Alaa Fekry, member of the Real Estate Investment Division at the Federation of Egyptian Chambers of Commerce (FEDCOC), said that real estate companies face several challenges in the current period which may adversely affect their expansion plans in the current year and increase the prices of real estate units.
Fekry, who is also the chairperson of Beta Egypt for Urban Development, pointed out that the flotation of the Egyptian pound and the lending interest rate increase have added to the burden on real estate companies which bought pieces of land from the New Urban Communities Authority due to the increase of the instalment interest rate from 10.5% to 15.75%.
The sudden increase in the instalment interest rate, the value-added tax (VAT), and the flotation of the pound which contributed to an increase in raw materials prices, have led to a decline in the financial flows and investments to the companies. In addition, more than 50% of real estate projects were delayed while other projects were totally stalled, according to Fekry.
He added that the challenges currently faced by the government imply the rational use of available resources, most notably the experiences and capacities of Egyptian private companies that participated in the development of urban projects over the last decades.
Fekry stressed the importance of developing the business climate, noting that the government has started to amend the Investment Law and fight corruption in government agencies. He added that these measures would attract foreign and Egyptian investments to the country.
Fekry also stressed the important role of the private sector as a key partner in the development process, criticising the expansion of government investments and state subsidiaries which led to the marginalisation of private sector investment.
He called for the issuance of a new real estate development law which would regulate the real estate market and guarantee the rights of customers. He suggested that the new law could classify real estate developers according to their experience, number of employees, financial solvency, development capacity, and previous activities.
The New Urban Communities Authority is responsible for the classification of companies and the creation of black lists to warn customers of non-compliant companies. The authority has a large database of all real estate developers responsible for the proposals of land and granting licences. Fekry spoke of the need to develop real estate policies, pointing out that there are many countries that have achieved an economic boom after they managed to organise the real estate market and facilitate the entry and exit of investors.
Fekry called on the government and real estate developers to abide by international standards in terms of the property space, and develop a mechanism to ensure the rights of land purchasers in case a developer does not abide by the agreed standards. In addition, the New Urban Communities Authority should review the registered documents of real estate, management, and maintenance companies after the sale of land, so as to ensure the safety of the buildings and follow maintenance operations on the long-term.