In an interview with Daily News Egypt, the regional director of Colliers International MENA, Ian Albert, said that the new Investment Law includes many advantages, including a one-stop shop where investors can complete all investment procedures through one entity, which is generally the largest bureaucratic obstacle when it comes to investment.
What are the challenges that mixed-use residential projects face in Egypt?
Developing successful master-planned mixed-use communities requires significant planning both from a market and urban design point of view. Except for a few established developers, many second/third-tier developers build residential projects with limited planning and consideration given to mixed-use community elements, such as retail, leisure, open spaces, etc. Since the collective volume of residential supply in Egypt is developed by these second/third-tier developers, most residential projects are faced with these challenges.
The lack of infrastructure services, such as train/metro networks, also strain vehicular traffic, making exit and entry into residential communities a challenging task. Furthermore, high land prices payable by landlords/developers is another challenge.
What are the most successful Egyptian mixed-use residential projects?
There are several successful mixed-use residential projects in East and West Cairo, including Uptown Cairo, Cairo Festival City, Katameya Heights, Hyde Park, Mivida, Mountain Views, Eastown Cairo, and New Giza, as well as Palm Hills in 6th of October City. There are also successful developments outside Cairo, such as Sahl El Hasheesh (Red Sea), and Marasi (North Coast).
Why are mixed-use projects and brand premium more expensive in Egypt than in Dubai?
The difference in price premiums is due to the individual market landscape of each city. In Dubai, social infrastructure facilities, such as retail, schools, clinics, etc., are in close proximity or are within short driving distance from communities. This provides consumers an option to live in communities even further away from the main city. In Cairo on the other hand, the emphasis given to self-sustained gated communities is much higher than in Dubai. Residents are less likely to leave their community for their everyday needs, thereby placing a much higher premium on unit prices.
The target markets are different in each city as well; i.e., unit sales in Dubai are driven by expatriates and investors. Therefore, high unit prices with higher premiums are likely to discourage both end user and investor buyers in Dubai, while Cairo is more focused on local residents willing to pay the price to live in a respected community and also invest in tangible assets to hedge against inflation.
Why does the report make a comparison between Egypt and Dubai?
The report is comparing two key regional markets that are world leaders in developing large-scale communities—Dubai and Cairo; the former, popular for expatriate living, while the residential market of the later is primarily focused on local residents.
Colliers International is also in the process of publishing reports on other regional markets as well.
What are the areas with most retail elements within a residential community in Egypt?
The majority of retail space in key residential communities, such as Uptown Cairo, Katameya Heights, and Eastown Cairo, comprise of convenience retail elements, such as supermarkets, cafés, and restaurants, creating a community where residents are less dependent on leaving their gated communities for everyday needs.
What is the percent of projects in Egypt including social infrastructure in mixed-use developments?
Approximately 15%-20% of total Grade A compounds in Cairo.
In your opinion, what is the impact of the recent cabinet decision to increase fuel prices on real estate development and units’ prices?
Increasing fuel prices up to 55% is likely to increase construction cost, reflecting the increase in transportation cost.
The increase in construction cost is expected to be translated into an increase in unit price, which generally ends up being paid as higher unit prices.
Do you think that the rise in interest rates of banks may affect the real estate sector?
The market is less driven by mortgages. Mortgage represents less than 1% of total GDP. Although there is likely to be an impact, it is Colliers’ opinion that it will be minimum.
Interest rates on developer finance, however, are expected to remain high, resulting in higher unit prices passed on to end-users.
After the Egyptian parliament’s approval of the New Investment Law, what are the advantages you see that will benefit the sector?
The government is seen taking many steps to attract investment and investors to Egypt. This initiative is reflected in several decisions, including the New Investment Law approved by the House of Representatives, as well as the government’s decision to grant foreigners the right to buy a property of a minimum value of $400,000 to obtain a 5-year residency.
The new law includes many advantages, including a one-stop shop where investors can complete all investment procedures through one entity, which is generally the largest bureaucratic obstacle when it comes to investment. The incentives include tax deduction at a rate of 70% of the investment costs in sector A, which are the geographical areas most in need of development according to reports issued by the Central Agency for Public Mobilization and Statistics, as well as a discount of 50% on investment costs in sector B and a 30% discount in sector C.
In your opinion, why does Egypt’s real estate sector remain strong?
Egyptians have historically purchased properties in order to hedge against inflation. With the recent devaluation and currency fluctuations, residential prices have witnessed a year-on-year increase of approximately 25% (in EGP terms), and properties continue to sell on the back of an undersupplied residential market.
Marriage remains the primary driver of new demand, with the total number of marriages each year equaling approximately 1% of the total population. Directly correlating this to new housing demand in Greater Cairo would suggest that approximately 95,000 residential units are required each year.
Additionally, Egypt’s residential sector benefits from a large and growing young domestic population who will eventually need housing. Approximately 60% of the country’s current population is under 30, with the total population anticipated to grow at an average annual rate of 2.4%.