCA), reported Al cials in the NUCA have stated that the conditions will be sent to Borsa. The land plots were prepared before the announcement the Housing and Development Bank in the next few days. The was sent to NUCA, which will in turn offer them for sale in new draft includes details about measures for acquiring the units, cities, stated Ashraf Abdelrahman, Head of the New Fayoum remaining available houses in each city, reservation deposits Administration. The revenues that will come from the land of- and several other conditions for applicants. ferings will contribute to implementing projects dedicated for public services in the next phases in the city, which has an area of 13,500 acres.

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World Bank Commends Egyptian Social Real Estate Developers to Construct Social Housing Projects Housing Projects Officials at the World Bank has praised the efforts made by the The Cabinet approved the draft of terms and conditions regard- Egyptian Ministry of Housing, Utilities, and Urban Communi- ing collaboration with real estate developers in building units in ties in the implementation of social housing schemes, reported the Social Housing Project aimed at low-income citizens, re- Amwal Elghad. Minister of Housing Mostafa Madbouly has ex- ported Al Borsa. The draft included determining the land plots plained the project to a World Bank delegation in a meeting that where the project will be constructed and the areas in which was held to review the progress of the project and future plans. developers will be employed, provided that these developers The Ministry is currently building over 500,000 units across the have worked on previous projects with the government. The country, as part of the social housing scheme, stated Madbou- conditions, applying to all new cities except for New Cairo and ly. The plan will also include 6,000 units that will be offered for Sheikh Zayed, determined that payments for units should be rent to low-income earners, according to Al Mal News. made in cash up-front, or with a minimum 15% down-payment of the total unit price, according to Al Shorouk News. Real Estate Prices Increase by 25% in Obour City CAPMAS: 1.2 M Residential Units Completed Obour City recently experienced a rising demand on resi- in 5 Years dential and commercial properties, according to real estate The Central Agency for Public Mobilization and statistics (CAP- experts who projected an increase of property prices by over MAS) issued a report on Egyptian real estate revealing that 25% compared to last year’s prices, reported Almal News. The 1.2 million residential units have been completed in total in average price per square meter in Obour City has recorded five years in both public and private housing projects, reported EGP 2,500. The satellite city has a total area of approximately Ahram Online. The total investments for the 1.2 million units 16,000 acres, with the aim of accommodating 640,000 citizens recorded approximately EGP 109.6 billion, according to the by the time construction is completed. Obour City recently fell report. It further highlights that public expenditure in the hous- under the management of the New Urban Communities Au- ing sector constituted 41.7% of all expenditure with 497,000 thority (NUCA), while some investment companies have com- units, while the private sector made up the remaining 58.3% menced works in several real estate projects across the city with 694,000 units. CAPMAS also reported that FY 2014/2015 due to its proximity to Cairo. recorded the highest number of completed units at 352,000.

Promotion Campaigns Set to Attract New Administrative Capital to Offer Lands, Foreigners to North Coast Finalize Agreements with Developers The Tourism Promotion Authority is expected to begin promot- The company handling the New Administrative Capital project ing tourism in the North Coast for people living abroad within is set to decide on offering the first phase of investment land the next weeks, President of the Authority Samy Mahmoud told plots, with total areas ranging between 3,000 to 3,500 acres, Invest-Gate. The campaigns aim to attract tourists to visit the reported Al Borsa. The Administrative City company estimat- North Coast during winter, aiming to make use of the 95% va- ed that revenues from the first phase of the project, which will cancy rate of over 100,000 during non-peak times, Mahmoud measure 14 million square meters, will amount to EGP 30 bil- said. The Authority will focus on introducing several projects lion. The previous phase of the project included 12,000 acres, in North Coast to foreigners, he noted. He moreover pointed with EGP 60 billion worth of investments. The company is also out that there is very little exposure on the North Coast among discussing the possibility of selling the units located in the resi- foreign markets, despite having some of the best beaches in dential district within the previous phase in the project. Egypt, thereby making it a prime potential touristic hub. Government to Develop Slums in Red Sea Colliers: Housing Demand Expected to Grow Cities Demand on residential units is expected to increase to approx- Slums located in Red Sea cities are expected to be developed imately 115,000 units per year, according to Ian Albert, the Re- by the Egyptian government at a cost of EGP 330 million, ac- gional Director at Colliers International Middle East and North cording to Minister of Housing, Utilities, and Urban Communi- Africa, reported Daily News Egypt. This compares to Colliers’ ties Mostafa Madbouly, reported Amwal Elghad. New residen- previous estimate, setting annual demand at 90,000 to 100,000 tial units are expected to be built instead of the informal ones units annually. A recession in the real estate market is unlikely located in Red Sea areas. Approximately 75% of the projects to happen due to the low supply in residential units compared are completed, while Madbouly confirmed that the remaining to the high demand, Albert said, noting that Greater Cairo is ex- construction should be completed over the next three months, pected to witness a deficit of 400,000 units for middle-income according to Al Watan. Some of the new homes will be deliv- citizens by 2020. He also noted that the retail sector is witness- ered to residents of informal settlements in the Radwa District ing increased investment, along with significant opportunities in next January according to Madbouly. urban regeneration.

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Ministry of Housing Completes Construction 5,400 Residential Units to be Launched Next of Facilities for 8,734 Units Month in Rehab and Madinaty The Ministry of Housing, Utilities, and Urban Communities has The Ministry of Housing, Utilities, and Urban Communitues announced the completion of construction of units and facilities launched 5400 units in Madinaty and Rehab in New Cairo, in 12 governorates across the country, reported Invest-Gate. reported Invest-Gate. The units include 3,912 apartments in These include 960 units in a social housing project located in Madinaty, and 1,488 apartments located in Rehab. Madbouly the Amlak area in Salam City in Cairo. The completed con- also clarified in a released statement that the units are fully struction work was undertaken in the govern orates of Cairo, ready for living and their sizes range between 58 square me- Suez, Red Sea, South and North Sinai, Damietta, Gharebya, ters and 162 square meters. Tarek El Sebaey, Supervisor on Sohag, Sharqia, Kafr El Sheikh, Beheira, and Menoufiya. Ac- trade and real estate affairs in the Al Omranya committee that cording to Mohamed Nasser, Head of the Central Authority for the conditions to acquire the units are present at all branches of Construction affiliated with the ministry, hundreds of units were “The housing and construction” Bank starting of 9th of October constructed in each of the aforementioned governorates. during the bank’s working days.

Housing Ministry to Offer Rent Option in 20,867 Residential Units Connected to the Social Housing Projects Water Supply Grid Residential units will be offered for low income citizens start- The National Authority for Potable Water and Sewage has ing October 9 in several governorates and cities, according to connected 20,867 residential units to the water supply grid, in Minister of Housing, Utilities, and Urban Communities Mostafa addition to constructing a sewage facility serving 18,112 resi- Madbouly, reported Invest-Gate. Citizens will be able to rent dential units, reported Invest-Gate. Current construction work the units within 10 governorate if their income is below EGP is underway to connect an additional 40,209 residential units 1,500. Residents will pay between EGP 300 and 410 with an to reach a total of 75,563 residential units. Sayed Ashry, Head expected rent increase of 7% annually and a rental period of of the Authority, stated that infrastructure work has taken place seven years, said Salah Hassan, Deputy Executive Director of in 12 governorates, adding that construction of pipelines has the Social Housing Fund. In case of a large demand among been extended to reach more than a thousand additional units, applicants, priorities are given to those living under more pre- mainly in the Luxor area. carious circumstances. NUCA to Launch New PPP Projects in Upper Housing Ministry to Launch 4,632 Units in Egypt 10th of Ramadan New Urban Communities Authority (NUCA) offered new part- Dar Misr social housing project is planned to include 4,632 new nership projects to property developers in Upper Egypt in Sep- residential units located in 10th of Ramadan City, reported Al tember, NUCA’s Vice President, Kamal Fahmy, told reported Borsa. The first phase of the project will include 2,832 units, Amwal Alghad. The new projects are part of the second phase while the second phase will include 1,800 units. The project will of the government’s public-private partnership (PPP) program, also include facilities such as water and electricity, gas, and tel- according to Fahmy, and will be located in New Beni Suef, New ecommunications as part of the services that will be offered as Minya, New Assiut, and New Tiba. NUCA is said to currently part of Dar Misr project, as well as two schools, a nursery, and carry a knowledge bank of all details about the investor includ- two commercial building according to Adel Al Nagar, Head of ing the authority’s assessment, approvals to provide lands, and the Development Committee of 10th of Ramadan City, stated- guarantees. The first stage of PPP projects was launched dur- Shorouk News. ing Egypt’s Economic Development Conference held in Sharm El-Sheikh in March 2015. Al Wadi Al Gedid Invests EGP 71 M in Slum Development Suez Governorate Announce 47,000 Square The Governorate of New Valley (Al Wadi Al Gedid) started im- Meters for Residential, Tourism Projects plementing the first phase of its plan to develop its slum areas Approximately 47,000 square meters will be assigned for at costs of EGP 71 million, reported Al Borsa. The governorate residential and tourism projects in Suez, which investors can seeks to develop areas of Old Nowt and Islamic Balatt during reserve starting next month, stated Hassan Kamal, Head of the first phase in collaboration with the general project of ren- Housing Committee in Suez, reported Al Borsa. Kamal added ovating slums, according to Mahmoud Ashmawy, New Valley that the land is divided in to five areas within the governorate Governor, Plans include the improvement of other areas in- and has been priced in collaboration with Ministry of Invest- cluding Dakhla and Kharga, Paris area, and Farfra; in addition ment. Six plots of land were previously showcased and sold to well as preserving areas of antiquities that are endangered out of a total of 17 land plots, constituting 40% of the total land. to collapse. Kamal also mentioned that Suez has appointed EGP 140 million for several projects, such as sanitation, electricity, water, and residential.

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The Key to Egypt’s Future:

New Alamein Eco-City By Ahnie Litecky

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Egypt’s official tourism website describes the Mediterranean city of Alamein as the “key to Egypt.” This Mediterranean city, located halfway between Alexandria and Marsa Matrouh, is famous for witnessing several World War II battles. The Egyp- tian government has targeted the country’s north west coast for development and New Alamein, a multi-billion pound eco-city designed to boost the country’s economy, will be an important part of that long-term goal. With initial construction underway on New Alamein, a more apt name may soon be “key to Egypt’s future.” Construction Underway New Alamein, to be built at an estimated initial cost of EGP 2 billion, is one of works. In October of last year, Minister The first phase of infrastructure and fa- multiple new urban centers that the gov- of Housing, Utilities and Urban Commu- cilities construction should be complet- ernment has planned to accommodate nities, Moustafa Madbouly, announced ed in two years at an estimated cost of a booming population, curb unemploy- that the project was underway with road EGP 1.5 billion, according to Daily News ment, and help the economy. network surveys and designs. The Arab Egypt. Contractors Company was working to Infrastructure and facilities construction Former Prime Minister, Ibrahim Mahlab, prep road network sites. announced the establishment of New is handled 3 different entities, each cov- Alamein at a press conference in August Kamal Fahmy, Vice President of the Au- ering different areas. thority of New Urban Communities for 2014. He stated, “…the new city falls un- Foreign investors are pursuing a stake Development, said that the Arab Con- der the ‘fourth generation of new cities’ in the new city project, which would also tractors’ Company has been assigned meaning that the infrastructure will be provide a boost to the Egyptian econo- to implement drinking water, sanitation, eco-oriented, aiming at sustainable de- my. A French delegation that met with drainage, irrigation, electricity, communi- velopment, exploring water desalination Madbouly in mid-April expressed inter- cations, and civil works on about 1,466 and other renewable energy methods,” est in investment opportunities in mul- acres. The Egyptian Contracting Com- according to Cairo Post. tiple Egyptian projects, including New pany (Mokhtar Ibrahim) will build roads, Alamein. Representatives of UAE’s Abu The Ministry of Housing aims to complete drinking water, sanitation, drainage, ir- Dhabi Investment Authority have also the first phase of construction by 2020. rigation, electricity and civil works on shown interest in investment in New This initial phase will be completed on another space of about 284 acres. The Alamein housing projects. an area of 41,000 acres. An additional company has also been contracted to im- 8,000 acres will be set aside for an In- plement drinking water, sanitation, drain- After the groundwork is laid, the Minis- ternational Tourism Zone. A further 13 age, irrigation, electricity, and civil works try of Housing plans to offer projects on kilometers along the shoreline will be on an additional space of about 250 areas of up to 2,000 acres to investors, designated for public beaches. The city acres. The Armed Forces Engineering according to a statement from the Min- will feature housing for all income levels. will complete all road works on an area istry of Housing. Next year the Ministry A general plan for the new city is in the totalling 1,717 acres. of Housing will begin construction on 10,000 residential units in New Alamein. These government-subsidized units will hopefully encourage workers to move to the new city. Other planned projects for the new city include an industrial zone, business zone, educational zone, medical center, universities, renewable energy stations, and a global tourism center. A New Kind of Egyptian City New Alamein is one of several “eco-cities” the Egyptian government is working towards building. An eco-city aims to implement “a wide range of environmental, social, and institutional policies that are directed to managing urban spaces to achieve sustainability,” according to Ho- sam K. El Ghorab and Heidi A. Shalaby, who wrote about eco-cities in a February 8 LATEST INDUSTRY UPDATES

2016 article in the Alexandria Engineer- ing Journal. An eco-city also provides an adequate living standard without deplet- ing the surrounding ecosystem. The Egyptian government expects New Alamein to rely on renewable resources. Plans for the city include a desalinization plant, solar energy, and other renewable sources. A shift towards an eco-friend- ly model of city building could help miti- gate Egypt’s long-term issues with water shortages and the ongoing energy crisis. Northwest Coast Development Project The construction of New Alamein is part late May 2016 the Egyptian government billion) investment to be demined, with of the Northwest Coast Development received an EGP 222 billion ($25 billion) cost ranging between EGP 2,600 – EGP Project, a large-scale government plan loan to finance construction of a nuclear 8,800 ($300- $1000) per mine. to generate economic growth, improve power station in Dabaa, located west of social and living conditions for local com- Water scarcity is another issue that chal- Alexandria. The loan will cover 85% of munities, increase infrastructure, and lenges development of New Alamein and construction, while the Egyptian govern- provide housing and job opportunities for the northwest coast in general. There ment will provide the rest of the funding. millions of Egyptians. The Egyptian gov- are limited quantities of surface wa- The government has almost finalized ernment inaugurated this project in 2014. ter available in the region and it mostly plans with the Russian nuclear firm Ro- The Northwest Coast Development Pro- comes from rainfall during the winter satom to construct the power plant. Con- ject could provide roughly 11 million job season. With improved infrastructure, struction should be completed by 2022. opportunities by the project’s expected this water could be captured and used for completion in 2052. Challenge to Development: Land irrigation. Groundwater resources are mines and Water more extensive but much of the water is To achieve these lofty goals, the Egyptian brackish and water quality varies great- The site for New Alamein was chosen government aims to establish interna- ly from place to place and seasonally. specifically to attract surplus population tionally renowned tourism centers, indus- Treated water is pumped from Alexandria from the Nile valley and because it pro- try, agriculture, and urban communities through the Marsa Matrouh Governorate, vides opportunities for economic and in the northwest coast region, which ex- but there is often insufficient water. The social development. The New Alamein tends 500 kilometers from El Alamein to Egyptian government recognizes the wa- site is in close proximity to Alexandria. Salloum. With acres of available land, ter scarcity issue and has plans to build However, the region does face ongoing including grazing land; resources such a desalination plant in Alamein. The pub- issues that will need to be addressed for as dolomite, limestone, natural gas, and lic-private partnership unit of the Minis- the New Alamein project to come to fru- crude oil; and multiple tourist attractions, try of Finance plans to offer the Alamein ition. such as beaches, monuments, and mon- desalination project to investors before asteries, the northwest coast is a prime Landmines are a major issue facing the the end of the fiscal year. However, until spot for economic development. development of New Alamein and the funding is secured, the problem of water- Infrastructure and Energy northwest coast in general. There were ing New Alamein remains a serious chal- an estimated 17.5 million land mines left lenge. Improving infrastructure in the region will behind by World War II troops in many also play an important role in building up A City for the Future areas of the Western Desert. While the the northwest coast. Roads are need- Egyptian military has been working to If New Alamein lives up to its many prom- ed to improve access to the region and remove landmines since 1983, there are ises, then the city will have a significant through the National Roads project, the still millions buried and unexploded ordi- impact on Egypt’s future. The timely and Egyptian government has begun renovat- nances spread throughout the Alamein successful completion of New Alamein ing roads in the north coast region. The region. could provide a model for how Egypt should 135 kilometer Wadi Al Natrun-Alamein address many serious issues: what to do In anticipation of construction projects road that connects Wadi Al Natrun area with the growing urban population around the Egyptian military has cleared by the in Beheira governorate to Alamein was the Nile River, water shortages, the energy end of 2015 26,190 acres of landmines recently renovated at a cost of EGP 1.9 crisis, economic instability, high unemploy- on the New Alamein site. The Egyptian billion, and included upgrades, toll gates, ment. If New Alamein is a success, then it government, United Nations Develop- and the addition of a third lane. The ren- could also be the first of many eco-city pro- ment Program, the United States Agency ovations were partly undertaken to en- jects in Egypt that address broader global for International Development, and the courage tourism between Cairo and the issues of climate change and sustainability. European Union, have all supported and northern coast, said Transportation Min- New Alamein represents a new perspective worked together to fund costly demining istry spokesperson Ayman al-Sheraie in on city planning and construction and can activities in the north west coast. The 2015, according to Nile Net. help lead Egypt into a sustainable future. Egyptian government estimated in 2009 Egypt has big plans for developing clean that the Alamein fields alone would re- energy options on the northwest coast. In quire more than an EGP 177 billion ($20 9 MARKET CLOSE-UP

What Happened in New Obour City?

By Fatma Khaled In efforts to expand the reach of urban New Obour City ownership through procedures that were landscape, moving away from the con- set by the ministry, whereas the applica- The total area of the New Obour City is gested banks of the Nile, the government tion deadline ends at the end of Septem- 58,914.4 acres, as the new borders of has launched numerous new cities, in- ber. the city will include borders of a gate that cluding New Obour City. is located at east of 10th of Ramadan Ownership Validation The land on which the city was planned City. The city’s entrances are set to be “We will not seize any land from any of was originally designated for agriculture from the Ismailia Desert Road and west the current owners, but we will not allow purposes, with 16,672 acres falling under of Nahda Road, and south of the Ismailia/ any informal settlements. We are cur- the jurisdiction of the Public Authority for Cairo Desert Road. rently in the process of regulating land Reconstruction Projects and Agriculture The decision was followed by the Hous- activity in the region, to transform it from Development, in addition to 16,649 acres ing Ministry assigning the Obour City agriculture activity into urban activity,” of agricultural land that were set under Authority to take over the lands, confirm- said Minister of Housing, Utilities, and the jurisdiction of New Urban Communi- ing state ownership over them based on Urban Communities, Mostafa Madbouly, ties Authority (NUCA). the issued presidential decree for 2016, in a meeting with representatives of the However, a presidential decree issued which also stipulates that the Egyptian entities and associations with properties earlier this year redefines the borders of Armed Forces owns six plots within the in the new city. The meeting was held in the city in efforts to transform it from ag- city, measuring a total of 13,770 acres, response to mounting uncertainty among riculture activity to an urban community, while the NUCA owns the remaining land owners, in fear of losing ownership due to what Housing Minister Mostafa 45,145 acres. to their properties. Madbouly described as “the scarcity of As a result of the decision, original land Owners were requested to prove own- water in such areas that makes it unrelia- owners were uncertain on how to act ership of land within the areas that fall ble for agriculture.” upon the lands following the declaration inside the borders of the city by submit- The move has stirred quite some drama, that is was state-owned land. Madbouly ting documentation proving ownership. between proof of ownership, required released statements later assuring land 62,000 applicants –to date- have submit- documentation, and removal of illegal owners that the government would not ted their ownership documents for vali- encroachments. seize any lands from owners, however dation, according to Amin Ghonim Head noting that owners had to validate their of Obour City Authority, and the person

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responsible for arranging matters related the new borders will abide by the new au- to Ghoneim, who also confirmed that the to the new city. thority, according to Ragaa Fouad, Vice removal orders came as a result of build- President of NUCA. ing without a license in the fourth district, The procedures for land validation also increasing the heights of some buildings, included owners preparing and submit- Building Violations and store owners who built walls, which ting only documents detailing any activity The Ministry of Housing has announced is considered a construction violation. that was previously undertaken on the that any building violations will be fined land plots by owners and prove that they The Housing Ministry has taken over the and removed, encouraging land own- are the original owners, added Ghonim. vacant lands in efforts to develop pro- ers to validate their lands. Meanwhile, jects in various sectors. Around 12,240 NUCA previously held several meetings Ghoneim, has confirmed that there are residential units are currently being con- with the Ministry of Housing and other campaigns for the closure and remov- structed and 15,000 residential units are housing associations to decide on the als of building violations, including some being implemented by the Armed Forces, conditions for reconciling land ownership shops located on the main road of the according to Kamal Fahmy, Vice Chair- amid the announcement of the presiden- first district, which is considered one of man of the NUCA. tial decree that outlined borders. The au- the first neighborhoods in the city. Addi- thority will also be deciding on the fees tionally, NUCA has ordered the removal Future plans in New Obour City have that will be paid in order to proceed with of residential buildings that turned their not been announced to date, nor has the land’s activity after the deadline for ap- ground floors into unauthorized commer- head of the newly established authority plications. cial shops and administrative units and for the city bee appointed. has deviated from serving residential One of the strategic plans for the new city The city’s proximity to Cairo is believed to purposes. is that it will have a separate administra- increase land value sharply in the coming tive body from the current Obour City, Around 123 removal orders have been years, especially as further commercial where all privately owned lands within implemented against violators, according and residential expansions take place.

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Everything You Need to Know About

Property Mortgage in Egypt By Noha Abdel Bary Despite the housing boom in Egypt, and to low- and middle-income homebuyers. ers with a chance to build their homes,” the myriad payment options that have The EGP 10 billion will be loaned out to the Chairman of the Egyptian Financial recently become available to buyers, local banks by the CBE at low interest Supervisory Authority (EFSA), Sherif S. mortgages have nonetheless maintained rates, with a 20-year repayment period. Samy, told Daily News Egypt in an inter- a limited popularity, despite being wide- In turn, mortgage loans will be provided view. spread in other parallel markets interna- to low- and middle-income buyers with The Mortgage Finance Fund, a subsidi- tionally. Aiming to tackle this issue, and a 7% and 8% interest rate respectively. ary of the CBE, regulates the entire mort- to moreover bridge the housing gap, the Mortgage loans are defined as loans in gage scheme in Egypt. Central Bank of Egypt (CBE) launched which the purchased house is put up as its mortgage financing initiative in 2014, collateral for the loan, wherein a buyer In February 2016, new amendments were aiming to provide EGP 10 billion to banks who defaults on a loan is subject to hav- introduced to CBE’s initiative. Under the to provide mortgage loans to homebuy- ing his/her house repossessed. new agreements, low-income individu- ers. als earning less than EGP 1,400 will be “Egypt is an equities market where mort- qualified for a loan at an interest rate of The initiative was forestalled for a peri- gage is a developing field, however it still 5% instead of 7%. Down payments have od of time, but picked up again last April is considered to be inadequate and with been reduced to EGP 12,000 instead of when banks withdrew EGP 1 billion of the the initiative launched by the CBE, fi- EGP 15,000, with governments providing allocated EGP 10 billion to begin loaning nancing mortgages provides home seek- 12 MARKET CLOSE-UP

an incentive to banks to finance income There are always two sides to every story “The investment culture in the domestic brackets that may have difficulty obtain- and Egyptians are considering properties market classifies real estate and land in- ing proof of income through insurance to be a way of guaranteed and sound vestments as the safest investment sec- policies. investment. The value of the Egyptian tors nowadays” as Tarek Shoukry, Chair- pound is declining and where to invest man of Arabia Group puts it. Shoukry Mortgage Firms the money and which construction pro- posited a rather important claim that the Other than banks, there are numerous jects and units to focus on is a fundamen- real estate industry is on the rise and is firms in Egypt specializing in finance tal part of the process of property mort- guaranteed to not decline and so using mortgage loans. A few examples of mortgage in Egypt. The value of the currency the money to invest in houses instead gage firms include the Egyptian Housing is diminishing against a plethora of real of safe boxes at banks is the safest type Finance Company (EHFC), Tamweel estate property and striking the balance of investment in Egypt today. Compared Mortgage Finance, Sakan Finance, Al is challenging. The benefit of using the to the US, hardly any hard transactions Ahly Mortgage Finance, Taamir Mort- mortgage system to finance a property take place, cards are being used for any gage Company, Arab African Internation- lies in investing in current investments payments and mortgages are being in- al Mortgage Finance, Egyptian Mortgage against an inevitable increase in prices vested in on every given chance, while Refinance Company, Al Naeem Mort- of real estate properties by a minimum in Egypt no one uses mortgages, and the gage Finance Company, Amlak for Real of 15% increase annually; Ayman Sami, CBE’s initiative would be utilized to pump Estate, among others. Country Head of Jones Lang Lasalle money for investment purposes and cash (JLL), stated that annually a 5% to 15% is would only be used in the form of build- Islamic Mortgage added to residential units and properties. ings and houses and not for transaction The Egyptian Financial Supervisory Au- While currency depreciation is not a nov- purposes. thority has provided the Islamic banks ice concept, the best method of investing There is always room to invest, how- with regulations under mortgage financ- the money available needs studying. ever, finding the right opportunity in the ing. As a result Faisal Islamic Bank Following the launch of the property right moment is an integral opportunity assigned EGP 200 million for individ- mortgage initiative, real estate projects to grasp and the abovementioned lists of uals who comply with low and middle-in- have taken leads and have topped lists firms to invest in and types of mortgages comes. of news agencies and news announce- listed would ease the process of com- Islamic mortgage is believed to develop ments. Other benefits for using property mitting to a life-long asset. The CBE’s and sustain applicable Islamic laws, reg- mortgage lie in building and sustaining specific regulations of how much money ulations and principles to financial trans- consumers’ confidence, which would be an individual can borrow depending on actions. Unlike a traditional mortgage attained through CBE’s system regula- their income level ensures a smooth re- system where the money borrower is giv- tions. payment system of how much money in- en a certain amount, which is then repaid dividuals can eventually pay back which Real estate is an embodiment of profit mak- with interest, Islamic mortgage is based guarantees an efficient overall system. ing and a safe haven; the prices keep ris- upon the Islamic funding principles of a From an economical point of view, per- ing and the value of the Egyptian currency co-ownership and leasing, according to taining to certain property mortgage per- keeps decreasing, and so investing now is Al Rayan Bank. centages would reduce the burden on the best solution to an economic rise. The banks, and therefore, boost the credibili- The Investment Benefits of Mortgages majority of investors in Egypt favor real es- ty of customers and this would achieve a tate investments compared to investments Property Mortgage in Egypt has opened win-win system. in other liquid assets such as shares, gold, new segments of investment, a new or bank certificates, said Ahmed Al Masou- scheme of property financing is to reflect di, the CEO of AqarMap, in an interview with on the rapidly expanding Egyptian mar- Daily News Egypt. kets, such as the real estate market.

13 MARKET CLOSE-UP

FDI in the Residential Market: A Closer Look By Tim Nanns The multitude of building projects across come buyers, but also the region of or- the top tiers of real estate companies list- Egypt’s various construction sites is near- igin of their investors – they are almost ed at the Egyptian stock market. ly endless, from huge, narrow apartment exclusively from Gulf countries like Sau- Another major player in the residential buildings for lower-income households, di-Arabia, Qatar, and the UAE. Some of market is Qatari Diar. Despite strained re- to the luxurious shopping malls springing the companies running these residential lationships between Egypt and its home up all over the main population hubs. development projects are joint ventures, country, the company is developing sev- some exclusively owned by their foreign Built with a similar view to luxury as these eral large-scale projects in the Greater investors. malls are the housing schemes in resi- Cairo area: with New Giza and City Gate dential projects geared towards mid- to Current Market Activity – over 1,500 and around 2,100 acres in high-income earners. With the exception size respectively – it features two major Probably the largest investors in the of government-funded social housing upscale developments. Additionally, it is housing sector is the UAE’s Emaar Misr, projects, the flags flying over these resi- also building the St. Regis Nile Corniche the Egypt-based subsidiary of Emaar dential projects are often those of foreign complex, which involves an upscale hotel Properties. Its CEO, Mohamed El-Da- construction or investment companies. and serviced apartments. The New Giza han, labelled his company as one of the and City Gate projects are both designed Though foreign investors are also in- largest foreign direct investors in Egypt, as integrated communities, with parks, volved in low- to middle-income residen- in a March interview with Daily News hotels, clubs and golf courses. tial projects, like the Kuwaiti firm Al Ju- Egypt. Indeed, Emaar Misr has a num- wisry which is running a social housing ber of projects under development, most Among the prominent developers is the project in 6th of October City, high-in- prominently Mivida and Uptown Cairo in joint venture Saudi-Egyptian Construc- come buyers are the main focus of for- the Greater Cairo area and Marassi at tion Company (SECON), established eign companies. the North Coast. It also achieved a 21.2% through an international agreement be- growth in sales from 2014 to 2015, from tween the two countries in 1975. In 2015, What most residential projects have EGP 7.1 billion to 8.6 billion, taking it to the company announced its plans to in common are of course their high-in- 14 MARKET CLOSE-UP

build two residential towers overlooking for Investment and Free Zones (GAFI), equality between local and foreign inves- the Nile in the Maadi district in Cairo, in- stating that there are now about six times tors when acquiring lands, entailing pro- cluding a five-star Hilton Hotel with a to- as many companies on the market as visions for voluntary liquidation within a tal investment of approximately EGP 1.6 in 2015, while the capital invested rose 120-day deadline. billion. more than tenfold – signifying a peak in Main issues foreign investors are still the incentive climate for FDI in the boom- What is notable about SECON’s projects facing however include the transfer of ing real estate industry. is their sheer number, though they mostly foreign exchange out of Egypt since larg- lack the scale of Marseilia’s, Emaar’s or Surprisingly, the UK accounted for 41.5% er transfers need to be approved by the Qatari Diar’s community projects. of foreign investment into Egypt, ac- CBE. According to a 2015 report by the cording to Santander’s 2014/15 figures, US State Department, legitimate trans- Moreover, across Egypt’s North and East while the UAE, Saudi Arabia, and Kuwait fers can sometimes be delayed for sev- coasts, Egyptian-Gulf company Marseil- together comprised only 17.5% of the eral months. In light of the recent curren- ia is building a range of residential units investments. However, since there has cy crisis, currency-related issues like this with investments worth EGP 1.7 billion in been an enormous rise of companies are not likely to vanish anytime soon. 2016 and 2017, the company’s chairman working in the real estate sector, and in Yasser Ragab told Al Borsa in August. Additionally, there are legal restrictions on lights the major trend towards foreign The main focus of its flagship projects the number of foreign workers in foreign investors coming from the Gulf, it is es- are beach communities on the North companies working in Egypt. The OECD timated that the UAE and Saudi Arabia Coast and near Alexandria. Further, ac- further stated in a 2014 report that, de together account for the largest share of cording to Ragab, in an interview with facto, foreign personnel are not permit- FDI in the residential market. Daily News Egypt, the company aims to ted in certain sectors, calling for codifica- achieve sales of EGP 1bn this year, de- Opportunities and Challenges Faced tion of these limits or their abolishment. spite planning to deliver only 824 housing by Foreign Investors Another issue is law no. 89 governing units this year, down from 1,470 last year. tenders, which allows the government The residential sector in Egypt is natu- Ragab also stated that social housing ac- to prioritize bids from domestic contrac- rally driven by an extremely fast-grow- counts for 70% of Marseilia’s 8,000 cli- tors over foreign ones when awarding ing population, and the attendant surge ents, and it would thus compete for land contracts, which could dissuade some in demand. This compounds an existing offered by the Ministry of Housing, aiming foreign companies from even competing housing crisis due to the inability of the to implement social projects in the Nile over government contracts. government to meet current demand. Delta, Upper Egypt and Cairo. Nonetheless, despite these problems Colliers International estimated the resi- Last but not least is Capital Group Prop- foreign investors might face when invest- dential market to require 500,000 units in erties (CGP), owned by Abu Dhabi Capi- ing into Egypt, the recent improvements 2020, which entails an annual demand of tal Group and Al Ain Properties. It started of the legal framework – specifically tar- 90,000-100,000 units, with annual sup- its first project on the Egyptian market geting foreign investment – were large- ply meeting only half the demand. Of the – labelled Al Burouj – this year. Accord- ly praised for improving the investment total demand, 77% is generated by mid- ing to CGP, the project aims to establish climate, as highlighted by the US State dle-income Egyptians. an integrated urban community between Department report. the Suez and Ismailia Desert Roads on This, however, does not account for the What makes Egypt’s residential mar- 1,212 acres, at an investment volume of great numbers of high-end and luxurious ket of Egypt so attractive for investors EGP 40 billion. CGP claims its new pro- housing currently under construction in in general, not just foreign ones, is the ject will create housing for all segments Egypt. Incentives for foreign capital in- aforementioned steadily high population of society. volve a weak Egyptian pound, currently growth, which guarantees a high demand in a severe crisis after a recent 13% de- FDI in the Residential Market: for housing units. However, the tradition- preciation of its value, changing hands at The Figures al role of real estate as a safe haven for EGP 8.88 per dollar in Egyptian banks, investments plays a part in this: with the To delve deeper into the matter, foreign and at far higher rates in the unofficial Egyptian pound in a perilous situation direct investments (FDI) are by defini- market, with analysts expecting further and inflation as a very real risk, many tion direct investments or investments by devaluation. people consider real estate as a safe in- companies in which foreign shareholders Additionally, the government has recently vestment opportunity. have at least 10% stake, though some made an effort to attract foreign inves- definitions put the percentage at 25. Furthermore, as Egypt’s mid- to high-in- tors with flagship conferences, like the come residents – particularly those in While figures on FDI in residential pro- Egypt Economic Development Confer- large urban cities – seek to move further jects are scarce, numbers from 2014/15 ence (EEDC) in 2015, but also with an away from urban centers and the con- by Santander show that construction improved legal framework for FDI, like gestion and other issues associated with and real estate together only amounted offering a range of incentives to foreign them, demand for a new kind of housing to roughly 3.6% of the total FDI flowing investors and reducing the bureaucracy has been established. In turn, foreign in- into Egypt. According to the UNCTAD’s surrounding foreign business activities. vestors have sought to take advantage World Investment Report the total FDI in The investment law, which was amend- of this urban sprawl, effectively changing Egypt has risen by 14.1% and 49.3% in ed days prior to the EEDC, introduces the landscape of Egypt’s property mar- 2014 and 2015 respectively. In particular, incentives for foreign investors, includ- ket. the real estate sector has made improve- ing, but not limited to, reduced customs, ments in terms of easing investment reduced sales tax rates, and ensuring procedures with the General Authority 15 MARKET CLOSE-UP

The Influence of FDI Investment on Egypt’s

Commercial Real Estate By Julian Nabil Viewed as one of Egypt’s stronger in- (GRETI), reaching the Semi-Transpar- tail space in 2015, increasing total mall- dustries, real estate ventures have been ent category, which is a sound indicator based retail space to around 1.3 million on the rise despite economic conditions. of the positive trend the local market is square meters, according to a report by With state efforts in attracting investment currently experiencing. Among the con- JLL. to numerous sectors, many investors, es- tributing factors to the boost, is the flow of The market saw the launch of a number pecially foreigners, have begun directing Foreign Direct Investment (FDI), namely of large mixed-use commercial projects capital towards one of the underserved from Gulf countries such as Saudi Arabia and the development of existing projects segments of the industry, commercial and the United Arab Emirates (UAE). in the recent years. property. In terms of figures, public and private One of the most known Saudi’s commer- Including office buildings and retail devel- capital poured into the real estate mar- cial projects is Citystars Heliopolis which opments, commercial real estate is con- ket as a whole stood at a total of EGP was launched in 2004 with total invest- sidered by many as a promising sector 47.5 billion ($5.3billion) in the previous ments over EGP 800 million. The mixed- as statistics have shown a significant de- fiscal year of 2014/2015, according the use development, which includes Citys- mand supply gap. According to a report Ministry of Housing. Similarly, the Cen- tars, office buildings and other facilities, by Jones Lang LaSalle (JLL), demand for tral Bank of Egypt (CBE) reported that is managed by Golden Pyramids Plaza. Gross Leasable Areas (GLA) in Egypt is investments pumped in the real estate expected to climb to 3.28 million square market by foreign investors, in the same Launched late November 2013, Cairo meters, while currently supply stands at fiscal year, account for 6% of total FDI in Festival City (CFC) is another major pro- only 1.3 million square meters, rendering the Egyptian market. ject that contributed to the standing of the the market a profitable venture, at least local commercial market. Developed by Market Overview – FDI in Retail by figures. Al-Futtaim Group Real Estate, part of Du- The retail market, in terms of real es- bai-based Al-Futtaim Group (MAF), the In recent years, Egypt’s commercial real tate, has continued to maintain a robust project was constructed with investments estate market became on more solid growth since 2015, with vacancy rates reaching EGP 7 billion. footing than it has been before, serving falling 14% year-on-year in the second as a hedge against the stock market vol- Additionally, MAF is currently developing quarter (Q2) of 2016, despite the rise of atility. It is also largely seen as a safe ha- a mega retail project, Mall of Egypt, in 6th rental rates by 13% year-on-year during ven against inflation and the devaluation of October City with total investments of the same quarter, reflecting the persis- of the Egyptian pound due to its high re- EGP 4.9 billion. The project is expected tently growing demand. turns on investment (ROI). to be finalized in Q4 2016. Being positioned in a very dynamic tier, The country has moved up to fourth The UAE developer has also launched Cairo saw the completion of around place within the MENA region in the 2016 other landmark shopping destinations in 93,000 square meters of additional re- Global Real Estate Transparency Index Egypt; City Centre Maadi and City Cen- 16 MARKET CLOSE-UP

tre Alexandria, with a total investment of around EGP 2.5 billion. The company is also in the preparation phase of a EGP 2 billion expansion of City Center Maadi, according to Mouien Al Madhoun, MAF Chief Human Capital Officer, interview with Daily News Egypt. In early January 2016, the company un- veiled plans to start a third City Centre project, the new City Centre Almaza, with an investment of over EGP 4 billion. The new project is expected to open its doors in 2019. A similarly prominent commercial project is Mall of Arabia, with its phases one and two hitting EGP 5 billion in investments. The mall’s owner, Saudi-based Fawaz Abdulaziz Al Hokair, earlier announced plans for a third phase which is still under study. Furthermore, Dubai’s Emaar Properties launched Emaar Square in the Mokat- tam area within its Uptown Cairo project, which is expected to be finalized in 2017. The venture is worth EGP 12.8 billion in investments, EGP 3 billion of which will be directed towards construction of Egypt’s largest open mall. The market has also started to see the entry of Arab investors outside the gulf region, such as Libyan HNS Group, owner of Sun City Mall; a project worth EGP Overlooking the main CFC Boulevard, the Southern Business District has been 3 billion in investment. There are also some concerns that rising divided into several phases. The first investment inflows into the commercial Market Overview – FDI in Office Space of which was launched in 2012 and in- property market may lead to oversupply cludes two buildings with an area of The office buildings market is also pick- or a potential asset bubble. However, the 40,000 square meters; while the second ing up, especially grade A offices in east market is backed by strong demand that phase includes five buildings with around and west Cairo, which have witnessed will help to protect it from any steep fall, 50,000 square meters. increasing demand during the past peri- according to Oxford Business Group. od. It is believed that tenants, when able Challenges and Market Resilience to, tend to relocate to quality office space In order to better understand the percep- with better geographical locations. Although the Egyptian government is fo- tion of the impact of FDI on the sector, cused on fostering a better investment Invest-Gate asked its readers about the The rise of entrepreneurial start-ups, environment, foreign investment flow is expected influence of the currently flow especially ones focused on technology still facing roadblocks. of foreign investment on the sector, a and mobile applications reflect a grow- whopping 62.5% believed that FDI is of Unlike the residential market where rev- ing need for small office space. In 2015 moderate influence on the real estate enue stream begins with the announce- alone 31,000 square meters were added sector’s performance. to the market, bringing the current total ment of the project, and ROI is relatively to 92,000 square meters based on JLL covered in a short period, commercial Despite all the economic challenges estimates. property requires longer periods to cover facing Egypt, the commercial real es- its initial capital investment. Part of this tate sector has succeeded to maintain While the need for business space is investment is land, and higher land pric- a buoyant performance with the capital increasing, supply is also growing as es offered by the state are straining profit has continued to attract from investors developers have ramped up their office itability prospects. The price increase is both local and foreign. Being considered projects. As part of CFC project worth mainly attributed to the state’s continued as a safe investment for many, such EGP 19 billion in investments, the Busi- monopoly over the sale of land, Egyp- fast-expanding industry will contribute to ness District was launched to address tian Businessmen’s Association’s (EBA) the recovery of the overall economy by the growing need for business space. Chairman, Hussein Sabour said, adding bringing in more inflows of hard curren- The project is divided to the Northern that the state role should focus on mon- cy, as well as securing more employment District and Southern District, offering a itoring and supervising land-offering pro- opportunities to balance out the recent combined total of 250,000 square meters cedures. rise in unemployment. of premium office space. 17 MARKET CLOSE-UP

Why Invest in Income Property? By Fatma Khaled

Despite the instability of the Egyptian from the property. Among the pioneers of Successful Examples market over the past few years, it has income property in the Egyptian market A vibrant example is Porto Group, a sub- become common knowledge that one are Porto Group, Brouj Egypt, and Italian sidiary of Amer Group, one of the most market has withstood the repeated eco- Square. prominent developers in the Middle East nomic shocks and has managed to flour- Income property is defined as earning and North Africa. Porto Group managed ish against the overarching downwards income through renting, leasing, or price to develop projects in several destina- current. appreciation of a property that can be res- tions that combine residential, retail, of- Real estate is perhaps the only industry idential or commercial, where residential fice spaces and international restaurants. that continues to see tremendous growth properties are referred to as “non-own- Porto Group operates mainly on four vital amid the complications of the economy, er occupied” that carry a mortgage of a interlinked lines of business that include with many—both investors and individu- higher interest rate than that of an “own- not only real estate, but also malls, ho- als alike—relying on it as the safe haven er-occupied” mortgage. tels, facilities’ management and sales, for investing their cash. The Egyptian market is currently filled and vacation club services. Seeking to set themselves apart in a high- with real estate developers and compa- The company states that it provides fa- ly competitive sector, a number of com- nies that offer the service of managing cilities management and maintenance panies have segued into a new branch those income properties, a process of- for all of its developments, offering many of the real estate market, offering rental ten referred to as property management. retail spaces in its recently established and management of properties as a ser- This involves the management of per- entities, and some found in Porto devel- vice offered alongside their regular prop- sonal property, tooling, systems, physical opments, which have sold approximately erty market, promising that in conjunc- capital assets, and manpower required 19,571 units since 2005. tion with the regular appreciation of the to maintain acquisition, control, account- property value, the buyer will also benefit ability, maintenance, utilization and dis- Porto Group is not the only real estate from a regular flow of income generated position. company that provides such services; 18 MARKET CLOSE-UP

many competitors have emerged recent- buildings rather than old ones, which is value can be funded by a financial insti- ly to the scene, such as Italian Square, considered a form of an income property tution. which mainly focuses on running and investment. The Indian investment market has wit- managing properties for its owners. There are two primary factions behind nessed advantages behind income prop- Italian Square is a commercial brand that the expected increase in demand, ac- erties, including confirmation by Indian was developed and managed by Misr Ita- cording to the company’s analysis; multi- private bankers and clients of wealth lia, which focuses on running the unit and national businesses seeking a presence management firms that they have strate- renting it with what they describe on their in Egypt and Middle Eastern companies gically started investing in income com- website as a guaranteed income that in- that have recently started to relocate in mercial properties because of the gained creases annually. Egypt to escape avoid the challenging assets that can protect their portfolios environments and cost of operating in from inflation and stock market instability. The company the focused on renting and Dubai and Lebanon. managing an investor’s business offering Another potential advantage, which can approximately 119 retail, administrative, “Our current projects include properties also be found in the Egyptian market of and service units for coffee shops, offic- in North Coast resorts, where customers income properties, is the availability of es, clinics, nurseries, beauty centers, etc. buy a residential chalet at a starting price chances for small investors who can in- of EGP 650,000 and sign a contract with vest in newly-built retail units and offices The company has stated on its website the resort’s hotel that will be further re- of smaller spaces. that their main goal is to develop a high- sponsible for attaining the monthly rental er return on investment (ROI) than from Investors, however, also face a number rate and providing maintenance before other sectors, such as banking, the stock of challenging potential disadvantages offering it for rent,” said Ayman Kamel, a market, and real estate investments. in the market when running an income sales administration employee at Brouj. property, which include the unstable in- According to Misr Italia, it is internation- Considerations before Investing in In- crease of net rental income; according to ally recognized that the return real estate come Properties the Global Property Guide, it is taxed at commercial investment reaches 18%; a progressive rates ranging between 20% number that is uncontested in any invest- Considering the challenging investment and 30%. ment project. climate in Egypt and the volatility of the Egyptian pound against the US dollar, One example is the rental control in Del- The company recently began selling its some Egyptian real estate companies hi, which is based on the maximum annu- commercial units in the final phase of its advise investors to answer certain ques- al rent, i.e. 10% of the construction cost projects in New Cairo and 6thof October tions before investing in an income prop- and the land’s price, which are assessed City, which boast a modern design and erty in order to cut potential losses. based on historical value rather than the superb location, with shops, cafes, res- property’s current value in the market. taurants, banks, and nurseries, a sales- Investors must decide on several factors, person told Invest-Gate. including whether they will invest in a unit Similar to Egyptian investors, Indian in- for accommodation or investment, the vestors may face trouble as landlords in She also added that customers make a size of the space needed and its internal protecting their property from unwanted down-payment of as little as 10% of the division, the facilities that can be provid- or overstaying renters, and although the total price of the unit as prepayment, and ed by the residential or commercial unit, case may be taken to court, the enforce- can choose to pay the rest over six years and the price compatibility with similar ment process may take years. from the date of purchase, describing projects in the same area. this as the “competitive edge that makes The very low Indian gross rental revenue Italian Square different from other com- The concept of income properties has is another disadvantage. In other words, panies.” existed in the Egyptian market for some the percentage of return on purchase of time, and similar investments have also property is low, even though residential “The price of one meter costs EGP been applied in other developing coun- property prices are high. 84,000, and will be rising by 5% next tries with economies similar to that of month. The increase is primarily based Bottom Line Egypt, such as India. on supply and demand,” another Italian Income property, while a new and emerg- Square employee told Invest-Gate. Investment in income and commercial ing trend, currently can be seen as one of properties in India have witnessed both Brouj for Real Estate is another compet- the most lucrative investments in Egypt. advantages and a number of challenges itor with a business model based on in- Combining both the safe haven of turning due to the same disadvantage Egypt is come property management. It is known a devaluating currency into appreciating facing currently, one of which is the In- for marketing projects in accommodation, brick and mortar, and securing regular dian rupee’s continuous depreciation administration, and luxury resorts, and is income. against the dollar. Therefore, the quest dedicated to property management and for high returns poses a challenging task. Delegating companies to run and man- real estate investment. age your property, ensuring maximum Similarly to Egyptian investment laws, The company’s real estate marketing output is an ideal process for those seek- Indian investment laws stipulate that analyst stated that there has been a noting a detached source of capital, and non-residential Indians can own unlimit- ed increase in the supply of commercial one which will pave the way to income ed residential and commercial properties. units since 2009. In addition, with the regardless of economic status. However, they are not allowed to pur- expansion of commercial and residen- chase agriculture lands, farm houses or tial units for rental usage, businesses plantation properties. The law also states have an opportunity to operate in new that a maximum of 80% of the property’s 19 MARKET CLOSE-UP

Trend Analysis: Devaluating Currency vs. Real Estate Boom

By Heba Eid

Egypt’s real estate market, described by the black market to flourish, with the dollar A Surge in Property Sales many as rock solid, may not necessarily reportedly crossing EGP 12. A weaker local currency has curtailed need a boost, yet the Egyptian pound’s In a move designed to reinvigorate a sales and market growth, which means (EGP) recent devaluation did exactly that. slowing economy and the depleted for- that the average consumer can afford Since the 2011 revolution, the economic eign reserves, and to subdue the growth less, and thus becomes more selective in decline has caused foreign reserves to of the black market, the Central Bank of purchasing habits. The real estate sector, dwindle to an all-time low, which has dis- Egypt (CBE) downgraded the EGP value contrary to the norm, has seen a real rise turbed the economic, political, and social by 14% against the US dollar – the larg- in sales. climate. Adding insult to injury, tourism est devaluation since 2003. The monu- suffered a major hit last year, dramatically The real estate market was remarkably mental devaluation has been applauded affecting one of the country’s key sources resilient while other industries stumbled by many economists and bankers, who of foreign currency. As a major importer of in the wake of the 2011 and 2013 revolu- view it as a step in the right direction. commodities, the dollar shortage fuelled tions. The stability of the property market Many Egyptians, however, are appre- inflation, led imported goods to pile up at is due in part to the trend amongst Egyp- hensive of how the devaluation will affect the ports, and disrupted businesses that tians to convert their cash to assets of the the prices of everyday goods and most rely on imported raw materials for produc- rock and mortar kind. importantly, their savings. tion. These developments have allowed 20 MARKET CLOSE-UP

Around 45% of investors in Egypt favor investments in real estate compared to investments in shares, gold, or bank certificates, said Ahmed Al Masoudi, the CEO of AqarMap, in an interview with Daily News Egypt. In times where the economic landscape is unstable, Egyp- tians tend to hedge against inflation and a weakened currency by investing in real estate. “The investment culture in the domestic market classifies real estate and land investments as the safest investment sectors nowadays; most Egyptians consider investing in real estate, better than the stock market or buying gold under the Prior to the EGP’s devaluation, last year following the CBE’s announcement. globally and locally volatile prices,” Tarek speculation of a weak currency caused The United Arab Emirates (UAE) real Shoukry, Chairman of Arabia Group said, a surge in property sales. Examples in- estate developer, Capital Group Prop- commenting on the trend. clude Palm Hills Development’s rise erties, has launched a major residential in property sales by 69% and Talaat Shoukry added that the recent decline in property in Egypt: Alburouj project. The Moustafa Group’s revenue increasing by the price of the Egyptian pound against project’s investment is estimated at EGP 17%. Similarly, Emaar Misr for Develop- the dollar has encouraged Egyptians to 40 billion, and it will create 30,000 hous- ment’s 2015 revenue reached EGP 8.6 change the foreign currency in their pos- ing units between Suez and the Ismailia billion, an increase of 21.2% compared session, and use the price difference to Desert Road. invest in housing units, since they are as- to that of 2014, according to Amwal El- sured that the real estate market prices Ghad. Another project was recently launched by the Saudi Egyptian Construction Compa- will not decline compared to other sec- EGP Depreciation and Foreign Invest- ny (SECON). Riyadh-SECON will be built tors, and that prices will actually continue ment to increase. in New Cairo, with investment worth 3 bil- The decision to devaluate the local cur- lion, covering an area of 68 acres. Ayman Sami, Country Head of Jones rency is viewed as part of the govern- Saudi Arabia and Egypt signed about Lang Lasalle (JLL), explained to The Na- ment’s larger scheme to attract foreign EGP 222 Billion ($25 billion) worth of tional that prices of residential units have investors. Structural reforms, state in- agreements during Saudi King Salman been increasing annually by 5% to 15%. centives, and government proposed in- bin Abdul Aziz Al Saud’s visit to Cairo in frastructure spending are part of a grand With the demand for residential units out- April, according to Al Ahram. This move plan to boost a rather stagnant economy. stripping supply, potential buyers from demonstrates the confidence regained Cairo’s young and growing population, Currency devaluation is nothing new to by investors. and the projected growth of the market the global market – the Chinese Yuan, In May, the Kuwait Fund for Arab Eco- as a whole, investment in real estate is a the Euro, and the Japanese Yenall saw nomic Development (KFAED), agreed sound decision compared to other forms a weakening of currency in an attempt to on a KWD 100 million loan to Egypt to of investment. stimulate their economies and boost ex- finance the construction of five seawater ports. Following the CBE’s announcement of the desalination plants in South Sinai, ac- change in exchange rate, the EGX 30 Real The rise in the price of the U.S. dollar cording to Daily News Egypt. Estate Index has risen by 22.6% according against the local currency may be one In Egypt, the shockwaves of the weaker to Bloomberg. Within 48 hours of the re- of the positive upsides that are expected currency and inflation are felt by busi- lease of Palm Valley project in west Cairo, to attract foreign investors to the real es- nesses as well as the average Egyptian. all of the 108 units offered by Palm Hills tate market, said Mohamed Saif Al Nasr, The silver lining, though, is reflected in Development were sold, raising EGP 491 Head of the Central Department of Build- the performance of the real estate mar- million. In late May, an iconic image circu- ings in the Urban Communities Authori- ket, with locals safeguarding their mon- lated social media of hundreds of people ty. He added that foreign investment in ey by investing in property. Developers crowding in front of Mountain View’s offices Egypt will appeal to investors, cost-wise, are noticing this trend and encouraging for a chance to reserve a unit in their lat- provided the cost of construction is not it by competing through incentives, more est project iCity. The reason for the signifi- overly impacted by the EGP’s devalua- relaxed installment plans, and huge pro- cant interest in the project is believed to be tion. due to its relatively lower price compared motional campaigns. The instigation of to neighboring areas in New Cairo, where Government support and noticeable re- multiple large-scale real estate plans prices for range between 10,000 to 20,000 forms alongside currency devaluation also indicates that the devaluation has per square meter, while iCity is priced at have been reliable indicators to investors positively impacted foreign interest in EGP 8,000 per square meter, according to of the government’s commitment to ease Egyptian projects. the Chairperson of Themar for Real Estate, any obstacles for investment. Maged Abdel Fadeel, who addressed the It is not surprising that Egypt has seen an topic in an interview with Daily News Egypt. influx of projects and investments launched 21 REACH, ENGAGE AND INFLUENCE YOUR AUDIENCE

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