CAIRO: Egypt’s housing sector will start surging again this summer, said one official Monday.
“By Ramadan [in August] the housing sector in Egypt will start booming, said Osama Saleh, chairman of the Mortgage Finance Authority (MFA), at a conference in Cairo.
Despite the slowdown witnessed by many industries in Egypt, real estate developers said Monday that the impact of the economic crisis on the local housing sector has been minimal.
Speakers on a panel at the Euromoney Egypt Housing Finance Conference this week attributed the limited impact to the significant gap between supply and demand in the market.
“The housing sector supplies 200,000 units a year while there is demand for 300,000 units, Saleh said.
Property prices have only declined around 3 percent since the onset of the crisis, but have started stabilizing in the last two months.
“The impact [of the financial crisis] hasn’t been as people anticipated. We’ve had no cancellations for reservations made in 2007 and 2008, said Ahmed Badrawi, director pf business development at SODIC.
SODIC (Sixth of October for Development and Investment Company) is one of Egypt’s largest developers by market value.
Generally focusing on upscale residential and commercial developments, the firm has recently forayed into mid-level housing. “It takes a lot of courage to enter this market, Badrawi said.
Omar El-Hitamy, managing director of Orascom Housing Communities, said, “We have finished 12,000 out of 50,000 units in the Sixth of October city project and the financial crisis has not affected the progress of our operations.
Orascom Housing Communities, a subsidiary of Orascom Development Housing (ODH), was set up in 2006 to focus on establishing affordable housing across Egypt.
Access to housing is a basic need, not a luxury, said Anwar El-Gonemy, associate director and head of Egypt at Jones Lang LaSalle – a global commercial real estate services company.
El-Gonemy said Egypt should address two main issues: low income housing and tax incentives for developers.
Around 75 percent of the population lives with a monthly income of less than LE 2,500, he added, which makes it necessary to provide tax incentives that encourage developers to cater to this niche market
He pointed to the Mexican system of offering affordable housing to the low-income segment, and said Egypt can benefit from that experience.
Orascom Housing Communities has a joint venture with Homex, a home development company focused on affordable housing in Mexico. “We tried to apply the Mexican model in Egypt but there are challenges, said El-Hitamy.
“Even when the land is subsidized by the government, it’s still difficult to make profits, and that is why developers avoid this challenge, said Badrawi.
Another obstacle is the disparity between affordability and need. Someone with LE 2,500 monthly income is eligible for a mortgage for a 70 square meter unit; but they will probably want a 100 square meter unit, which needs an income of LE 4,000, explained Hesham Shoukri, CEO and executive president of Rooya Group.
There’s also a lack of awareness about the mortgage system, with people comparing the final price of the unit after a 25-year mortgage with the current price.
This discourages consumers, Shoukri said, and is “far from the real concept of mortgages.