CAIRO: Mortgage Finance Authority (MFA) Chairman Osama Saleh announced Monday total lending under the government s revised mortgage finance system had reached LE 650 million by the end of September. The figure is up from LE 514 million in June 2006 and just LE 15.8 million in June 2005. Saleh added he expects total lending to reach LE 1 billion by the end of this year.
In an effort to increase sector activity, Minister of Investment (MOI) Mahmoud Mohieddin also announced plans to restrict lending activities by real estate developers, as is currently commonly practiced, in order to allow banks to play a more active role. By the end of 2007, he says the government is aiming for total lending to reach 5 percent of GDP or LE 20 billion to LE 30 billion ($3.5 billion-$5.2 billion).
Property development companies are not qualified to finance, Moheiddin says. They must start dealing with lending institutions. Otherwise, the law allows for the minister to give them direct orders to do so. They need to give the bread to its baker; and now the baker is here.
The sector has seen little activity since the passage of the Mortgage Finance Law of 2001, mainly because of high lending rates and property registration fees and lack of cooperation between lending institutions and property development companies. In 2005, Moheiddin vowed to activate the system by implementing a series of reforms that he now says are producing results.
In the past year, MFA kicked off a widely visible print and broadcast media campaign, established a mortgage hotline and website, all largely aimed at low income individuals seeking to purchase their own homes. The Ministry of Investment further helped by pushing through legislation to reduce the property registration fee from 12 percent to 3 percent or a maximum of LE 2,000.
Still, limited-income groups continue to avoid mortgage finance because of high interest rates and the limitations on the amount of money they can borrow based on the 2001 law. With lending rates in the 12-14 percent range, the law limits the maximum monthly payment of a low-income borrower to 25 percent of total monthly income. This, in turn, limits the total amount that a person can borrow. Accordingly, an individual earning LE 750 per month can borrow a maximum of LE 16,000 ($2,780) on a 20-year mortgage. At a 13 percent interest rate, he will have paid LE 45,000 ($7,830) by the end of his loan term.
Moheiddin says he is focusing on getting the wheel to turn for now and will continue to develop the law with MFA to better cater to the needs of low-income individuals.
We are not satisfied, but now it s time for the ministry to take a step back and allow the established lending institutions to do their work, he says. Some people are waiting for [the lending rate] to go below 10 percent but there s no guarantee that it will.
Head: Rachid says FTA with Russia to be signed within one year
CAIRO: Minister of Foreign Trade and Industry Rachid Mohamed Rachid said Egypt and Russia are much closer now to signing a free trade agreement and predicted that the signing would take place within the coming year.
Rachid made the announcement after a three-day trip to Moscow earlier in the month. The minister is now back in Russia among President Hosni Mubarak s delegation to discuss further details of the impending agreement.
A Russian delegation is scheduled to visit Egypt in December to study the possibility of establishing a Russian industrial zone, much as Rachid had offered the Chinese during his trip in September. Consequently, a Chinese industrial park is now being established on the Cairo-Ismailia Road.
The FTA signing with Russia is expected to boost Egypt s agricultural exports through the creation of a green corridor where Egyptian exports will be exempt from most duties and will be inspected by Russian officials at the ports of departure to expedite release procedures upon arrival. Egyptian exports to Russia totalled $27.5 million (LE 158 million) in H1 2006.