Real estate workers are hoping the sector will recover and return to the growth rates visible prior to the 25 January Revolution.
It is hoped the recovery will stem from the government’s Suez Canal Project and its plan to offer several other mega projects, on the North Coast, Upper Egypt, and in the Golden Triangle area.
Egypt’s construction sector is key to the country’s economic growth. Prior to 2011, the sector achieved an annual growth rate of 16%, before its decline to around 8%, according to real estate workers.
“Chances of growth for real estate activity is very high during the next period,” said Chairman of the Egyptian Businessmen Association, Hussein Sabbour, adding the continuous population increase requires more housing units.
Sabbour believes that, besides the large increase in population as an investment stimulator, old buildings are also collapsing and are in need of renovation and rebuilding.
Egyptian cities have a growing population due to migration from the countryside, which, according to Sabbour, gives the real estate sector viable opportunities during the next period.
The population growth rate further encourages other subsidiary activities and provides new job opportunities, according to Egyptian Junior Business Association (EJB) member, Gamal Fathallah Fawzy.
The government targets economic growth rates of about 4% by the end of the current fiscal year (FY) 2014/2015 to decrease the deficit to 10% from 12.8% during FY 2013/2014.
The government is preparing to launch a number of motivating legislations starting with the unified investment law, according to Fawzy, which meets an urgent demand for investors. The law intends to reduce the difficult bureaucratic polices to obtain the approvals and licences that preclude the growth of the sector.
Any procedure made by the government in favour of the sector will reduce unemployment rates, according to Fawzy.
According to the committee director, there is an annual deficiency in the availability of housing units, which stands at 500,000 units.
“Demand on real estate sector is huge, giving it great chances for development,” he said.
Real estate activities are not limited to the establishment of housing units. Activities also extend to touristic investments in hotels and resorts on the Red Sea and Mediterranean coasts and major cities, added Elhamy El-Zayat, Head of the Egyptian Federation of Chambers of Tourism.
According to the Ministry of Tourism, the 2014 tourism revenue reached $7.5bn, which is $1.6bn higher than the previous year.
There are still 108,000 hotel rooms under construction. When it comes to tourist numbers, the ministry aims for a growth rate of roughly 20%, which will rapidly double construction opportunities in the sector after four years of recession.
The number of the tourists who visited Egypt last year reached 10 million, according to the Ministry of Tourism.
The ministry, alongside the Ministry of Housing and Urban Communities, intends to finalise plans for the North Coast project by mid-2015. This will allow the ministry to offer its tender to investors, according to statements made by Minister of Tourism Hisham Zaazou.
Despite the real estate investment opportunities in the coming period, investors and experts in the sector believe that many challenges stand in the way of this push.
“The roles for each party, the government and investors, must be set, so that there is an integration of policies,” said Salah Hegab, former Chairman of the Construction Committee at the Egyptian Businessmen’s Association (EBA).
Hegab believes the government must pick land that compliments demand to boost the sector in the coming period. He added the selection process must include the infrastructure of the land offered to investors.
According to Hegab, the process of land selection differs from one place to another.
In the past, constructing high-cost housing units used to attract many investors, Hegab said, but with Egyptian investors entering the market, the government needs to supervise the market and plan without intervening.
Hegab said this method used to slow down the sector, adding that 80% of investors meet the demand of high-cost housing units, while the majority of Egyptians demand medium or low-cost units.
Hegab does not believe that, although the sector is not slowing down, it is facing a number of challenges, the most prominent of which is the scarcity of land with utilities as well as the government’s plan to raise energy and oil prices within the coming years in line with a plan to reduce the budget deficit.
According to Sabbour, the two factors will limit the sector’s ability to develop. He noted that the reduction of Egyptians’ income is the reason why investors seek to only satisfy the demands of the high-income class.
Sabbour believes that the price increase of energy and oil will lead to the increase of costs in housing units.
Despite what is stated above, Hegab believes that the sector will attract foreign investments, especially from the Arabian Gulf. “We are implementing several projects and, directly after their implementation, we will begin others,” he said. “This is proof that great development opportunities exist for the sector.”