Construction & Real Estate
From The Report: Egypt 2013
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Aided in part by the large domestic market, a spate of new industrial facilities, competitive labour costs and increasing urbanisation, the fundamentals of the Egyptian construction market look promising. The Egyptian real estate sector has continued to see growth, which has helped to support some contractors, but companies relying on work in the infrastructure segment, particularly those dependent on government contracts, have been suffering. Although the sector has been buoyed by positive population demographics and a mild backlog of public projects, rising costs and disputes over land ownership continue to pose challenges. However, the continued and long-term need for investment in housing and infrastructure means that diversified construction groups will certainly survive, if not thrive, over the medium to long term.

The real estate market continues to exhibit potential, despite facing many challenges in the near term. Some of these, such as uncertainty, are the result of the turbulence following the 2011 revolution, while others, such as issues relating to the availability of land, date back several decades and will require sustained government action to resolve. In spite of an uncertain macro environment, the Egyptian real estate industry has managed to thrive over the past year and looks set to continue doing so. This is thanks to very propitious demographic fundamentals and a trend towards using property as a safe haven investment.

This chapter contains interviews with Dasha Badrawi, Managing Director, Sixth of October Development and Investment Company (SODIC); and Magued Sherif, CEO, Hyde Park.

Articles from this Chapter

Overview

Shifting sands: Companies have been adapting to the new post-revolution conditions
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Aided in part by the large domestic market, a spate of new industrial facilities, competitive labour costs and increasing urbanisation, the fundamentals of the Egyptian construction market look promising, although like many other sectors it has been suffering from a certain lack of confidence after the revolution of 2011. A variety of new projects including plans for new power plants, factories and infrastructure works, combined with a mild backlog, have helped ensure that at least some of…

Analysis

Partnering for success: PPPs are increasingly regarded as an ideal way to fund public projects
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Over the past 20 years, there has been a clear trend in many countries towards using the private sector to run public services or to commission new infrastructure projects, often-times in public-private partnerships (PPPs), and Egypt is no exception. Egypt first adopted the principle of PPPs under the Hosni Mubarak regime. In 2010, the government issued a special law, Law 67, to improve regulation of such contracts. The regulations allow for longer time-frames and detail the offtake payment criteria,…

Overview

Open opportunities: Demographics will ensure housing remains in high demand
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The Egyptian real estate market continues to exhibit potential, despite facing many challenges in the near term. Some of these, such as uncertainty, are the result of the turbulence following the 2011 revolution, while others, such as issues relating to the availability of land, date back several decades and will require sustained government action to resolve. Nevertheless, with extremely positive long-term indicators, the outlook is encouraging although, in comparison to other major regional…

Interview

OBG talks to Dasha Badrawi, Managing Director, Sixth of October Development and Investment Company (SODIC)
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Interview:Dasha Badrawi What sort of regulatory reform is needed to improve access to land in the near term? DASHA BADRAWI: While we now use 6% of Egypt’s total land, it is estimated that a further 69% is habitable. That said, it still remains difficult to secure clean land for development. Typically, developers prefer to buy land from the government rather than from private landowners, whether by direct allocation or by auction. Government lands generally enjoy better infrastructure, more…

Analysis

Home financing: Improving access to mortgages could boost the real estate sector
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Although Egypt lacks a strong mortgage lending segment, promoting home lending is not a current political priority. However, over the longer term, developing a stronger lending framework could assist in assuaging the country’s housing crisis. STATE OF THE SECTOR: Mortgages are governed by Law 140 of 2001, which lays out the framework for the industry. The Egyptian Financial Supervisory Authority (EFSA) is responsible for regulating all non-banking activities and financial instruments (including…

Analysis

Unstable ground: Establishing and maintaining land ownership is proving challenging
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In the wake of the revolution, one of the biggest issues facing the real estate business in Egypt is the question of access to, and ownership of, land. The legal background surrounding title to land can be unclear, partly due to the country’s history, which has seen Ottoman legislation overlaid with European legal codes, and a tradition in which unused land reverted to public ownership. Just under half the population (and over 60% in Cairo) live in informal settlements – that is, in buildings…

Analysis

Residential revival: Rising demand has resulted in new activity in the housing market
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As a result of the ongoing political unrest, the expansion of Egypt’s real estate sector has slowed considerably in recent years. Since demonstrations kicked off in early 2011, developers, investors and potential purchasers have postponed many deals, and, in some cases, cancelled projects outright. While uncertainty has continued to grow in some segments, as of mid-2013 the country’s residential market was widely considered to be a bright spot. Demand for housing – particularly at the top…

Analysis

Fair play: The new tax law aims to close loopholes and improve collection
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In December 2012, the Egyptian cabinet agreed to postpone the implementation of the country’s new property tax law – which had been due to take effect in January – until July 2013. The new law, which was intended to expand the tax base, was introduced to the statute book in 2008 under former president Hosni Mubarak but had not yet been implemented due to opposition from large property holders. PREVIOUS SYSTEM The previous property tax system, which dated to 1954, levied taxes at a rate…

Analysis

Adapting to change: Commercial property developers focus on the long-term outlook
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Commercial real estate developers in Egypt currently face a number of key challenges. Since the 2011 revolution, demand for grade-A office and high-end retail space has fluctuated dramatically. As of the second half of 2013, a considerable percentage of the country’s high-quality commercial space had been recently vacated, according to data from the global property management and research firm Jones Lang LaSalle, as foreign property investors and other market participants halted local operations…