CAIRO: Aside from situations of distress, auctioning real estate is a relatively new concept in Egypt.
Traditionally, auctions are associated with negative circumstances, such as bankruptcy and seizure. But these views are being challenged with a number of auctions having been carried out of late as a conventional method of selling real estate.
This is a new idea for Egypt, because people associate auctions with embarrassing situations, says Islam El-Sirsawy, auction consultant at Coldwell Banker.
The latest auction of real estate in the Beverly Hills project in Sixth of October City concluded this week, generating LE 46 million over a period of two days.
Beverly Hills, named after a Los Angeles suburb, is a large upscale residential project owned by Sixth of October Development and Investment Company (Sodic).
The projects takes up 1.7 million square meters of a total area of 6 million square meters owned by Sodic in Sixth of October City.
The area has been under development for several years and the units that were auctioned off represent the last remaining ones in Beverly Hills owned by Sodic.
Plots of land, apartments and villas were successfully sold on previous occasions without an auction. Nevertheless, Sodic decided to sell its final stake in the project in an auction because of the speed of the process and in order to achieve a fair price.
We will sell in any case, but this allowed us to sell quickly at a fair price, says Omar Rushdi, senior sales agent at Sodic.
The goal of the auction is to sell everything in one day, adds El-Sirsawy. This would normally take four months or more.
Three villas and 40 apartments were sold during this week’s auction and another 94 plots of land were sold in an auction last week.
The villas range from 750 square meters to 803 square meters in size, the apartments are 260 square meters to 300 square meters and each plot of land covers an area of 600 square meters to 1,200 square meters.
Sodic offered each unit with a 10 percent down payment and the balance payable on installments over a period of three years.
Seventy percent of the buyers are contractors who will develop the land and sell the development, says El-Sirsawy, who advised Sodic on the auction.
The remaining 30 percent of buyers are families looking for a home.
Although each auction was concluded in a day, preparations began nearly 45 days ago with a widespread advertising campaign.
Interested buyers responded with a deposit of LE 50,000 for land and LE 25,000 for apartments and villas. The deposit is held against fulfillment of payment for winning bids.
It was a successful idea because we were able to bring together serious buyers, and we were able to get a real value estimation in the market, says Rushdi.
The opportunity to gauge the true value of the development was an important factor for Sodic, according to Rushdi.
While there is substantial demand for housing for middle to upper-income families, the market infrastructure remains underdeveloped.
Our real estate market is not a mature one, says Rushdi.
The auction therefore provided a disciplined environment for buyers, overseen by the professional appraisal company Nader Khozam.
Our main goal is to sell and to make a profit, but at the same time we want to contribute principles to the market, says Rushdi.
Suburban developments have become a popular alternative to city living in recent years, with many individuals who work in central areas preferring the commute to the ever-present smog and noise of the city.
Cairo, in the recent period, has become overpopulated and very polluted, so people want to leave the city, says El-Sirsawy. This has been the trend for the past 10 years.
The government s effort to reform the real estate market has also encouraged buyers. Although the mortgage finance law introduced in 2001 has had a modest impact on the market due to the continuation of impediments relating to property registration, El-Sirsawy says that there is a growing awareness of mortgages as a financing option and that measures to streamline registration are likely to take effect in the near future.
Buyers from other Arab countries are also likely to redirect their real estate investments from Lebanon due to the ongoing conflict, and Egyptian real estate developers may benefit from this.
In the three years, the real estate market in Egypt has been extraordinary, because the law has encouraged buying and, with the recent events in Lebanon, Egypt is an [attractive] alternative, says El-Sirsawy.