Real estate bubble does not exist as this sector is a real market from the demand side, according to SODIC Managing Director Magued Sherif.
Half of the population under the age of 25 are victims of the housing gap. Despite the challenges in the sector, this led to the promotion of the real estate market and the demand for real estate has been strong over the past two years, Sherif said.
Land prices have doubled over the past two years despite the economic situation. Sherif said that a mechanism must be created to provide land for the sector in order to boost the economy.
Hesham Shoukri, chairperson and CFO of Rooya Group, agreed with Sherif that there is not a closed bubble in the sector, which is evident by the constant increase in prices.
Two million units are added to the real estate sector every year and this may increase by 30%, he said. “Real estate companies are building homes and units for future demand for their young children because it is considered a safe asset and investment,” Shoukri said.
Shoukri added that 80% of lands are not developed and the year-on-year growth in the sector is just 7%.
Shoukri demanded that the government consider land as a raw material and not a product in itself to give added-value to the economy.
“The government increases land prices on large plots of lands that are not developed, which are often deserts and need infrastructure. If the high prices continue, the sector’s development would be low,” Shoukri said.
He pointed out that the land accounts for 40% of the project’s total value in some areas even though, in other countries, the cost of land does not exceed 20% of the value of projects.
Regional director at Colliers International Middle East and North Africa Ian Albert said that the real estate sector is a success story. The market has seen an increase in real estate investments, and the private sector can contribute to the strengthening of the sector.
During the Euromoney conference on Monday, Albert said that Egypt has a great deal of land, but accessing this land is a problem. Egypt needs mortgages in the current period, he said.
Hassan Hussein, chairperson and managing director of El-Taamir Mortgage Finance Co–Al-Oula, said that the amount banks lent to low-income people and expanded mortgage funds reached EGP 5-6bn. Leasing companies’ total financing amounted to EGP 40bn and leasing services, such as hospitals and shopping malls, amounted to EGP 20-30bn.
Further, Stéphanie Lanfranchi, country director for Agence Française de Développement in Egypt, said that 40% of Egypt’s population live in ashway’at (informal housing) and the government and grant organisations must intensify their efforts in these areas.
Director for Middle East and Africa Euromoney Conferences, Victoria Behn, said that a survey was conducted among attendees about whether they would invest in the real estate sector, with 63% saying “yes” as it is a safe asset.