Auctions conducted by the New Urban Communities Authority (NUCA) for the sale of commercial units in the first phase of the Dar Misr project saw great demand, which increased the price per square metre to record levels, reaching EGP 176,100.
A number of people who won shops resorted to announcing the resale of shops on the social media pages of the project and the new cities’ authorities amid demands for a profit margin of EGP 200,000.
NUCA targets to collect more than EGP 200m from the sale of shops and commercial and service activities in eight cities, comprising of 31,000 units in the first phase of the Dar Misr project, and it plans to announce other auctions in March.
The price per square metre registered a selling value estimated at EGP 176,100 in New Damietta City, EGP 70,100 in Badr City, EGP 33,600 in Sadat City, and EGP 90,000 in Obour City.
Sources at NUCA told Daily News Egypt that NUCA targets to sell shops and pharmacies in auctions of the first phase of the Dar Misr project at a value of EGP 200m in order to provide commercial and service activities, coinciding with the beginning of the handover of units.
The sources said that the sale price per square metre is exaggerated, especially considering that the project is implemented with a compound system that includes integrated commercial, administrative, educational, health, and sports services.
The sources added that the offering of shops targets to provide services to residents such as restaurants, pharmacies, and various food commodities outlets.
On the other hand, advertisements for the resale of shops appeared after being awarded at auctions. In New Damietta City, one of the real estate marketing offices offered the resale of a supermarket at a profit margin of EGP 200,000.
One of the officials at the marketing office told Daily News Egypt that the profit margin is non-negotiable, and the buyer will pay the rest of the instalments over three years.
He added that one of the partners in the marketing office competed in the auction conducted by the city system, and the transfer of ownership will be done with official papers.
He added that the shop was sold in a public auction at a high price, and the transfer of ownership is possible as long as it abides by the conditions set by the system, with the payment of instalments as scheduled.
The area of the shop reached 20sqm at a price of EGP 176,000 per square metre, with the total value of the shop reaching EGP 3.6m.
Sources at NUCA emphasised that the transfer of ownership of shops is stipulated under three conditions: payment of the total value of the shop, obtaining an operation license, and performing its function.
NUCA cannot control the illegal resale operations, but it can recover the shops in case of non-payment of instalments, end of activity, or lack of licenses.
The sources noted that NUCA does not deliberately raise the selling prices significantly, especially as the awarding is done through a public auction and buyers know the investment feasibility of the offered stores.
Sources said that the winners in the auction are paying 10% of the value of the stores at the awarding time, along with 2% for administrative fees and 1% to the board of trustees in each city. The remaining value can be paid interest-free during the first three months, or on quarterly instalments with additional interest on three years.
The offering of the shops coincides with the announcement of the launch of investment lands, which targets providing service activities on larger areas such as schools, hospitals, sports clubs, commercial centres, and gas stations.
The Ministry of Housing, in collaboration with the Ministry of Investment, has proposed a number of pieces of land for sale in the service areas within the first phase of the Dar Misr project for middle-income housing, with sizes ranging between 540sqm and 93,400sqm.
The ministry has already launched the first phase of the service land, as it sold 15 parcels of land worth EGP 298m, out of a total of 44 parcels with sizes ranging between 935sqm and 93,000sqm distributed over eight cities.
Some real estate marketers expected considerable stability in the prices of commercial units in the next proposals, reaching EGP 30,000-100,000 per square metre, varying from city to city.
Hazem El Shabasy, chairperson of Zain House Real Estate, said that price hikes of commercial units in the project will not last for a long time, expecting to record EGP 40,000-100,000 per square metre in the next proposals by the New Urban Communities Authority (NUCA).
He added that the prices of commercial units in malls located in the Fifth Settlement in New Cairo reach a maximum EGP 100,000 per square metre compared to other units outside malls, which reach a maximum of EGP 40,000-70,000 per square metre.
Al-Shabasy explained that the high demand from individuals and real estate developers on the Ministry of Housing’s proposals is the key factor of the high prices, calling for the ministry to propose larger commercial areas at reasonable prices to control the prices hikes.
He pointed out that most of the purchasers of commercial units set their units for sale after a maximum of six months to achieve significant returns, especially in the areas where the square metre price amounts to a maximum EGP 60,000.
Al-Shabasy warned that individual purchasers of commercial units in Dar Misr worth EGP 100,000 per square metre may incur significant losses because they would not sell their units at the same price rate of the auction.
Ahmed Hamdy, sales manager at Beutat Housing and Real Estate Development Company, said the high auction prices of commercial units in Dar Misr come as a result of the proposed small areas, especially in the new residential areas.
He added that the policy adopted by the Ministry of Housing in proposing lands has also contributed to the increase of commercial unit prices, warning of a possible reluctance on the part of individuals to purchase commercial units in the coming period.
Hamdy pointed out that high prices of commercial units in Dar Misr will prompt an increase in other commercial unit prices in all new cities, especially New Cairo, 6th of October City, Sadat City, Obour City, and Badr City.
He explained that the price per commercial square metre in the Rehab project in New Cairo does not exceed EGP 70,000.
Hamdy said that the continuous hikes in commercial unit prices have become familiar in the last two years because it has become the best investment for individuals.
Hamdy expected considerable stability in the prices of commercial units in the next land proposals, reaching EGP 30,000-70,000 per square metre based on the city, following the end of the price boom.
The Ministry of Housing launched the first phase of Dar Misr in 2014, including 31,000 units, in addition to 25,600 units in the second phase. The total investments of the project amounted to about EGP 70bn for building 250,000 units.
Sources in the Ministry of Housing said that they discussed setting a timetable for the delivery of units with the Armed Forces Engineering Authority (AFEA), which is implementing the Dar Misr project.
The first phase of the project was scheduled to be completed in October 2016, but the AFEA announced that it will deliver the first phase’s units over separate stages.
NUCA decided to postpone the collection of quarterly instalments until the delivery of the units, in a bid to calm down the outraged customers due to the delay of the construction phase, while the authority continues to collect the instalments, ranging from EGP 7,500 to EGP 10,000 based on the size of each unit.