The issue of launching real estate funds dominated the session which addressed the role of real estate funds in investment and financing at the Capital Markets & Financing Growth conference held Tuesday.
Despite the existence of legislative structure allowing this activity, Egypt does not have any real estate investment funds, said Hashem El-Said, deputy chairman and managing director of the Egyptian Company for Housing Development & Reconstruction (EHDR).
El-Said noted, moreover, during the session, that real estate investment funds are an important means to acquire funding.
During the session, Chairman of the Egyptian Exchange (EGX) Mohamed Omran said the real estate sector has major potential, and thus real estate financing funds can contribute to the financing of this sector.
The Egyptian law allows the offering of stocks worth 50 times the value of the fund’s capital in the stock exchange, which translates to a huge wealth of funding, El-Said said. For example, if the fund’s capital is EGP 100m, it can offer stocks worth EGP 5bn.
El-Said added that the state should encourage investors to establish real estate investment funds, which, if present, could resolve obstacles facing major national real estate projects, such as the new administrative capital and the 1m housing units project for low-income citizens.
Chairman of the Egyptian Financial Supervisory Authority (EFSA) Sherif Samy pointed out that the establishment of real estate funds will allow for cooperation between real estate developers, and will attract Arab investments.
He added that the state should provide these funds with incentives, such as tax breaks, which exist in numerous countries to encourage the real estate investment funds sector.
Samy believes that the presence of such funds will help public sector companies and government agencies better utilise the lands affiliated to them, which have so far remained under-utilised. This would increase the profitability of these companies and boost state revenues.
Assistant Minister of Housing Khaled Abbas moreover highlighted the importance of differentiating between real estate developers’ activities, and the activities of real estate financing bodies. He pointed out that a number of real estate developers were forced to provide financing facilitations to sell their projects due to recent economic difficulties; a role which they should not play.
He further pointed to Egypt’s leading position worldwide in terms of real estate investments, noting that national projects are currently being implemented on a total area of 300,000 acres. 2016 is expected to witness the launch of one or two real estate investment funds.
The Tax Authority is currently considering the exemption of real estate investment funds from taxation, according to Ragab Mahrous, head of international conventions and agreements at the authority.
Chairman of Rooya Group Hisham Shoukry said real estate funds or investors and real estate developers have complimentary roles. He did however criticise the usurpation of the role of investors by real estate developers over the last 20 years.
“We must work on attracting foreign funds to invest in the Egyptian market through the creation of local real estate funds, especially as we have a lot of competitive advantages, such as the rate of return on the dollar,” Shoukry said.
He added that real estate funds provide developers with adequate liquidity to inject investments into other projects, which ensures the sustainability of real estate activity.
Chairman of Arabia Group Tarek Shoukry said providing incentives for real estate funds is essential for stimulating real estate investment funds in the Egyptian market.
Furthermore, CEO of Pinnacle Construction Projects Sherif Salim said economic development in Egypt is majorly dependent on real estate, noting that the establishment of real estate investment funds will help drive economic growth, bring economic mobility and provide job opportunities.