CAIRO: While the slowdown witnessed by Egypt’s real estate sector after the economic crisis was not as grave as expected, it has forced “developers to reevaluate what was going on in the market,” said Mohamed Sherbini, director of marketing at Al Ahly for Real Estate Development.
The next five years will see a shift, he predicts, away from profit-driven development and towards growth that caters more to consumer needs.
“In the 90s we looked at real estate as units, where you would build one unit and sell one unit, but now we are focusing more on the customer and what the customer wants in terms of leisure, convenience and entertainment, things that were previously considered to be more for second homes,” he added.
Sherbini spoke to Daily News Egypt on the sidelines of Next Move 2010, a real estate exhibition boasting sophisticated audio visual displays, exquisitely decorated showrooms and sprawling sets of scaled-down miniatures.
The conference aims to attract foreign investments to balance the growth of residential and non-residential developments in the country, allowing developers to showcase their large-scale projects.
Demonstrating Egypt’s attractiveness as an investment destination, the ambitious projects are a testament to the speed at which the country’s real estate market has moved on from the financial crisis.
“The real estate market in Cairo is actually very resilient, and despite the economic crisis we have seen a lot of demand for residential property,” said Youssef Hammad, chief commercial officer at SODIC.
“When you have a population that is growing at the rate Egypt is going and 5 percent GDP growth like we saw last year, it is expected that you will have demand for residential real estate,” Hammad said.
“Although there was a slowdown, 2009 was a better year for us than 2008. The most important thing was to maintain the trust of our clients by meeting deadlines and that is why Allegria, one of our main projects, is being delivered to clients significantly ahead of schedule,” he added.
As developers focus more on what the market lacks, the need for low- and middle-income housing becomes more apparent.
Like many developers at the exhibition, Al Ahly has been focusing on higher income client, but according to Sherbini, the company is now looking into projects targeting the middle-income segment.
“Middle-income housing is now a [growing] market because of the rising awareness and longing for community in this segment…look[ing] for a life in compounds outside of the city,” Sherbini added.
Few developers have forayed into low-income housing, which is viewed as being more of a risky venture.
“When you have fluctuating prices of construction inputs like steel and cement, there is a very thin line for profit in the low-income housing business, which makes it very risky,” said Hammad.
Orascom Housing Communities is one of the only developers focusing on lower income real estate at the exhibition. Mohamed Tarek, sales and marketing manager said that Haram City, their main low-income housing development, is successful due to economies of scale.
“Orascom could do this because of its relative experience in the field and ease in acquiring government permits required for such construction,” said Tarek. The project is offering 70,000 units.
“Our customers have certain criteria; it’s a household that doesn’t make more than LE 2,500 a month. This criterion makes them eligible for the government’s LE 10,000 pound subsidy and this customer doesn’t have money invested in stock markets or companies that would have made a loss so they are different from the high end customers.
“We have already sold most of our 12,000 units in the first phase of Haram City and are looking to develop similar projects in Turkey, the Gulf and even Europe,” added Tarek.
Most of the recent urban sprawl has seen expansions either east or west of Cairo, in Sixth of October City or New Cairo. “I think it’s basically when the government deregulated the real estate and allowed people to buy property it was generally east and west Cairo that were focused on.
“Historically, Cairo grew on a north-south axis and this was basically encroaching on arable land, yet [in] Egypt, our fertile land and the Nile valley are very dear. So the government shifted the growth on an east-west axis [towards] Sixth of October and Katameya, New Cairo and the Fifth Settlement,” Hammad said.