Invest-Gate Magazine, September 2020 Issue

september 2020 - 40 PAGES - ISSUE 42

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I N V E S T- GAT E

THE VOICE OF REAL ESTATE

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A DV E R TO R I A L

FIRST GROUP

LAUNCHES ‘SILVA’ IN SHEIKH ZAYED WITH EGP 2 BN

ENG. BASHEER MOSTAFA CEO, FIRST GROUP

W

hile aligning its business plan to stand reliable for customers to elevate their standard of living, while also offering first-tier investment grabs for potential investors, Egypt-based First Group was set up in 2002 to create multiple opportunities for growth, constructing and designing selective projects that offer valuable properties and a gratifying lifestyle to live up with local customer needs.

Against this background, Invest-Gate interviews First Group CEO Basheer Mostafa about the developer's hard-driving plans, latest updates on under-development projects, potential investments, and future-oriented outlook. We also ask the real estate expert to share his market sentiment amidst the turmoil caused by the current health crisis, thereby scrutinizing the post-Coronavirus status quo.

After embracing a longstanding history in the local property, what is First Group's strategic vision? How did the developer manage to create the target clientele?

With over 20 years of experience in the Egyptian real estate market, First Group is enriched with extensive knowledge of property development and construction, proficient realtors, numerous opportunities, on top of a high reputation.

On one hand, our goal is to create value for our stakeholders, one step at a time.

On the other, our vision stems from transparency and fair disclosure toward our loyal clients and partners, bidding for the development and modernization of the local property landscape. Year after year, we have followed a disciplined approach to growth, thereby focusing our efforts and deploying our capital in real estate development, relentlessly evolving and adapting to meet the ever-shifting industry and consumer needs.

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Specifically, First Group continuously aims at achieving the most and best results, whether through hand-picking our project locations or carrying out on-time deliveries.

Perhaps most importantly, we always attempt to continue navigating the dynamic tides in the real estate sphere, which invariably places First Group as the ultimate safe haven for potential buyers, who are increasingly looking for ingenuity, paired with modernity.

Is there a philosophy behind focusing on building state-of-the-art real estate in west Cairo? In what ways does First Group see the potentiality of expanding into the North Coast, for example?

As part of the commitment to provide a first-rate quality of life, First Group embraces an impressive portfolio of well-crafted real estate in both the eastern and western edges of the capital, yet beholding a whopping customer base in west Cairo's 6th of October City and Sheikh Zayed. This sheer demand for our projects in this area, in specific, has mainly driven the company to cater to its valued clients.

However, this does not necessarily mean that further expansion into the city and other provinces as well is not First Group's checklist, as the company continually looks for flourishing investment grabs across the nation. As a matter of fact, First Group eyes additional developments in east Cairo, along with the North Coast.

I N V E S T- GAT E

Being deemed a contemporary residetial community, what services set Kenz Compound apart from others across west Cairo? Any updates to exclusively share?

Minding that First Group is already developing some residential and commercial projects nationwide, what other investment fields do the Egypt-based company plan to tap into?

First Group has managed to implement almost 80% of Kenz Compound after five years of round-the-clock construction work on-site. Moreover, the company has undertaken on-time deliveries of all sold-out residential units (i.e. more than 900 out of the project's total homes), generating EGP 480 mn worth of sales thus far.

Our expertise constitutes the foundation from which to develop prosperous investments. From residential to commercial and tourism developments, First Group takes pride in acquiring opportunistic real estate grabs, in line with the Egyptian developer's focus to make a difference and add outstanding value to our loyal customers.

In an attempt for completion by June 2021, work is now underway on the fourth and last phase of Kenz Compound, which is the first fully-integrated project in October Gardens, developed in a strategic spot over a combined area of 30 acres, with easy access from all Cairo's main roads and vital highways.

The mixed-use development also features the neighborhood's first commercial mall, with direct access to Fayoum Road, in a bid to offer all the recreational and living facilities needed by our homebuyers at their fingertips, not to mention after-sale services. Correspondingly, First Group will soon roll out Kenz Sports Club, which is currently under construction to unique sporting experience.

On a separate note, the Egyptian property market has been witnessing a sales momentum starting from last July, as the lingering impact of the Coronavirus-induced slump begins to unfold. As a consequence, First Group saw a rebound to prepandemic selling levels, which was positively reflected in the handover process; so it is foreseeable that the company will entirely sell out Kenz Compound by year-end.

In general, can you elaborate on updates on projects underway, including implementation rates and investment costs?

Work is still ongoing at the 12,000-square-meter Kaya Plaza in west Cairo, consisting of commercial, administrative, and medical units. We have finalized more than 50% of the project's concrete work, aiming for completion within one year, while also intending for delivery by the end of 2021.

In addition, First Group plans to launch phase II of Kazan Plaza, which is also being implemented in west Cairo, with investments amounting to EGP 800 mn. The 20,000-square-meter mall, of which the first phase is currently being delivered, comprises some commercial, office, and medical spaces, nestled in the vicinity to 6th of October City's Mall of Arabia.

What does First Group have in the pipeline? Any new investments, deliveries, or launchings before year-end?

First Group's expansion plan for the forthcoming period includes the launch of "Silva," which is our brand-new residential project at one of Sheikh Zayed's prestigious areas, but only designs are complete until this point.

The gated community will be executed over two phases, each of which covers 20 ​​ acres and costs about EGP 800 mn, lasting for a three-year construction duration. At the new villas-only compound, we promise a lavish lifestyle for all residents, providing possible clients with flexible payment plans of up to 10 years.

We are also gearing up to release the second phase of Kazan Mall 2, following the entire sale and lease of Kazan Plaza. Spreading over 12,000 square meters in 6th of October City, with a built-up area of 38,000 square meters, the newest addition will encompass various medical, commercial, and office properties.

Finally, what are your expectations for the year-end performance of the Egyptian real estate industry, given the current conditions in light of the COVID-19 recession?

In Q3 2020, the Egyptian property sector's sales movement witnessed a relative leap, compared to the first and second quarters of this year. However, the pace of growth does not match the developers' targeted levels, given the lingering impact of the Coronavirus-induced slump, as more people put away their wallets and spend less amid the pandemic woes.

Meanwhile, with the increased awareness of the illness and ways to combat infection spread, there is optimism that the real estate market’s activity will make a gradual comeback during the last quarter of this year as well as early 2021 onwards, especially with the emergence of massive real estate projects and urban developments.

THE VOICE OF REAL ESTATE

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EDITOR’S LETTER At a time when one thought that we would face a huge challenge to stand up against the pandemic and its economic effect across many businesses, Egypt’s property market stroke back again with massive launches, attractive offers, and on-time deliveries.

The real estate industry stands strong with impressive updates across the nation. Market leaders have set some records straight to show the upcoming trends and give advice to the industry-related fellow members with what would enhance urban development plans, including the provision of medical components within gated communities.

In our September issue, Invest-Gate CEO Mohamed Fouad gives his insights on the digital world and its effect on business growth as a whole. Further, we present some solid analysis of the country's second-home market and feature how violations have been put to rest in Egypt.

Invest-Gate's team also branches out to check on the latest in the world of construction, featuring cement giant Lafarge Egypt.

As we cautiously move forward with our lives, anticipating another wave of this outbreak, those working in this business are to face up with some major challenges; but, in the end, there is always light at the end of the tunnel in real estate.

General Manager YASMINE EL NAHAS Editor-in-Chief FARAH MONTASSER Managing Editor SARA MOHAMED Business Reporters NOURAN MAHMOUD RANIA FAZAA Arabic Writer SHAIMAA IBRAHIM Senior Market Research Analyst DINA EL BEHIRY Contributing Data Analyst AYA RADY

Stay safe and enjoy your read!

EDITOR-IN-CHIEF

Email: fmontasser@invest-gate.me

Data Collectors YASSEN MAHMOUD MOHAMED SAYED Business Development Director SAFAA ABDEL BARY Operations Manager NADA EL-LABBAN

CONTENTS

Senior Digital Marketing Specialist MAMDOUH ABDELHAMID Creative Director OMAR GHAZAL Art Director MAGED KHATTAB LIFE AFTER CORONAVIRUS MEDICAL CARE IN URBAN COMMUNITIES

Graphic Designers MARIAN WAEL MERNA WILLIAM

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3D Visualizer TAMER GAMAL

MARKET WATCH

CORONA FEARS CHANGE COLOR OF PROPERTY MARKET SENTIMENT

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HR Manager AYMAN ABDEL RAHMAN Web Master OLFAT KAMEL Financial Manager ABDALLAH EL GOHARY

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Accountants MAHMOUD KHALIL MOHAMED NAGY Database Executive TAGHREED MOUNIR IT Specialist AHMED ABDULLAH CLOSE-UP ON EGYPT’S

BUILDING VIOLATIONS BRING OUT TAILOR-MADE PANDEMIC FOR REAL ESTATE

investgateofficial

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Invest-Gate

SECOND-HOME MARKET AMIDST PANDEMIC

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Distribution Officers MAHSOUB KENZI MOHAMED EL-SAYED MAHMOUD NABIL HESHAM MOHAMED OSAMA MOHAMED

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I N V E S T- GAT E

THE VOICE OF REAL ESTATE

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septe m b er H E A D L I N E S

Tatweer Misr Sees EGP 2 bn Sales in H1 2020 Tatweer Misr recorded EGP 2 bn worth of sales in H1 2020 – equivalent to 75% of target sales for the period, making way for similar gains in the months ahead to log contractual deals of EGP 6 bn by year-end, InvestGate reports.

Builderia to Invest EGP 500 mn in NAC’s Paragon

The Egypt-based company is on the verge to hand over phase I of its flagship project in Ain Sokhna, called “Il Monte Galala,” where more than 500 fully-finished homes being delivered as of next September, Tatweer President and CEO Ahmed Shalaby announced in an August 17 press release.

This comes along with 500 others in the second phase of “Fouka Bay,” the developer’s well-crafted development on the North Coast, Ras El Hikma. The handover process for both projects will extend until the end of 2020, Shalaby confirmed.

According to the CEO, the COVID-19 crisis was a major challenge for the Egyptian real estate sector, particularly for Tatweer Misr. Thanks to the company’s well-established principles of innovation, teamwork, and commitment, on top of its long-standing market experience, Tatweer Misr was capable of eliminating all downfalls and do business professionally.

“This is strongly evident in the volume of sales achieved in H1 2020 and the successful opening of Fouka Bay last July, in addition to the delivery volume which is set

to exceed 1,000 residential units in each of Fouka Bay and Il Monte Galala by year-end,” Shalaby explained..

Further, in the face of the Coronavirus woes, Tatweer Misr managed to maintain a constant pace of implementation rates of its three flagship developments nationwide (i.e.

Fouka Bay, Il Monte Galala, and Bloomfields in Mostakbal City), while also taking all precautionary measures to safeguard the health and safety of all workers on-site.

The CEO also reckoned that the company was keen to meet all payment dues to its success partners and dealers on time, not to mention committing to paying salaries of all employees in full and announcing promotions, along with spending bonuses twice this year.

CED, Suez Canal Bank Partner to Ease Mortgage Lending in Egypt “The third system offers various installment periods that reach up to 10 years provided to contracting clients that wish to sell units to others according to the resale system,” read the statement.

According to Ashraf Salman, the company’s chairman, CED endeavors to team up with additional entities and institutions to achieve its strategic vision toward the advancement of the Egyptian real estate market, not to mention the local economy at large.

City Edge Developments (CED) has signed a cooperation protocol with Suez Canal Bank to offer more diverse mortgage finance products, in line with the Central Bank of Egypt’s (CBE) initiative to boost the field of real estate lending in Egypt, Invest-Gate reports.

Under the deal, both parties will “provide convenient payment plans for CED customers through three systems,” the first of which

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entails the provision of mortgage finance with a 20-plus-year repayment period, at a 20% upfront payment, as highlighted in the developer’s press release on August 12.

Secondly, prospective clients can buy real estate units that are not listed under the CBE’s initiative through various payment plans of up to 10 years, in accordance with the Mortgage Finance Law.

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Last June, CED and Al Tameer Mor tgage Finance (Al Oula) joined forces to present potential h o m e b u ye r s w i th d i f fe re nt mortgage financing packages, thereby allowing them to acquire the desired fully-finished or readyto-move properties and pay the unit value over an extended period of up to 20 years, as highlighted in an earlier statement.

Egypt’s Builderia Development plans to pump EGP 500 mn into its first intelligent administrative complex in the New Administrative Capital (NAC), or “Paragon,” aiming for completion in 2022, Invest-Gate reports.

Extending over 4,300 square meters, with a builtup area of 23,000 square meters, Paragon will include seven floors of 205 office spaces, in addition to a two-story 8,500-square-meter parking area, Ziad El Hares, the company’s managing director, affirmed during a press conference on August 17, stating that almost EGP 100 mn are earmarked for construction work in FY 2020/21.

Strategically located at the heart of NAC’s Central Business District (CBD), the state-of-art complex utilizes cutting-edge technologies to bring the latest of smart office solutions to Egypt, seeking to enable all business owners and tenants to operate effectively with higher productivity, while featuring all means of comfort, luxury, and entertainment, El Hares noted.

On his part, Builderia Development CEO Mohamed Bedeir highlighted that Paragon will boast double-height units, equipped with technologically advanced amenities and services.

Design of offices and workspaces was inspired by modern architecture, thereby established with bold, modern lines for epitomizing contemporary architecture.

Speaking of the company’s visionary thinking, Bedeir underscored, “Builderia is committed to a strategic vision built on excellence and leadership in introducing and implementing the latest architectural concepts and standards in designing smart office buildings.”

ERA Commercial Egypt will take on the marketing and sales of Paragon, whereas Hafez Consultant is the architectural consultant firm and ASASS Construction is the general contracting company, El Hares concluded.

I N V E S T- GAT E

Marseilia Group Delivers 850 Homes in Marseilia Beach 4

Marseilia Group has delivered phase II of its North Coast flagship project, dubbed “Marseilia Beach 4,” with a total of 850 chalets and villas, in the face of strains endured to continue construction and finishing works due to Coronavirus, Invest-Gate reports.

Being handed over under the slogan “Delivering Happiness,” the second phase’s finalization was deemed a key challenge for Marseilia Group, given the current market conditions in light of the pandemic woes, Sherif Heliw, the company’s chairman, emphasized in a press release on August 16..

According to Heliw, the provision of raw and finishing materials was a daunting task for Marseilia Group,

not to mention securing and intensifying the required workforce to carry out landscaping and general implementation works to present clients with their coastal homes on time..

Spreading over 140 acres, Marseilia Beach 4 comprises over 2,000 residences, with the first phase entirely delivered and marketed, Heliw previously uncovered in a previous statement, affirming that more than 50% of the entire project has been sold out.

This sales momentum will continue till year-end, the executive earlier anticipated, while also targeting contractual deals estimated at EGP 1.5 bn..

Minka Launches EGP 5 bn Project in East Cairo Minka Development has launched an integrated urban development in east Cairo, called “Kinda,” with planned investments of EGP 5 bn, attempting for completion in 2025, Invest-Gate reports.

“Through this, we aim to provide a practical and sustainable residential community. The design teams that worked on Kinda have shortlisted nine main features of livability to be the cornerstones of the features and design of the project: climate, community, connectivity, design, education, health, public space, sustainability, and safety,” he continued.

Misr Italia Properties (MIP) Managing Director and CEO Mohamed Khaled El Assal has uncovered plans to deliver phase I of Kai Sokhna in the upcoming November, which is being developed with combined investments of EGP 2.4 bn on the Red Sea coast, InvestGate reports.

This came during El Assal’s tour on-site to keep abreast of the latest implementation updates, where he also revealed that the project’s fivestar hotel, or “Hilton Ain Sokhna Hotel,” is slated to open in 2024, according to the company’s press release on August 25.

“Our partnership with Hilton is an important step that enhances the value of our project in Sokhna. We aim to change the stereotype of Ain Sokhna bein a winter destination with the provision of various activities and services within a gated beach community,” El Assal was quoted as saying, emphasizing that Kai Sokhna is a boutique luxury coastal resort, designed by Alchemy Design Studio.

Extending over a distinctive sandy beach of 1,000 meters in length, Kai Sokhna will encompass a total of 366 residential units, varying between chalets and standalone villas, in addition to the very first kitesurf center in Ain Sokhna, dubbed “FINS,” and the upscale Hilton hotel, the CEO further stated.

Sales of EGP 6 bn are planned for generation from the 800-unit compound, which spreads over 28 acres, situated directly on the Ring Road and within Madinet Nasr for Housing and Development’s (MNHD) flagship project, Taj City, Minka Development CEO Abdullah Sallam revealed during an online press conference on August 24.

“We are happy to launch one of our largest projects to date, to continue the path that the company has started, aiming to add new innovative offerings to the Egyptian market. The project is inspired and designed around aspects of the livability of the top-ranked cities in Canada,” Sallam was quoted as saying.

MIP to Deliver Kai Sokhna Phase I in November, Open Hilton Hotel in 2024

Last March, Minka Development purchased the EGP 1.15 bn land plot from MNHD, according to the CEO, noting that work commenced on-site last May, while also stressing that construction of Kinda will be financed from the Egypt-based company’s own resources and possibly other credit sources.

On July 6, the real estate developer announced being on the verge to finalize its “latest and largest project” in east Cairo, endeavoring for launching within the next couple of months, with intentions to set foot in west Cairo and expand into various coastal areas in the near future, according to a previous statement.

On his part, Hilton’s Vice President of Operations for Egypt and North Africa Mohab Ghali noted, “Hilton Ain Sokhna is set to be the perfect getaway destination, with its proximity to Cairo and prime location in Kai Sokhna. We are delighted to partner with MIP to introduce our first hotel in Ain Sokhna, under Hilton Hotels and Resorts brand.”

Hilton Ain Sokhna, which will comprise 200 keys, will be a valuable addition to the existing portfolio of 15 Hilton Hotels and Resorts, strategically located less than a two-hour away from Cairo, offering the brand’s world-class hospitality services to Egyptians and foreign visitors alike.

THE VOICE OF REAL ESTATE

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OPINION

DID CORONA FAST-TRACK ADOPTION OF

DIGITAL TOOLS IN REAL ESTATE?

T

he real estate sector seemed always a bit conservative, mostly unresponsive to innovation. Just a couple of years back, not many countries had a digital public ledger of properties. With time, digital solutions are firmly taking bit by bit over in the property business, particularly as the rise of the pandemic COVID-19 ensues need for social distancing, cleanliness, and minimal contact, and changes the role of technology from nice-to-have into a must-have.

Nowadays, the conservative image of this pen-and-pencil industry is shifting and all the parties in this game realize that new cutting-edge technologies will breathe new life into it. Better yet, it appears that innovations in this segment of the economy are coming to simplify the lives of buyers, homeowners, and other market participants alike.

In the era of face masks, with walk-ins and in-person tours losing traction, one of the most mentioned technologies seeing widespread use and indeed changing much of the face of real estate deals is, in fact, one of the simplest: virtual walkthroughs/meetings.

Lately, this consumer-grade technology has become a staple of home shopping, wherein agents effortlessly get in contact with potential buyers via teleconferencing software such as Zoom Video Communications and Facetime. Essentially, they get to share screens, go over data and analytics, close on desired properties.

Beyond that, realtors are also embracing TikTok for virtual showings and even hosting virtual open houses through Facebook Live, allowing homebuyers to conduct in-person visits to over two dozen places electronically. These virtual 3D tours, according to market experts, are accelerating the existing property search, with customers winnowing down the list of potential real estate faster than eve.

Meanwhile, in Egypt, there is a limited number of websites available to showcase real estate properties online, namely Aqarmap and Property Finder, which indeed disputes the adoption of the virtual sales concept countrywide.

Therefore, companies should work on building strong websites/platforms and creating virtual tours that are as vigorous and influential as mockup showrooms.

Consequently, sales can seamlessly take place, just pending the Central Bank of Egypt (CBE) approval on the online transaction.

While most of the home-buying process – from negotiating to contract agreement – can be carried out electronically, yet for a major life purchase like a home, the tactile experience is still important. This is

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because customers typically prefer to feel, touch, and eyewitness prospective properties.

But the real challenge Coronavirus poses to real estate deals, is not shopping for property – it is closing on one.

Many documents in the purchase closure require a notary, and notarization is normally done in-person, especially in Egypt; even closing on a mortgage entails face-to-face paperwork.

Speaking of the North African country, Egypt, this issue can be addressed by installing an electronic public ledger of all real estate units nationwide, backed by blockchain technology, which will offer visibility to all participants and allow for deals to automatically close using smart contracts, hence eliminate the need for third-party intermediaries.

From conducting due diligence to enabling crowdsourced investments and more, blockchain makes way for designing rental and purchase contracts, providing and evaluating the necessary data for real estate valuation, commissioning service providers along the value chain, mapping out property data, and storing sensitive information.

H oweve r, th e i m p e d i m e nt to b l o c kc ha i n adoption in Egypt is not quite technological but rather juridical; legalities should be revisited to facilitate financial transactions in the longed-for blockchain-backed real estate sector, which will, in parallel, contribute to the development of the economy as a whole.

The takeaway regarding the current business climate seems to still heavily revolve around the air of uncertainty. Despite the early stages of the pandemic’s lifespan, all markets have already experienced severities, and the Egyptian real estate industry – like any other – will certainly pivot.

That being said, as so much of the home-buying process can be resolved or substituted via digital channels, it means that the global health crisis may actually induce a seismic shift when it comes to how real estate agents adopt (and flourish in) the new technological wave – and harness it to their advantage.

BY MOHAMED FOUAD

Invest-Gate's Managing Partner

BIO: Business-minded Fouad has found success as both entrepreneur and investor from an early age. He is not only managing partner at Invest-Gate, which is Egypt’s first online and print real estate magazine, standing as the "Voice of Real Estate” since 2016, but he is also managing director of Egypt Oil & Gas - the leading information provider for the Egyptian petroleum industry.

As Invest-Gate managing partner, Fouad ensures his company reaches its full potential through the establishment and execution of a long-term strategy for the Egypt-based magazine, designed to deliver a competitive advantage to affiliated stakeholders, investors, agents, and realtors. His unique combination of wide-breadth experience in tactical thinking, strategic planning, product management, marketing, and digital communications makes him capable of comprehending the complexity involved in setting up online and print publications.

I N V E S T- GAT E

THE VOICE OF REAL ESTATE

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MARKET WATCH TRANSPORT SECTOR ACHIEVEMENTS SINCE 2014 Time Period

Plan

2014-2020

Egypt's National Development Plan

Transportation Ministry's Achievements

NATIONAL ROADS PROJECT

EGP 175 bn

4,500 km (Phases I & II)

Total Investment Cost

Executed Roads (Since 2014)

7,000 km Total Length

180 km Upper Egypt-Red Sea

1,300 km (Phase III)

135 km

Under-Construction Roads

Wadi El Natrun-Alamein

90km

1,200 km (After Phase III)

Farafra-Ain Dalla

Planned Roads

82 km

30,500 km vs. 23,500 km in 2014 Total Length of Main Routes & Highways

DEVELOPMENT & MAINTENANCE OF CURRENT ROADS

Total Investment Cost

Northern Arc of Regional Ring Road

90km

EGP 15 bn

El Galala Road

40 km Shobra-Banha

BRIDGES & TUNNELS

EGP 85 bn Total Investment Cost

Length of Developed Roads

5,000 km

600 No. of Executed Bridges & Tunnels

Major Developed Roads

Sohag-Western Desert Qena / El Mahla-Kafr El Sheikh / Tanta-Kafr El Sheikh / Taba-Nuweiba / Damietta-Kafr El Battikh & Kafoury-Borg El Arab

Sources: State Information Service (SIS) & Ministry of Transportation.

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Main Rail Slipways & Road Junctions Location

I N V E S T- GAT E

REAL ESTATE SECTOR INSIGHTS WB SUPPORTS SOCIAL HOUSING PROGRAM

REAL ESTATE DEMAND INDEX (POINTS) April

May

June

Q2 (average)

3,441 EGP  bn (USD  mn)

Value

2,954

2,682

2,592 2,917

2,364

2,183 2,421

2,680





3,382

Cabinet Ratified The World Bank (WB) Facility Extention

Loan Status

2,425

2,159

2,700

Improve Access to Low-Income Housing & Bolster The Social Housing and Mortgage Finance Fund (SHMFF)

Target

1,936 Q

12%





26%

 17%



 17%

PRICES OF CONSTRUCTION MATERIALS (JULY 2020) (EGP)

 STEEL BARS

CRETAL STEEL

PORTLAND CEMENT

COARSE SAND

(per ton)

(per ton)

(per sqm)

(YOY -21.6%)

(YOY -13.8%)

(YOY -7.1%)

(per ton)

,

M-O-M REAL ESTATE DEMAND INDEX (POINTS)

(YOY -19%)

,



SOLID CEMENT BRICKS

BRICK HOLLOW CONCRETE

(per 1,000 bricks)

(40x20x12 cm) (per 1,000 bricks)

(YOY 0%)

(YOY 3%)

,

3,441

2,954

2,682

2,183 23%



28%

14%





,

2,592

REAL ESTATE & CONSTRUCTION STOCK MARKETS INDEXES PERFORMANCE IN EGYPT (2020)

12%





JUNE

Real Estate

COMMERCIAL/ADMINISTRATIVE RENTS PER SQUARE METER IN CAIRO (EGP) Min

Max

Price in 2019

Offices

300 /450



Construction & Materials





















08 JUL

15 JUL

06 AUG

09 AUG

11 AUG

POINTS





Price in 2020

300 / 499

ONLINE MONTHLY SURVEY (%) WHAT IS THE FINEST ADVERTISING STRATEGY FOR DEVELOPERS TO INCREASE SECOND-HOME SALES WHILE COPING WITH SOCIAL DISTANCING MEASURES?

360 /650

370 /670 45%

Retail

41%

9%

30 /51 Industrial Sector

31 /52.5

Virtual Tours

Online Word-of-Mouth Campaigns Marketing

5%

TV Ads

0%

Outdoor Billboards

Sources: Aqarmap, Cabinet, Fitch Solutions, Ministry of Housing, Utilities & Urban Communities, Egyptian Exchange (EGX) & Invest-Gate R&A.

THE VOICE OF REAL ESTATE

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M A R K E T WATC H

NEW CITIES UPDATE NEW MANSOURA

AL ASMARAT

Total Area

Phase I Area

Location

No. of Residential Units

7,200 Acres

2,063 Acres

Mokattam Hills

18,000 (429 Buildings)

No. of Commercial Properties

News

281

JANNA

Project Type

No. of Residential Units

Luxury Housing Project

11,232 (468 Buildings)

Tahya Misr Fund Invests in Project Development

Value

EGP 1 bn

Plan

Build Decent Homes for Over 80,000 Slum Residents

Completion Rate

75%

AL ASMARAT (Phase III) Sakan Misr

Project Type

No. of Residential Units

Middle-Income Project

4,704 (196 Buildings)

No. of Residential Units

Delivery Date

7,440

July 12

Unit Type

Fully-Finished & Furnished Completion Rate

90% Supply Volume

DAR MISR (Phase II)

Location

Project Type

Badr City

Middle-Income Project

No. of Residential Units

Completion Rate

1,128 (47 Buildings)

95%

Sports Courts

Medical Units

9,000-Car Parking Area

Service Complex

SOCIAL HOUSING EXTENSION

No. of Residential Units

Delivery Date

250,000 (Nationwide)

Until 2023

News Status Central Bank of Egypt (CBE) to Secure Funds for Extra Social Housing

Interior & Exterior Works Done

Landscape & General Works Ongoing

Source: Cabinet, Tahya Misr Fund, Egyptian Presidency & Badr City Development Authority.

14

september 2020 - ISSUE 42

Value EGP 30 bn (With Lower Key Rates)

No. of Initial Unit Offering 120,000

I N V E S T- GAT E

PRIVATE REAL ESTATE PROJECTS UPDATE CONSTRUCTION AWARDS

Developer Sixth of October Development & Investment (SODIC)

Award Value Over EGP 1.2 bn

SODIC EAST

Location East Cairo

655 Acres

Duration

Delivery Date Early 2021

Contracting Purpose Supply Volume

Area

Last 2 Yrs

SODIC Awards Construction Tenders No. of Under-Construction Homes 776

Open Greeneries

Completion Rate 65%

Educational Projects

Commercial Assets

Entertainment Facilities

PROJECTS UNDERWAY

Developer IGI Real Estate

News

Location 6th of October City

Area 148 Acres

IGI Gets Loan Facility From National Bank of Egypt (NBE) Target: Finance Project Construction & Finalize Remaining Phases 1st Tranche Value: EGP 600 mn

Ashgar City Supply Volume

Developer Mountain View (MV)

News

Crete Islands

Supply Volume

No. of Residential Units 4,000

Commercial/Administrative Units

Unit Areas 77-234 m²

Medical Center

School

Sports & Social Club

Location MV Ras El Hikma, North Coast

No. of Residential Units 1,116

MV Logs EGP 2 bn Sales After 4 Days of Launching

45 m2 Crystal Lagoon

Dining Outlets

2.3-km Beachfront

Emarat Misr Gas Station

Clinic

Commercial Area

Clinic

Source: Developers’ Official Statements

THE VOICE OF REAL ESTATE

15

M A R K E T WATC H

PROJECTS UNDERWAY

Location

Developer Al Ahly Sabbour Development

Area

North Coast

342 Acres

No. of Residential Units

Total Investment Cost

3,589

Amwaj

EGP 4.2 bn Al Ahly Sabbour Delivers 362 Homes

News

No. of Remaining Units: 577 (Part of Phase IV) Delivery Date: Before 2021

Location

Developer Marseilia Group

Sidi Abdel Rahman Bay, North Coast

140 Acres 50% of Project Sold Out

News

No. of Residential Units

Marseilia Beach 4

Area

2,000

Phase I Delivered & Sold Out

850 Homes Delivered (Phase II)

Target Contractual Deals of Almost EGP 1.5 bn

Plan

Phase IV to be Delivered in 2021

Location

Developer Palm Hills Developments (PHD)

Haceinda Bay

Area

Sidi Abdel Rahman Bay, North Coast

PHD Inks Middle-Term Loan with AAIB & Banque Misr

News

Target Finance Part of Construction Cost, Plus Infrastructure & Administrative Expenses

Loan Value EGP 365 mn

Location

Developer PHD

News

100,000 m² Target

Build Private University, in Collaboration with Medical University of Vienna International (MUVI)

Plan

september 2020 - ISSUE 42

3,000 Acres

PHD & CI Capital's Taaleem Management Services Company to Build Higher Education Campus

Badya

16

Area

6th of October City

Area

Source: Developers’ Official Statements

2.4 mn m²

Build Foreign Branch Campuses of 1st-Class Universities

Work to Start Upon Obtaining Regulatory & Corporate Approvals

I N V E S T- GAT E

PROJECTS UNDERWAY

Location

Developer Orascom Development Egypt (ODE)

6th of October City

4.2 mn m²

ODE & Dr. Nermien Ismail Schools (NIS) to Construct 2 New Schools (American & IB/IGCSE Systems)

News

O West

No. of Students

2,400

Investment Cost

Over EGP 500 mn

Delivery Date

September 2022

Location

Developer Misr Italia Properties (MIP)

Area

New Cairo

18 Acres

No. of Keys in Hilton Garden In Hotel

Cairo Business Park

Area

No. of Administrative Buildings

42

130

News

Investments EGP 1.5 bn

Unit Areas

Location

Developer Ivory Investments

Ivory Business Park (IBP)

Area Office Space 10,000 m²

MIP's Allure Executive Offices Sees EGP 200 mn Sales After 48 Hrs of Launching

SODIC's Allegria, West Cairo

News

17,000 m²

58-300 m²

Launching Date Mid 2021 Ivory Investments Partners with Savills to Manage, Lease & Market IBP

Leasable Retail 7,000 m²

NEW RESIDENTIAL PROJECTS

Developer SODIC

News

SOL

(VYE-Phase II)

SODIC Unveils Pre-Launch of SOL

Location

Payment Method

New Zayed, West Cairo

Installments Over 8 Yrs

Supply Volume

Limited Solar-Powered Homes

Twin Houses

Townhouses

Cycling Lanes

Prices of Townhouses Starting from EGP 4.5 mn

Gardens

Co-Working Spaces

Source: Developers’ Official Statements

THE VOICE OF REAL ESTATE

17

M A R K E T WATC H

ECONOMIC SNAPSHOT INTEREST RATES ANNUAL HEADLINE INFLATION JUNE 

JULY 

.%

OVERNIGHT DEPOSIT RATE

.%

.%

OVERNIGHT LENDING RATE

.%

NET INTERNATIONAL RESERVES (USD BN) JULY 

.

JUNE 

.

RATE OF MAIN OPERATION

.%

DISCOUNT RATE

.%

PURCHASING MANAGERS' INDEX (PMI) JULY 

.

JUNE 

.

CURRENT ACCOUNT DEFICIT (USD BN)

$

£

.

.

JUL-MAR /

JUL-MAR /

Exchange Rates

€

GBP

EUR

USD

.

.

.

.

.

.

.

.

.

.

.

.

.

.

 June-  July

- July

- July

- July

NON-OIL TRADE DEFICIT (USD BN)

.

JUL-MAR /

.

JUL-MAR /

. - July

CAPITAL MARKET INDICATORS PETROLEUM TRADE DEFICIT (USD MN) EGX 30

Jul-Mar 2018/19

Jul-Mar 2019/20

294.3

773.3

10,957

10,765

CURRENT TRANSFERS (USD BN) 1,451

Jul-Mar 2018/19

18.2

Jul-Mar 2019/20

21.5

Sources: CBE, Central Agency for Public Mobilization & Statistics (CAPMAS), IHS Markit & EGX.

18

september 2020 - ISSUE 42

2,246

 JULY

EGX 70 EWI

10,441

1,477

10,599

10,460

2,290

 JULY

EGX 100 EWI

1,426

2,203

 JULY

1,494

2,288

 JULY

1,536

2,352

 JULY

I N V E S T- GAT E

SUEZ CANAL REVENUES (USD BN)

SERVICE BALANCE SURPLUS (USD BN)

Jul-Mar 2019/20

Jul-Mar 2018/19

9.8

5.75

5.72

8.4 /

FY

/

INVESTMENT INCOME DEFICIT (USD BN) GDP LOSSES DUE TO TOURISM HALT AMID CORONAVIRUS (%)

Jul-Mar 2018/19

8

Jul-Mar 2019/20

9.2

EVOLUTION OF EGYPT'S BANKING INDICATORS (SINCE 2014)

Deposits

(EGP TRN)

(EGP TRN)

Loans

Irregular Loans

June 

1.42

0.59

9.1

March 

4.42

2.02

4.2

(%)

CREDIT RATINGS

2020

Fitch Solutions

B

B+

S&P Global Ratings

B-

B

Coo2

B2

January 2016March 2020

9

Thailand

8

Croatia

6

Portugal

5

Dominican Rep.

5

Kenya

5

Morocco

4

Greece

3

Mauritius

3

Senegal

3

Ireland

3

South Africa

3

Malaysia

3

Spain

Egypt

S&P SEES GCC GOV'T DEBT ACCUMULATION

Expected Debt Increase

SMES INITIATIVE

Time Period

Jamaica

3

2014

Moody's

11

Total Initiative Value

No. of Beneficiaries

EGP 181 bn

1.044 mn

Time Period

Reasons

USD 100 bn 2020 Coronavirus Woes Oil Prices Drop

Source: Suez Canal Authority (SCA), S&P Global Ratings, United Nations Conference on Trade & Development (UNCTAD) & CBE.

THE VOICE OF REAL ESTATE

19

M A R K E T WATC H

FULL ANALYSIS

FACTS

& FIGURES GOV'T ACCELERATES EFFORTS IN TRANSPORT & REAL ESTATE SECTORS SINCE 2014

BY DINA EL BEHIRY

F

rom 2014 onwards, the Egyptian transportation sector witnessed a noticeable boom, thanks to the never-ending efforts by the Ministry of Transportation, which principally aims to forge ahead with market advancement, in line with the state’s strategic national development plans.

While the past few years of political and economic uncertainty have slowed capital spending on infrastructure, 2015 has seen that trend reversed in dramatic fashion, with the President Abdel-Fattah El-Sisi prioritizing the completion of major infrastructure projects as part of his policy agenda, planning for a 7,000-kilometer national road network, with an investment cost of EGP 175 bn.

Approximately 4,500 kilometers (phases I and II) of the aforementioned projects have been successfully carried out, whereas work is ongoing to complete about 1,300 kilometers (phase III). Another 1,200 kilometers are scheduled following the finalization of phase III, making the total length of main roads reach 30,500 kilometers to date, up from 23,500 kilometers in June 2014.

Further, the ministry has mandated the execution of 21 bridge axes on the Nile River, at costs estimated at EGP 30 bn. Nearly seven axes

20

september 2020 - ISSUE 42

are done, with eight others still under construction. The government plans to establish six more axes to reach a total of 59 axes nationwide, instead of the 38 ones built in 2014. Beyond that, 600 bridges have been constructed at rail slipways and junctions of main roads, at a total value of EGP 85 bn.

In addition to the establishment of new roads, the transportation ministry took on the development and upgrading of the existing road network.

Accordingly, almost 5,000 kilometers - worth roughly EGP 15 bn - have been completely developed and rehabilitated.

Looking at the improvements in the railway aspect, around EGP 40 bn have been used to execute new projects to develop the railway segment. In addition to that, other projects are still underway worth EGP 86 bn. Better yet, around EGP 55 bn have been allocated to other planned projects.

I N V E S T- GAT E

With an eye on the real estate sector, according to Aqarmap’s real estate demand index, Egypt’s property industry witnessed a 17% drop in Q2 2020 versus the year-ago period. On a month-on-month basis, the sector shrank by 12% last June, compared to the corresponding period last year, on the back of the COVID-19 headwinds.

Despite the chaos looming the whole world due to Coronavirus, Egypt’s Cabinet has ratified a USD 500 mn (EGP 8 bn) extension to a World Bank (WB) facility, as part of a program to improve access to low-income housing and bolster the state’s Social Housing and Mortgage Finance Fund (SHMFF). The loan, which the bank had signed off on earlier this year, will be extended by the WB’s lending arm, or the International Bank for Reconstruction and Development (IBRD).

Despite the pandemic disruption, the Ministry of Housing, Utilities, and Urban Communities is right on cue when it comes to the development of new cities. In July, El-Sisi opened phase III of Mokattam’s Al Asmarat housing project to roll out new homes for slum residents (i.e combat informal settlements). Al Asmarat III encompasses 7,440 fully-equipped and furnished houses, besides several sports courts, medical units, along with a 9,000-car parking area and a service complex to meet all residents' needs.

In the same vein, Egypt’s Tahya Misr Fund has contributed EGP 1 bn for project development. The public fund has also given a boost to repairing and renovating 10,000 damaged residential units, nestled within 332 villages across 18 governorates, at a combined cost of EGP 300 mn.

On another note, the housing ministry paid a great deal of attention to projects underway, aiming for on-time deliveries. In New Mansoura, for example, about 11,232 residences in the JANNA luxury project are 75% finished, whilst 4,704 other apartments are 90% complete in the city’s Sakan Misr project. As for Badr City, 1,128 homes within phase II of Dar Misr project are 95% done.

In the efforts to further reinforce the country’s real estate industry, the Central Bank of Egypt (CBE) has been given the green light to extend EGP 30 bn, partly borne by the finance ministry, for subsidizing the execution of 250,000 social housing units nationwide until 2023. This came as a part of the government’s strategy to secure the necessary funding for building additional social housing units.

Private Sector's Plans on Course

Likewise, Al Ahly Sabbour Development has successfully handed over 362 residences in its North Coast flagship project, or “Amwaj,” bidding to deliver 577 others before year-end, as part of phase IV. Marseilia Group has also presented a number of coastal homes at its North Coast megaproject, called “Marseilia Beach 4,” which is being developed over three phases, with the final one scheduled for handover in 2021.

Economic Snapshot Indeed, Coronavirus is more than just a health crisis; it actually managed to shock economies worldwide. However, focusing on the local case, Egypt's economy is capable of grappling with the pandemic headwinds, thanks to the reform program and other measures taken to aid the country's previously ailing economy (i.e. put on the path to growth), market experts agree.

Evidence to that is the headline inflation rate dipping to 4.2% in July, which is the lowest level since last November, after recording 5.6% in June. Equally noteworthy is the fact that this rate is less than the CBE’s target range of 9% (±3) for the month, the CBE uncovered in a recent official statement, noting that the whole country’s CPI inched up to 107.8 points in July, logging a slight rise of 0.2% from June. In addition to this, the state’s net international reserves logged a slight increase to reach USD 38.31 bn in the previous month, up from USD 38.20 bn in June.

Speaking of the non-oil private sector in Egypt, it saw a significant improvement as the Purchasing Managers’ Index (PMI) recorded 49.6 in July, going up from 44.6 in June. This noticeable increase is an eloquent testimony of economic recovery, especially after the unprecedented circumstances it had earlier witnessed.

In an attempt to further strengthen the Egyptian economy, the CBE kept the interest rates on hold during their last meeting on August 13.

Against this background, the overnight deposit, overnight lending, discount, and main operation rates registered 9.25%, 10.25%, 9.75%, and 9.75%, appropriately.

Digging deeper into Egypt’s economic stance, specifically in July-March of FY 2019/20 vs the same period last year, the current account deficit bettered by 25.2% to hit USD 7.3 bn. Better figures for account deficit came on the back of an USD 2.2 bn drop in the non-oil trade deficit, recording a total of USD 27.3 bn. Meanwhile, the petroleum trade deficit reached USD 773.3 mn, whilst current transfers have risen by USD 3.3 bn to post USD 21.5 bn.

There is more good news as Egypt's real estate companies are launching brand-new projects, in the face of COVID-19 woes. After the successful sold-out launch of VYE phase I, Sixth of October for Development and Investment Company (SODIC), for instance, has unveiled the pre-launch of the compound's phase II, called “SOL.” The new phase, located in west Cairo's New Zayed, will comprise a handful of efficiently-designed townhouses and twin homes.

Further, in FY 2019/20, surplus in service balance dwindled by 13.7%, reaching USD 8.4 bn. Adding to that, the investment income deficit increased by USD 1.2 bn to register USD 9.2 bn. During this period, Suez Canal revenues shrank by USD 32.1 mn to stand at USD 5.72 bn, up from USD 5.75 bn in the corresponding period of 2019.

Concerning under-construction projects, IGI Real Estate has agreed on a loan facility from the National Bank of Egypt (NBE) to finance the construction of its flagship project in 6th of October City, named “Ashgar City,” alongside the finalization the development’s remaining phases with respect to the set timeframes and high-quality execution metrics.

Under the agreement, inked on July 28, the first tranche is valued at EGP 600 mn.

On the other end of the spectrum, tourism is one of the main sectors that was hit hard by the calamity of the Coronavirus outbreak. According to the United Nations Conference on Trade and Development’s (UNCTAD) report on July 1, the world’s tourism sector could lose around USD 1.2 trn or 1.5% of the Gross Domestic Product (GDP), thanks to the global lockdowns which lasted for more than four months to combat virus spread. Moreover, the UNCTAD's report sees developing countries facing some severe losses. Some tourism hotspots such as Kenya, Egypt, and Malaysia could lose over 3% of GDP.

When it comes to handover dates, property developers are sparing no efforts to eliminate any delays. Case in point: SODIC has awarded more than EGP 1.2 bn worth of construction tenders to develop its SODIC East project over the last two years, considering that all parcels released are well underway and are scheduled for delivery starting from 2021.

Despite all odds wrought by the havoc, Fitch Solutions believes that Egypt’s growth rate is projected to remain positive to reach 2.6% in FY 2020/21. Not only that but also, it is expected to remain positive in FY 2021/22, going up to 3.6%.

THE VOICE OF REAL ESTATE

21

R E S E A R C H & A N A LY S I S

CLOSE-UP ON EGYPT’S

SECOND-HOME MARKET AMIDST PANDEMIC

BY DINA EL BEHIRY & AYA RADY

S

ummer is the time when most people head to their vacation houses on the North Coast or the Red Sea, fueling an appetite for first-time buyers and potential investors to hop on the bandwagon. This, in parallel, rekindles a tough battle between market players eager to capitalize on this annual mania, thereby rushing to spotlight their second-home projects and bring out the utmost offers for their clients to avail of a broad range of competitive benefits and exclusive payment plans.

But summer 2020 is unlike any other; appetite for leisure property purchases is somewhat suppressed during this supposedly "always-busy" holiday season, as consumer behavior was radically altered off course due to the Coronavirus crisis. So will buyers and investors continue shopping for secondary residences, particularly after the pandemic? Invest-Gate’s R&A team looks at the scenario in this niche chunk of the Egyptian real estate market to answer this crucial question.

Market Insights

area, with New Alamein, Ghazala Bay, and Sidi Heneish coming next in line, each at 5% separately.

On the other hand, Ain Sokhna's Zaafarana is deemed the top choice for investment in the area, assuming nearly 42% of total projects, whereas El Galala is the latter option for most homebuyers at 33%. The remainder is situated on Attaqa Mountain and Cairo-Suez Road, which encompass 17% and 8% of all developments in the vicinity, respectively.

Opening a window on the finest places for vacation properties in Egypt, InvestGate's newest report on this specific segment concludes that the North Coast and Ain Sokhna are the number one pick for homeowners and possible purchasers.

The North Coast, which is one of the most attractive locations for second-home investments in Egypt, saw merely 45% of new projects being rolled out in Ras El Hikma, followed by Sidi Abd El Rahman for embracing 30% of total developments.

Fouka Bay follows in third place, comprising about 10% of recent launchings in the

22

september 2020 - ISSUE 42

10%

5%

Before examining how the germ episode impacted real estate developers currently building gated holiday communities nationwide, it is equally important to get some market insights into the business climate and consumer needs to keep pace with the latest trends, besides mapping out the country's many hot spots for investment grabs.

Sidi Heneish

Fouka Bay

5%

Ghazala Bay

5%

30%

New Alamein

Sidi Abdel Rahman

PROJECTS' LOCATION ON NORTH COAST

45%

Ras El Hikma

I N V E S T- GAT E

PROJECTS' LOCATION ON AIN SOKHNA

AMENITIES & SERVICES ON-BOARD North Coast

Zafarana

Attaqa Mountain

42%

El Galala

17%

Cairo-Suez Rd

33%

8%

With an eye on delivery dates of projects located in both Ain Sokhna and the North Coast, Invest-Gate's study indicates that nearly half the developments in the former area were successfully delivered, compared with 25% on the northern edge.

Ain Sokhna

40%

20% 17%

10%

8% 0%

83% 65%

Sports Facilities (Gym, Sports Clubs)

67% 60%

Hotels

67% 60%

Medical Services

33% 50%

Security

Educational Projects

25% 5% 8%

Coronavirus Havoc

Against this background, Invest-Gate’s R&A team asks 15 Egypt-based developers to analyze the impact of the pandemic on summer homes, shedding light on ways to boost sales - while coping with social distancing measures - and proposing survival strategies and tactics for a potential upturn in the near future.

50% 25%

95%

When buying a second house, shoppers consider the property's location and its ability to keep the family safe and comfortable; basically, a home that is in a less populated area can be a household’s upcoming saving grace. And ever since the Coronavirus outbreak slammed into the Egyptian scene, the priority among highend homeowners has been clear-cut: to get out of cities, and perhaps take refuge in secondary residences.

SCHEDULED DELIVERY DATES

25%

92%

Commercial Activities (Retail Shops, Malls, Restaurants)

On a separate note, despite the variety in unit types and prices, almost all real estate companies have resorted to offering flexible payment plans to give a fresh impetus to the country’s second-home market, which is pretty often active during summertime only (i.e presenting homebuyers with budget-friendly vacation properties).

Accordingly, most developers carrying out beach communities on the North Coast have provided their prospective customers with payment schemes ranging from seven to nine years tops. In Red Sea’s Ain Sokhna, however, the majority turned to the 10 to 12-year instalment plans.

100%

Recreational Spots (Cinemas, Clubs, Kids Area)

During this year, some other residential compounds are scheduled for completion on the North Coast and Ain Sokhna, at 20% and 25%, respectively. As for 2021, about 10% of North Coast’s projects are set for handover, whilst none would be ready in Ain Sokhna. Beyond that, in 2022, the North Coast and Ain Sokhna would see the delivery of merely 40% and 8% of planned units, appropriately.

North Coast

Ain Sokhna

5% 0%

0%

Delivered Projects Adding to that, second-home developers have been lately paying much attention to supplement secondary residences with all needed services and amenities. And that is why all recently-launched North Coast projects include entertainment/recreational areas, whereas 92% of those in Ain Sokhna incorporate similar grounds.

Likewise, merely 92% of residential communities on the northern edge compose commercial activities, compared with 83% in Ain Sokhna. Better yet, sports facilities are found at 65% and 67% of projects located in both areas, appropriately. Equally important are basic medical services, which are at the heart of 60% of North Coast developments versus 33% in Ain Sokhna.

COVID-19 Impact on Summer Homes In the aftermath of the current health crisis, about 33% of Invest-Gate's surveyed real estate companies suppose that the summer housing market was hit hard by the health crisis due to the Coronavirus recession, amidst Egypt's unprecedented quarantine of more than 100 mn people.

20%

33%

Disagree

Strongly Agree

20%

NEGATIVE IMPACT OF COVID-19

Neutral

Educational components, on the contrary, are deemed of less priority among those building secondary residences for covering nearly 5% and 8% of projects on the North Coast and Ain Sokhna, respectively. Meanwhile, market players are verging for a perspective change, in line with the state’s endeavors to transform summer destinations into all-year-round ones.

ON SECOND HOMES

27% Agree

0% Strongly Disagree

THE VOICE OF REAL ESTATE 23

R E S E A R C H & A N A LY S I S

Furthermore, as a result of the recent market tumult, 20% of respondents see less demand for second homes as consumers put away their wallets and plan to spend less this year. Another 27%, however, believe that this niche segment of the property sector is blowing hot and cold in spite of the COVID-19 shock, with no influence on demand for leisure property purchases.

DEMAND FOR SECOND HOMES SHRINK DUE TO COVID-19

27%

73%

No

13% 20%

FLEXIBLE PAYMENT OPTIONS BY DEVELOPERS TO BOOST DEMAND

Yes

Strongly Agree Agree

27% Neutral

27%

18%

Disagree

13%

55%

More Payment Years

Lower Upfronts

Strongly Disagree Types of Payment Offers

Implementation of projects underway across the country's summer destinations is proceeding on track, therefore smoothly navigating headwinds and facing difficulties triggered by the germ episode, according to 33% of responding developers.

Work is in full swing on-sites to eliminate delays and adhere to the set handover dates, while also taking into consideration the necessary protective measures for fieldbased workers. Conversely, another 20% see delivery timelines being disrupted as a result of the Coronavirus woes, with most businesses facing multiple complications to make progress in tandem.

DELIVERY DELAYS DUE TO COVID-19

27% 20%

0%

Strongly Disagree

Disagree

Neutral

Others

27%

Reduced Unit Prices

On the other end of the spectrum, the Coronavirus calamity has pushed market players to embrace tech tools and platforms to easily close real estate deals, including digital marketing, virtual sales, artificial intelligence (AI), and more, in a bid to cope with the new wave of technology.

Thanks to these cutting-edge innovative approaches, the Egyptian property industry is adjusting to doing business amid the pandemic by installing online systems to seamlessly adopt remote work policies, following the adoption of governmentdictated precautionary and social distancing measures. As a consequence, more realtors were able to reach out for possible second-home buyers.

33%

20%

18%

Agree

Strongly Agree

There have been efforts by 60% of our surveyed developers to revisit and redesign their vacation houses to accommodate the newly-introduced working-from-home policy. Some of the proposals include the provision of in-home offices and extension of outdoor spaces, according to 67% of respondents. Another 22% suggest the redivision of internal spaces, with a separate equal share mooting increased unit areas as an alternative method.

REVISIT SECOND HOMES TO FIT REMOTE-WORK POLICY

Ways to Combat Pandemic Woes Several industry-related companies are seemingly absorbing the headwinds posed by the outbreak, in an attempt to bounce back from losses to rivals. This is because 73% of surveyed developers inclined to flexible payment plans to attract more consumers (i.e. fuel demand for second homes).

Invest-Gate's analysis showed that 55% of respondents have required homebuyers to pay reduced upfronts, whilst another 27% turned to lowering unit prices. Meanwhile, 18% of those interviewed have extended instalment periods.

24

september 2020 - ISSUE 42

Yes

60%

No

40%

I N V E S T- GAT E

WAYS TO INCORPORATE WORKSPACES WITHIN SECOND HOMES Extend Outdoor Areas

Re-Division of Internal Spaces

Increase Unit Areas

Others

67%

22%

22%

11%

In the same vein, Invest-Gate's R&A expects no drops in demand levels in the near future, with the majority of homebuyers still aspiring to own new vacation properties.

According to surveyed developers, demand for North Coast properties will exhibit an 80% upward trend, with 93% voting for New Alamein in specific. Respondents also agree that 67%, 13%, and 20% of shoppers will hunt for houses in Ain Sokhna, Sharm El Sheikh, and Hurghada, separately.

FUTURE DEMAND FOR SECOND HOMES Higher

Market Prospects Despite all odds, it appears that the Egyptian summer housing market is demonstrating resilience against the adverse effects of the COVID-19 outbreak. With that said, merely 73% of responding developers are giving credence to oncoming recovery, anticipating market players to bounce back on track after just three months.

PROSPECTS FOR SECOND-HOME MARKET RECOVERY

73%

7%

20%

0%

M

M

YR

YR+

Stationary

Lower

Indistinct

North Coast

80%

13%

7%

0%

New Alamein

93%

0%

0%

7%

Ain Sokhna

67%

13%

7%

13%

Sharm El Sheikh

13%

13%

27%

47%

Hurghada

20%

20%

20%

40%

Speaking of post-pandemic prices anticipated for secondary residences, approximately 80% of responding developers predict potential hikes in levels, on the back of the radical changes coming on the back of the Coronavirus shock.

EXPECTED SECOND HOME PRICES Up Accordingly, roughly 93% of respondents plan to launch new second-home developments after the pandemic recedes. With some already carrying out gated holiday communities, almost 79% and 43% of responding real estate companies intend for post-pandemic launchings on the North Coast and Ain Sokhna, respectively.

POST-CRISIS NEW PROJECT LAUNCHINGS

7%

93%

No

Yes

%

Stationary

%

Down

%

Recommendations Given the bumpy road ahead for the property market due to pandemic woes, developers shall march forward to overcome any stumbling blocks in doing business, thereby reinforcing the second-home segment by catering to the recent consumer behavior. At this point, the nature of existing real estate products should adjust to the new normal, which is already driving the acceleration of the sector’s digital transformation.

During Invest-Gate’s "New Real Estate Product" virtual roundtable on June 15, Egyptian property gurus affirmed that the novel Coronavirus crisis has prompted the creation of new layouts for residential units in both secondary and primary markets.

By new layouts, they meant reconfiguring unit areas in a way that will make it more convenient for those working from home.

Accordingly, developers need to make proper use of architectural spaces, especially after the pandemic recedes, making room for home-based study rooms or workspaces within residences. The rise of technological tools has made it vital to incorporate a strong digital infrastructure to facilitate and stimulate welfare. Additional homeowners will also appeal for renovations at their second-home units or even purchase new ones.

AREAS FOR NEW RELEASES North Coast

Ain Sokhna

Sharm El Sheikh

Hurghada

Others

79%

43%

0%

7%

7%

That is why more developers are calling for diversification of real estate products and home features of current inventory to offer better lifestyles and complement different clientele. Overall, what seems clear now is that people will be staying in places such as Ras El Hikma and Sidi Heneish well past summertime, which was not the norm a year ago. Owing to the advent of COVID-19, seasons do not matter much anymore, and second-home developers should follow in the footsteps to exploit the new opportunities.

THE VOICE OF REAL ESTATE 25

F E AT U R E D T H I S I S S U E

LAFARGE CONTRIBUTES IN CAIRO METRO WITH OVER 900,000 M³ OF CONCRETE: LAFARGE EGYPT CEO I

n an interview with Invest-Gate, CEO of Lafarge Egypt Solomon Baumgartner Aviles underlined the latest projects in which his company’s cement has prevailed. He discussed the potentials in Egypt, and shared the hardships the industry is going through, and discloses the company’s initiatives to reinforce community protection post coronavirus outbreak, along with the precautionary measures adopted by Lafarge Egypt to maintain the safety and wellbeing of its employees.

Can you elaborate on Lafarge Egypt’s contribution to national infrastructure development projects?

Being a key player in the construction materials industry, LafargeHolcim’s historic relation with the Egyptian national infrastructure development projects goes back to the 18th Century, specifically in 1864, when Lafarge contributed in the construction of the Suez Canal delivering Hydraulic lime stone. Here we are, after one hundred and sixty-four years I am glad to share with you our historic experience in Egypt. In fact, with Lafarge Egypt’s

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extensive road expertise and integrated solutions, the company has proudly completed the 170km long Cairo–Alexandria Desert Road in 2012, optimizing construction costs, while augmenting road service life. & in 2017, we supplied for the 45km long Shoubra–Banha Highway. Today, Lafarge Egypt is contributing to one of the most technically challenging projects in Africa; which is the Cairo Metro project, supplying over 900,000 m³ of various concrete types while delivering the optimum solutions that best suit this mega project’s construction needs, and our story in Egypt continues.

I N V E S T- GAT E

What criteria does Lafarge Egypt follow when choosing a country to inaugurate a factory or when specifying a regional manufacturing hub? Is Lafarge Egypt considered a hub?

When it comes to business in the MENA Region, Egypt is a key country for LafargeHolcim Group. The country is blessed with a privileged geographical export location; a competitive feature for Lafarge Egypt’s business to thrive. We take pride in our presence in this strategic market of 100 million people. This doesn’t mean the picture is rosy, the industry as a whole is terribly suffering, we in Lafarge Egypt like others survive in a market tremendously oversupplied, cost of components of production has hiked, but we have full confidence in the State‘s ability to weather the current hardships and support the Egyptian Cement Industry in becoming a regional hub for Africa along with the neighboring countries.

How many factories does Lafarge have in Egypt and what is the production capacity & workforce?

We have one plant in Ain Al-Sokhna, which is considered one of the largest cement plants in the MENA region. It was established in 1997, way before Lafarge’s acquisition of the Egyptian Cement Company. Operating by 1,534 dedicated employees, our plant has 5 production lines with an overall capacity of 10.2 Metric Tons. We also have Geocycle Egypt, a member of LafargeHolcim Group. Inaugurated in 2011, Geocycle Egypt feeds Lafarge Cement plant with Refusederived Fuel (RDF) as an alternative to fossil fuel. Strictly complying with the ecological standards in Egypt, Geocycle has meticulously chosen RDF waste management solutions for their economical and environmental-friendly nature. We own as well a Bags plant in the 6th of October City, the plant is competently serving the entire cement industry along with other sectors in Egypt.

What were the implications of COVID-19 on Egypt’s cement industry?

In fact, COVID-19 has severely impacted the building materials sector at large and the cement industry in specific. Individual construction, which is the largest consumer of cement, has been harshly affected as a result of the pandemic due to low demand, as individuals don’t tend to invest in construction in times of crisis. Additionally, the former ministerial decision to halt licenses for building, expanding, upgrading, amending, or supporting construction work for private housing in Egypt’s major cities has increased pressure on the cement sector.

With the hit of COVID-19 leading to trembling market conditions and competitive environment for Egypt’s cement sector, producers who were previously operating under normal business conditions, are now suffering financial loss and we wonder how the industry will be able to sustain it’s operations. If nothing happens, this will inevitably result in the collapse of a number of players, including the exit of certain foreign players from Egypt. Thanks to the sound guidance of the Egyptian government, infrastructure projects the industry is now still operating pledging a promising prospect for the construction industry to steadily heal & recover.

What is Lafarge Egypt’s strategy to face the current crisis & declining demand in the market?

We have developed an integrated plan to reduce costs and create export opportunities, despite scarcity. We also call for the support of

the Egyptian government to intervene to save the industry regarding the overcapacity hardships.

Further we hope the government will set incentives for plants to use alternative fuels. This will foster waste recycling at sites and the creation of environmental-friendly factories in the long-term. Finally, we are a strong believer in performance-based product portfolios. In such we have a great opportunity here in Egypt to introduce a larger variety of blended cements. Besides their ecological advantages, blended cements provide better performance during usage and even after it is used. This, together with facilitating exports, will increase our industry’s competitiveness; regionally & internationally. Hence, compensating for decreased demand on a local market while preserving the foreign currency that is vastly used to import coal.

Please elaborate on Lafarge Egypt’s 1H 2020 results.

What is your estimated target for the 2nd half of 2020?

During the first half of the year, the national demand for cement decreased, and of course this is never satisfying for any producer or investor, concerning expectations to our sales for the end of the year.

The answer to this question will ultimately depend on the development of this fierce and mysterious virus and on how long it takes to develop a vaccine to eradicate it. However, we at Lafarge Egypt look beyond the pandemic and push our sustainable development agenda further, complying to the Egyptian Ministry of Trade & Industry’s Joint Committee and European Bank for Reconstruction and Development (EBRD) efforts.

With countries easing lockdowns, how does Lafarge Egypt adapt to the new normal?

At LafargeHolcim, the health and safety of our employees, contractors, customers and surrounding communities are on top of our priorities.

In a nut shell, it is our DNA. We have and will continue to take all precautionary measures to work with and abide by all the instructions and directives issued by the Ministry of Health together with the World Health Organization (WHO).

They say that in every crisis there is an opportunity. In light of the challenges produced by the pandemic, I’m especially proud to spotlight the work that our industrial colleagues in our company have done to produce safe sterilization booths at our sites. This employee-driven initiative demonstrated innovation and a strong sense of awareness.

It’s a great example of team work and solidarity.

What about Lafarge Egypt’s CSR projects, in terms of funds, goals, plans?

With regards to the health aspect, Lafarge Egypt has positively impacted over 100,000 lives by supporting local communities to curb the spread of COVID-19. We have served over 2,000 food boxes for temporary workers along with their families in Al-Qalyubia Governorate, donated over 80,000 masks and gloves, provided 200 liters of antibacterial gel, and supported public hospitals by refurbishing 460 ventilators. This month, we will be contributing another 56,000 masks to the Delta public hospitals.

On a separate note, I would like to praise the Egyptian government’s response and policies to COVID-19. Their swift, professional and transparent actions along with their allocation of EGP 100 Billion to mitigate the repercussions of the pandemic have been gratefully received by both companies and individuals alike.

THE VOICE OF REAL ESTATE 27

THE REAL DEAL

LIFE AFTER CORONAVIRUS

MEDICAL CARE IN URBAN COMMUNITIES

BY NOURAN MAHMOUD

B

eing the latest tide in real estate development, new urban communities are deemed to be fully integrated to unlock all essential services for residents. Amid the recent outbreak, healthcare has undoubtedly acquired great significance, ergo necessitating the provision of the medical component within range.

Invest-Gate examines the extent to which COVID-19 led to a surge in the need for medical care within Egypt’s new mixed-use developments, therefore scrutinizing the impediments to the wide inclusion of health services within these communities to help property developers respond to this rising consumer need through their newly-crafted masterplans.

Change of Perspective Becomes Cardinal Coronavirus has definitely triggered the question of whether or not the existing medical care is ample to cater to local demand, especially for those dwelling in the so-called mixed-use compounds. Beyond that, the germ episode aroused the deeply-rooted issue of readiness and adequacy of healthcare facilities to hospitalize masses of infected patients in Egypt.

Although the newly-introduced residential projects are often being marketed as integrated communities that feature more than one use or purpose within a shared building or development area, including recreational, commercial, or retail components, it is safe to say that medical real estate is still a missing ingredient in the current mix.

Broadly speaking, gated communities countrywide have managed to incorporate nothing more than the essential standards for creating a healthy community.

Despite the rush for urban development, almost no hospitals or medical providers are found in today’s residential projects. Instead, compounds are merely anchored with vast outdoor landscapes to provide some fresh air, paired with many well-ventilated buildings, all to prioritize the mental health and wellbeing of homeowners.

The foregoing, however, is not the general rule of thumb as a handful of real estate companies are taking the initiative to roll out sort of corresponding healthcare establishments on-site. Case in point: Mountain View Ras El Hikma, North Coast, includes a clinic that is quite vital for the beach resort. But, this was deemed a somewhat necessary selling point to attract potential buyers, given that the project is the only livable space in the vicinity.

as free-standing healthcare centers that are uncommonly supported by other real estate components, rather than a vital and integral part of public health.

Likewise, Iwan Developments CEO Waleed Mokhtar draws attention to the issue of licensing, which often adds unforeseen overheads and lengthens development process. He emphasized the need to coordinate with relevant authorities to allocate mixed-use plots with designated areas for the construction of private medical spaces within residential communities, hence offset some of the increased costs.

He emphasizes the significance of joint collaboration with relevant entities in the healthcare and real estate sectors to facilitate licensing procedures, while also securing cutting-edge medical equipment and solutions to build some well-crafted establishments.

As such, Mokhtar calls on private property companies to conduct thorough market studies and research before planning to carry out this type of investment, in particular, “with a special focus on the value of land allocated as well as geographical location.”

Broader Context After embarking on an ambitious national strategic plan for urban development, Egypt had plunged into the execution of 75 new health facilities across several new cities (i.e. hospitals, medical units, ambulance checkpoints, and more), with investments totaled at EGP 200 mn, as highlighted in an official statement back in February 2016.

It, therefore, becomes a question of determining where lies the shortage. Is it a matter of lack of expertise? Four years ago, the local press stirred up panic after reporting complaints by heads of new cities’ authorities on failure to operate these newly-delivered medical spaces.

The rationale for this fiasco, according to local health officials, is the lack of human resources and medical equipment required to properly offer medical care. Due to low population density, not to mention facilities being located miles away from downtown, healthcare personnel feel drastically dispirited to work in new cities.

When asked for the hold-up, the majority of Egyptian developers agree that it is principally from the government’s end for stipulating the provision of a dedicated piece of land to implement healthcare establishments, similar to those acquired for educational projects and the like.

Alaa Ghanam, public health expert and member of the Legislative Committee of the Healthcare Law, affirms that medical staff often retreats from joining remote hospitals, especially those in Upper Egypt as well as the newly-introduced cities.

According to Tatweer Misr President and CEO Ahmed Shalaby, the New Urban Communities Authority (NUCA) sees the typical business model of medical projects

In that case, more incentives (i.e. travel and transportation allowances) would be proposed for public health workers. But Egypt is already verging to strengthen its

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I N V E S T- GAT E

universal health coverage via its Universal Health Insurance System (UHIS), which envisions mandatory coverage for all local citizens, including vulnerable groups who will be subsidized by the government.

According to Ghanam, the problem essentially stems from the maldistribution of the overall health workforce; numerous areas do not have enough staff to provide even basic medical care in these newly-added establishments.

The good news is that the Middle East’s largest integrated private medical city is currently in the making in Badr City, located in Northeast Cairo. Last January, Minister of Housing, Utilities, and Urban Communities Assem El Gazzar had laid down the cornerstone for the megaproject, which is set for completion within 10 years tops, an earlier ministerial statement revealed.

To be developed over three phases by Egyptians for Healthcare Services Company (EHSC), with investments of more than USD 1 bn (EGP 18 bn), “CapitalMed” will encompass a 350-bed state-of-art general hospital, clinics plaza, five-star hotel, along with 11 specialized health centers, several commercial spots, among others, El Gazzar confirmed back then, anticipating phase I to be completed by 2022.

Better yet, on August 13, EHSC and Huawei partnered for designing and setting up the technological infrastructure of the smart medical development, on top of equipping the premises for 5G services. The Chinese company will also supply and install technological devices on-site, besides supervising operations and training local talent, according to a recent separate statement.

Commenting on the first-of-its-kind addition, Ghanam underlines that this robust business model is a pathway to success, yet it could be useful to further expand this type of investment in other areas nationwide to better serve the Egyptian society.

Instead of sticking to the infinite loop of rolling out medical spaces in the city center, resources should be well-allocated to the entire periphery.

Growth Coming Forth?

All in all, private and public sectors’ hard lessons from Coronavirus outbreak are: be prepared and comprehend other aspects of urban development, by which there are essential services that must be incorporated into projects in many different ways to tailor an integrated community.

At the same time, healthcare is the ultimate argument for this difficult experience.

Correspondingly, medical investments are projected to grow in the North African country in the short run, hence growth across the whole spectrum of real estate.

On a final note, the modern philosophy of urban development tends toward small- and medium-sized communities, rather than enormous metropolitan cities.

Nevertheless, a healthy community is not all about clean lives, cycling lanes, or even wide landscapes for open-air workouts. In the post-pandemic world, it became the one that can respond to a mass casualty event without a hitch.

Even if Coronavirus did not take hold, healthcare investment would never be superfluous; it is not a lap of luxury, but rather a basic need.

It appears that the collaboration between both policymakers and real estate developers is merely the emergency exit strategy to avoid the emergence of financial imbalances amid the pandemic woes, while also forging ahead with the establishment of medical facilities within urban areas.

Regardless that CapitalMed looks like a promising initiative aimed at improving access to medical care in Egypt, says Tatweer Misr’s Shalaby, there is still a limited number of specialized healthcare providers to decently manage such facilities, in compliance with international standards, which is also a concern for the longed-for medical city.

In that regard, public and private players should team up to respond more effectively to the matter. On one hand, the state should amend legalities to enhance the investment climate for health investors, particularly foreigners. On the other hand, the private sector will work on attracting additional foreign investments and reaching out to international healthcare providers, the CEO adds, noting that this will also contribute to exporting real estate.

Overall, experts argue that all stumbling blocks, including the above mentioned, shall be wiped out for developers of mixeduse communities to operationalize the domestic unexploited assets and human resources. Accordingly, beneficiaries will be able to lure the targeted clientele and drive increased profits, on top of meeting consumer needs.

While anchoring medical care as a planning priority, the government is well advised to recognize Egyptian real estate developers as masterminds, simply because plenty of them have been divulging some innovative solutions to provide health services in a more efficient manner, particularly since the beginning of the outbreak.

In response to the current emergency situation, Mountain View, for instance, took the lead and rolled out the globally-renowned concept of drive-thru COVID-19 testing sites at several of its gated communities in Egypt, venturing to help introduce this new approach to other residential projects nationwide in the near future.

THE VOICE OF REAL ESTATE 29

THE REAL DEAL

CORONA FEARS CHANGE COLOR OF

PROPERTY MARKET SENTIMENT

BY RANIA FAZZA

I

n a world filled with choices and decisions, fear always causes hesitation; and crises tend to intensify such distress when consumers start to reconsider future plans. For the property sector, in particular, uncertainty began to color new market sentiment amid the rising COVID-19 unknowns, thereby making some clients puzzle over home buying and turn to rental options instead.

This prompted Invest-Gate to probe if potential customers are reconsidering purchasing and are better off sticking with renting residential units as the Coronavirus-induced slump takes hold, asking real estate professionals to get to the bottom of the matter and map out the prevailing market conditions.

Hesitation Haunts Clients?

Over the years, experts have been reckoning residential property leasing as: “An existing trend for non-homeowners who cannot afford to acquire houses.” But does this mean that would-be shoppers are resorting to rentals as housing options in the wake of the current Coronavirus crisis, specifically in Egypt?

According to Aqarmap’s “Egypt Real Estate Demand Index,” there was a toll in the local property sector last March, which is the same month COVID-19 was declared a pandemic, as home-buying demand dipped 20%, whereas demand for renting remained stationary.

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However, Head of the Real Estate Development Chamber Tarek Shoukry tells InvestGate, “While at the beginning of the germ episode fear and hesitation were looming in the country’s real estate sphere, in general, a clear-cut trend toward renting instead of owning residential units is presently indiscernible.”

In a similar vein, Rooya Group Chairman and CEO Hisham Shoukri also believes that the Coronavirus shock did not lead to this kind of reverse trend. He points out, “The buy-versus-rent calculus is not shifting toward renting, at least until now.”

Corroborating the above property professionals’ assessment, Invest-Gate’s latest poll reveals respondents were split nearly fifty-fifty on whether or not there is a tendency for lease rather than purchase agreements, given the Coronavirus chaos.

I N V E S T- GAT E

Future Unleashed With the lingering economic impact of the Coronavirus-induced slump, the current status quo is alarming for ushering in sweeping upheavals to the Egyptian economy.

In a matter of weeks, people tightened their wallets and changed their spending patterns, ergo temporarily backing out of home buying.

“Down the line, there may be a shift from owning to renting [residences] due to present uncertainties, paired with multiple factors such as furloughs, layoffs, and pay cuts, which will certainly put a dent into consumers’ disposable income. Even for those still being regularly paid, some ambiguity would underlie their decisionmaking,” Iwan Developments’ CEO anticipates.

The fact remains that real estate purchase is much of a high-risk investment and often requires consumer confidence, on top of sustainable long-term cash flows as well as trust in developers’ capability to conclude the selling process without delivery delays or other shortcomings.

Meanwhile, the reality today is akin to that of the 2011 uprising, when the North African nation witnessed some sky-high unemployment rates due to the political turmoil.

Back then, this resulted in a gloomy outlook of zero sales by almost all property companies, before the real estate sector made strides amid economic recovery almost five years later.

In like manner, the 2020 real estate sales are already being dampened by Coronavirus fears, as social distancing measures create major challenges for businesses, with some of the fundamental property exhibitions, events, and launchings postponed to curb infection spread.

One key renowned show, Cityscape, was officially delayed after some partial and full curfew measures were made effective almost worldwide by March. The property conference’s Egyptian edition is “considered the start of real estate season,” Managing Director of Property Finder Mohamed Hammad stated on the company’s official website.

Along the same lines, Business Development Manager at Aqarmap Ahmed Abdel Fatah highlights that the takeaway from this health crisis is not necessarily a low appetite for homeownership.

“This is because the rental market attracts a specific clientele, which belongs to a totally different category than that of owning,” Abdel Fatah further underscores.

That can be backed up by the massive housing estates underway across Egypt’s newly-introduced cities, which are lately becoming more favorable to some targeted shoppers than others, including Egyptian expats and foreign investors.

Perhaps, for the time being, it is too hard and early to tell if leasing is on the rise across the board, Iwan Developments CEO Waleed Mokhtar argues.

“On one hand, there is seemingly no significant uptick in leased residences. On the other hand, the middle-income group is exhibiting healthy demand for buying real estate, especially with the continuous property transactions being sealed during the pandemic,” Mokhtar explains.

The upper-class segment might as well be dominant on the local purchasing front at present, given the ongoing efforts to steadily fuel demand for real estate. Currently, various entities seek to ease the daunting financial burden of home buying in Egypt, namely bank and mortgage loans, along with diverse flexible and extended payment plans by financing firms and property developers.

Late last year, the Central Bank of Egypt (CBE) had given the go-ahead for middleincome home buyers to access EGP 50 bn in subsidized mortgages, at a preferential 10% interest rate, under the state’s mortgage finance program. The funds are being channeled either through mortgage lenders or state-affiliated banks, which the government either fully owns or in which it holds a stake, on homes of up to 150 square meters, and a maximum price tag of EGP 2.25 mn.

“This has negatively influenced the sales target of property developers because the majority find Cityscape a great opportunity to showcase their special offers. At the top of these companies is ‘Palm Hills,’ which was planning to introduce the 10-year installment-with-zero-interest payment plan [during the four-day event],” Hammad was quoted as saying.

Customers, as a result, missed the chance that they used to annually seize to cash in on a myriad of attractive offers put forth by property developers under one roof, ranging between flexible and extended payment plans, not to mention exclusive project launchings. In this regard, digital platforms became the general consumer plan B to scout for hot deals in the time of Corona.

Being brutally honest, in a dollarized world, no country is immune to crisis. But one good thing: Egypt will be the only MENA economy to (just barely) see its economy expand in 2020, the International Monetary Fund (IMF) predicted in an April press release. The fund now projects GDP to grow at a 2% clip this year, before accelerating slightly to 2.8% in 2021.

This owes to the continuing episodes of domestic political unrest that the country has been excessively exposed to and proved to be resilient, starting from the January 25 Revolution, through a set of successive political cycles, and ending with the recently escalating Egyptian-Ethiopian tensions.

Therefore, this sort of home buying limbo only requires longanimity and endurance to brace for a sharp rebound in demand from potential investors looking to buy residences for housing rather than investment purposes, at least until the outbreak recedes.

On the whole, although experts find that Coronavirus fears have led to hesitation in buyer decision-making and dried up customer traction, Egypt’s real estate market is somewhat in the wait-and-see mode. Regardless of what kind of housing people gravitate toward, it is too soon to ascertain the current behavior of potential home buyers, let alone their future planning.

THE VOICE OF REAL ESTATE

31

THE REAL DEAL

BUILDING VIOLATIONS BRING OUT

TAILOR-MADE PANDEMIC FOR REAL ESTATE

BY RANIA FAZZA

O

ver the years, building violations have posed a tremendous dilemma in Egypt. Lately, these infringements have been exhibiting an upward trend, given the state’s preoccupation with combating the Coronavirus pandemic. Correspondingly, the Egyptian government recently imposed a six-month ban on building permits, halting the construction of private housing in various urban cities, including Greater Cairo and Alexandria, in a crackdown on housing code violations.

This move, however, partly gives way to the predictions of doom and gloom in the country’s property sector, which is already grappling with the COVID-19 headwinds and adapting to the new normal of the outbreak. Building on that premise, Invest-Gate digs deep into the matter and reaches out to several market experts to scrutinize this decision-making, which comes into effect after Egypt called for reconciliation over construction infractions recently, aiming to outline the law’s impact on private property developers and the overall real estate landscape.

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I N V E S T- GAT E

“License holders have initiated the construction process already, hired contractors and perhaps sold units, and are committed to delivery dates. I believe it would have been ideal to allow them to construct under governmental supervision. In case of any infringements or incompatibility between property design and governmental vision, alterations should be negotiated by both parties,” he continues, adding, “Terminating issuance of new licenses is essential, yet, suspending active licensed construction processes lacks encouragement of sustained foreign investments.”

The CEO further highlights, “Conversely, the [Emergency Law] will not undermine Tatweer Misr’s work, for example, as our developments are being carried out in coastal areas and new cities, which are excluded from the ministerial decree.” This comes together with industrial, tourism, government, and national projects, according to the Cabinet statement.

Along the same lines, Fawzy attributes the multitude of building non-compliance cases in the North African country to government negligence as well as lack of authorities’ supervision of building work and rehabilitation of plaintiffs’ property.

“The absence of such offenses in new cities serves as a case in point,” he notes.

Core of the Matter The building codes have been there for ages. Yet, compliance is generally absent or limited, especially in the widespread informal building sector, which relatively has restricted access to legal requirements and little financial capacity to comply.

Further exacerbating the matter is the fact that while informal housing remains rampant in Egypt, unregistered properties are also rising hand-in-hand at an alarming pace, with over 1 mn residential units identified until last year, according to BEO. Even more challenging when 90% of the country’s total houses are unregistered, according to Oxford Business Group’s “The Report: Egypt 2018.”

It turns out that illegal buildings are often found in unplanned areas or unsafe slums, which constitute almost 39% of all built environments in Egypt, according to a 2016 research paper by the Central Agency for Public Mobilization and Statistics (CAPMAS).

Some initiatives are being taken by the state to problem-solve such the adoption of an EGP 31 bn response plan to eradicate slums, including 357 unsafe areas nationwide, with 192 revamped so far, said Minister of Housing, Utilities, and Urban Communities Assem El Gazzar in a ministerial statement last year.

Market Slightly ‘on Pause’

Accordingly, all unplanned settlements in Egypt will be rehabilitated by the end of 2020, Executive Director of the Slums Development Fund (SDF) Khaled Siddiq earlier uncovered.

Last May, the new amendments to the “Emergency Law” were enforced, after approval of President Abdel-Fattah El-Sisi. Under these reforms, all ongoing private housing construction will pause for six months until owners present masterplans and designs to verify fitting with building codes, which specify the standards for established projects, Prime Minister Mostafa Madbouly announced in a recent Cabinet statement, stressing that violators will not be tolerated in this critical period.

But given the excessive breaches, last January, El-Sisi ratified a law allowing reconciliation with the state over construction infractions, stipulating that offenders shall be fined a sum of money per square meter of the violating building’s area of no less than EGP 50 and not more than EGP 2,000. Until March, Egypt’s Local Development Ministry had received 300,000 requests for reconciliation in building violations, the Cabinet revealed in a separate press release.

Accordingly, members of the armed forces were granted the power of judicial oversight. The military prosecution was also empowered to investigate related violations, limiting the role of the Public Prosecution to referring offenders to the judiciary at its discretion, the statement added.

During the same month, the Egyptian parliament approved the Unified Building Code, giving the government sharper teeth to clamp down on illegal construction.

The long-awaited amendments extend the validity of building permits to three years from one, along with imposing harsher penalties on violators.

This, however, raised the ire of local real estate players. Mena Group Founder and Vice-Chairman of Egyptian Businessmen’s Association (EBA) Fathallah Fawzi argues that the bill will leave a negative imprint on the Egyptian property market, including developers, contractors, and all sector-related partners, who are already ladened with challenges amidst the COVID-19 hit.

“Most notably, the country’s engineering management field is in itself corrupted in a way or another, not mention the weakness of the administrative body that follows up on building operations, and thus, the majority of homes are built illegally,” El Fayoumi continues. “The foremost solution to this matter is salary increments.”

In the same vein, Tatweer Misr President and CEO Ahmed Shalaby tells Invest-Gate, “I totally agree with revising some building licenses in some provinces, due to the increasing number of infringements in these areas, which will consequently add to the state’s endeavors for the redesign of Egypt’s populated cities. But, putting a grinding halt to the entire building process creates complications for license holders.”

All in all, just like a jigsaw puzzle, Egypt’s laws and legal system are full of such layers of complexity, the official concludes, remarking, “There is no surprise that building codes are convoluted as well. On that note, the Egyptian government should adjust certain regulations and procedures to address impediments to compliance with these legal requirements.”

THE VOICE OF REAL ESTATE 33

MARKET RESEARCH REPORTS

WITHOUT DATA, IT’S JUST AN OPINION Why Is Market Research Important In Real Estate?

SUCCESSFUL

BUSINESSES WORLDWIDE CONDUCT MARKET RESEARCHES PERIODICALLY AND STAY TUNED TO THE CHANGING MARKET TRENDS TO RETAIN THEIR COMPETITIVE EDGE

LEARN MORE BEFORE YOU INVEST

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The Real Estate market is very large and compatible with changes that individuals and corporates can waste their time and get misleading information from the larger market.

Individuals do not have the time, money or energy to keep up with the unpredictable market changes. Keeping pace with price changes, market movements and competition, is a full-time job in itself. The permanent success of new businesses is based on regular market research done by their owners to understand their target market, identify consumer problems, pinpoint realistic competitors, to keep up with market trends and maintain competitive edge by sizing opportunities.

There is more diversification in Egyptian real estate than any other country in the region. In Egypt, the real estate market is locally oriented and each market has its own unique behavioral pattern.

International development consultants such as Coldwell Banker Commercial Advantage assist in mapping investment hotspots and understanding its vital parts for investors, end users, developers and company owners.

Market research reports provide an understanding of the market and an insight into the most affordable and profitable locations for investment, price trends and the classifications of the Egyptian real estate market.

Do the necessary research, study, and analysis before making any investment decisions, and learn how to keep your thumb on the market pulse.

Doing that can be a challenge in itself, so where do you turn for the right information?

Objective data isn’t always the most apparent or popular. That is why you need to utilize a power team. There is a responsibility to know the right plays to make, as the market is constantly shifting.

Market research reports utilize data from different perspectives within the local market to help you take the right investment decisions.

“Before you invest, make sure you understand the risks & the potential impact that any investment might have on your overall financial goals.”

I N V E S T- GAT E

D E V E L O P M E N T C O N S U LTA N T S & T H E R E A L E S TAT E D E V E L O P M E N T P R O C E S S T H E I M P O R TA N C E O F M A R K E T R E S E A R C H Market research replaces excessive reliance on intuition and complacency due to past success in real estate decisions. There is a misconception that offering new developments creates their own demand. In everyday language, some market players believe that if they "build it, (buyers / renters) will come".

This attitude towards real estate developments can lead to costly failures such as empty shopping centers or office buildings. The problem with this approach is that intuition replaces the systematic search for evidence of demand for an apartment complex, administrative building, or shopping center before mobilizing resources for its development.

Given the large amounts of money and bank loans used by investors in these projects, failure to establish evidence of demand for an asset will lead to problems for the developers, banks and investors alike.

Thus, market research protects developers, investors and property managers from costly investment and development failures.

Benefits

Primary Research

Iden�fy the problem areas in the business Understand the needs of exis�ng customers and why they choose the project over compe�tors Iden�fy new business opportuni�es & change market trends Recognize new areas for expansion, and increase customer base Discover poten�al clients and their needs Set achievable targets for business growth, sales, and latest project trends Make well-informed market decisions about the services and develop effec�ve strategies

Monitor the effec�veness of sales, exis�ng business prac�ces, the quality of services, and the tools used for communica�on Assess the current market compe��on by evalua�ng the business plans of the compe�tors

Secondary Research

Collec�on of already published data to create a company database that helps in situa�on analysis Devising strategies for benchmarking and to help in determining the market segments that a company should target

Some developers and real estate investors fail to realize the importance of market research; which is a vital component to assist businesses with all the essential information and making wise decisions and valuable insights into shifts in the economy, competitors, ongoing market trends, demographics, and customers' expenditure. Developers who lack the knowledge or underestimate market research prior their investment can threaten the outcome.

Therefore, market research is the most important component of real estate investment studies, as it forms the basis of each calculation and its decision.

DO THE NECESSARY RESEARCH, STUDY AND ANALYSIS BEFORE MAKING ANY INVESTMENT DECISIONS Coldwell Banker Commercial Advantage helps you understand compe�tors' strategies, determine relative position in markets, leverage market insights strategically to maximize compe�tive advantage. Our Market Research services provide insights to answer an array of business questions on compe�tors, market size and targe�ng acquisitions. We take you through the whole cycle, suppor�ng your investment journey in all or any of the market research stages.

For more details, please contact: info.advantage@cb-egypt.com

+2012 270 36790

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