SODIC looks to ensure business continuity, while safeguarding the health and safety of its employees and communities living at the company’s compounds and the society at large, according to the company’s Managing Director Magued Sharif.
Daily News Egypt sat down with Sherif to learn more on the company’s plans and vision regarding Egypt’s real estate market.
How do you see Egypt’s real estate market in the second half (H2) of 2020?
Egypt’s real estate market is driven by strong underlying fundamentals that create real demand. At SODIC, we have an optimistic outlook for H2 of the year, and we believe that the market is showing promising signs of recovery following the COVID-19 shock.
Could you update us on the company’s projects and current executive position?
SODIC has a diversified project portfolio that includes residential, retail, and commercial developments. Last year, we inaugurated New Zayed City with the launch of two new projects, including The Estates spanning 630,000 sqm, making us the first developer to launch a fourth generation city planned as a natural extension to upscale Sheikh Zayed.
Additionally, the VYE development is the first revealed neighbourhood of three in SODIC’s newly acquired 500 feddan, in partnership with the New Urban Communities Authority (NUCA).
On the east side, SODIC has four projects. Katameya Plaza is our first development in East Cairo delivered in 2010 which is home to over 400 families already.
Eastown directly adjacent to the American University in Cairo (AUC), is a 200 feddan mixed-use development, home to almost 500 families with over 2,000 units delivered. Eastown’s commercial component on Road 90 is made up of 84,000 sqm of office and retail.
BUA is destined to be SODIC’s commercial development with delivery on schedule to begin by 2021.
Villette is a residential community spanning 301 feddan in New Cairo offering luxurious single-family homes and apartments with delivery having begun last year.
Our largest development in East Cairo is SODIC East, a 655 feddan project planned as the twin city of SODIC West. Developed in partnership with the Heliopolis Company for Housing and Development (HHD), SODIC East is master-planned by renowned designers Sasaki, and has all the components in place to offer young couples and families the modern progressive lifestyle they seek at more accessible prices than New Cairo. The project will boast the biggest camping site in Egypt as well as schools, retail and commercial space, and its very own Club S run by SODIC. All launched parcels are well underway, with construction on schedule for delivery to start in 2021.
Lastly, SODIC has developed the Caesar project on the North Coast, which spans over 100 acres and enjoys a pristine bay and sea views from almost every home. Moreover, we are currently awaiting the necessary permits to bring our newest development Malaaz to the market.
Have your projects been affected by the COVID-19 crisis?
Following the COVID-19 outbreak, we had to cease all on-site construction works in line with government guidelines. However, we were able to resume construction at many sites under strict safety measures as the government eased restrictions. The length of our three year delivery cycle would allow us to catch up on construction disruptions without significant delays to clients.
Due to social distancing measures and curfews restricting people’s mobility, our deliveries have been affected, especially in the second quarter (Q2) of 2020, but we are seeing a pickup in deliveries starting from June. The effect on sales has been less pronounced despite the cancellation of major marketing events and the postponement of several launches to later in the year.
What precautionary measures did the company take to protect its employees and clients?
Our priorities are to ensure business continuity while safeguarding the health and safety of our employees and their families, the health and safety of the communities living in our developments, and society at large. As such, we have taken immediate response actions in our offices, the communities that we manage and our construction sites. At our offices, we have worked remotely, applied social distancing measures, banned meetings in closed areas, ensured continuous deep cleaning of our offices, and employed on-site medical personnel to maintain the health and welfare of our employees to name a few.
What do you need from the state and developers to boost real estate sales and investments?
The Central Bank of Egypt’s (CBE) initiative to reduce interest rates by 300 basis points (bps) last March was a very welcome, bold move to help businesses access cheaper lines of credit and withstand financial pressures during the pandemic. The interest rate reduction will positively impact the real-estate sector, which has always been a preferred means of investment for Egyptians, and has had to compete with high-interest yielding instruments since November 2016.
A much-needed measure would be the modification of current regulations to allow the construction financing by banks. This would enable developers to sell delivery ready units and help to finance buyers, a common practice almost everywhere else in the world. Another crucial measure would be further facilitating mortgage finance, widening the pool eligible for preferential mortgage rates to unlock more of the pent-up demand for homes.
Due to the health crisis, many companies have changed its sales policies. Did you change any of your policies?
Aside from easing the virtual sales platform, we have also made our payment plans more flexible and granted some extensions for some projects. While many developers have significantly extended their payment plans during this time, the educated buyer knows that they have to preserve value to deliver value. Buying real estate is a life-time decision, and while promotions encourage and expedite decision making, they are not the deciding factor.
Did you plan to innovate or change your products to suit new customer needs post-COVID-19?
The situation we are in is pushing a new norm and the recent launch of our first standalone villas in VYE in New Zayed caters to that. We brought to the market a brand new concept for small villas built on the expectation that people will continue spending more of their lives at home even after the current situation subsides, having tapped into a more productive higher quality way of living.
The launch of this new product offers small homes with functionalities and features that have traditionally been reserved for mansion living in much larger homes. It also comes in line with the innovative nature of the project targeting a new generation of homebuyers who put high emphasis on the value of living experiences.
What are the value of SODIC’s investments in H1 of 2020, and targeted investments in H2?
SODIC had planned to inject investments worth EGP 3.7bn in 2020, in addition to EGP 623m as land instalments. In Q1 of 2020, SODIC spent EGP 950m on construction, in addition to EGP 75m in land instalments to NUCA.
What about SODIC sales in H1 of 2020? Have they been affected by COVID-19?
In Q1 of 2020, we witnessed a 25% increase in residential sales despite limited new launches. Total gross contracted sales for the period were down 14% recording EGP 865m, versus EGP 1.01bn for the same period last year. While gross contracted sales from residential units grew 25% over Q1 of 2020 to reach EGP 842m, up from EGP 672m during Q1 of 2019. Commercial sales contributed only 2.6% to the company’s gross contracted sales during Q1 of 2020, versus 33% of gross contracted sales during the same period last year. This comes in line with the company’s strategy to largely retain prime non-residential assets to contribute to the company’s recurring income in the future.
Were your deliveries affected by COVID-19?
SODIC delivered some 100 units during Q1 of 2020 out of 120 units initially targeted for this period. East Cairo projects accounted for 61 of the delivered units while delivering 37 and 2 units in West Cairo and the North Coast respectively. This compares to 201 units delivered in Q1 of 2019, as a lower number of deliveries were planned for the period, with the majority of expected unit deliveries for 2020 scheduled for later during the year.
The effect of the outbreak on the business during Q1 is reflected in the lower number of deliveries during March, as mobility restrictions decreased the urgency for customers to come in for handovers.
Do you intend to raise your local investments in the coming period? What are the most prominent features of the company’s expansion plan?
During this time, we are focused on ensuring our operations are on schedule and our launches are timely in all our markets. We have a positive outlook for the local market. SODIC enjoys a very solid financial position and we are always on the lookout for the right expansion opportunity.
You said in previous statements that postponed real estate exhibitions affected your expansion. Please elaborate and what is your plan B?
Following the COVID-19 outbreak and the postponement of major real estate exhibitions like Cityscape, we decided to put our new launches on hold until the situation settles and we have better clarity on the way forward. As the situation started to normalise, we proceeded with our first launch post-COVID-19 with the first standalone villas’ launch in VYE last month. The launch sold out in 48 hours, bringing in EGP 250m. We have several launches planned for the second half of the year. We feel confident that the market will steadily perform better over the coming period.