Egypt: 2012 breathes confidence into real estate market
Uncertainties had their impact on the real estate market in Egypt in 2011, but as the participants of Cityscape Global would note, the industry is looking at a strong comeback in 2012.
The decision to move the Cityscape Global real estate summit from Dubai to Cairo this year demonstrates the preeminence of the Egyptian property market within the region. Dubai’s flagging property values no longer offered a desirable location for this influential gathering of regional real estate magnates, therefore it teamed up with Cairo’s Next Move real estate fair to host the regional event in Egypt.
Real estate developer SODIC held a roundtable to discuss the current market climate and SODIC’s performance. Maher Maksoud, CEO and managing director, told Daily News Egypt that “in the past three months, things have been really looking better. We’ve had a strong first quarter in 2012. We’re selling smaller, more modest units, and people are buying.”
Although the Egyptian housing market slowed last year due to political unrest and legal challenges facing several real estate developers, the market is improving as property appears to be regaining its reputation as a secure vessel for both international and domestic investment.
Maksoud attributed the weak market of 2011 to Egyptians’ sense of uncertainty about sinking money into property with a potentially insecure future. “I think Egyptians are generally inclined to purchase real estate, both for living and as a secure area for investment. In 2011, they were concerned, given various legal issues, that it was no longer as secure. But now those issues have been largely resolved and there is a bit more transparency. People can see which companies are serious and moving forwards, and now are beginning to invest in real estate again.”
Several lawsuits that have dominated the scene since 2010, with increasing intensity after the Jan. 25 uprising in 2011, have challenged the land deals between the government and real estate companies. Ahmed Badrawi, SODIC’s chief business development officer, acknowledged that 2011 was a difficult year for the company, but not as bad as expected. “We projected zero sales for 2011, and instead had LE 972 million.”
Badrawi attributed part of the success of Westtown—a new development that sold out in three days—to an increased desire for physical and financial security. “It’s a gated community. It provides management services, as well as shops and entertainment. In addition to safety, people are worried about inflation and devaluation, and they know that real estate is generally a good hedge.” Badrawi reiterated SODIC’s confidence in the market by pointing out that the company spends LE 100 million a month building its projects. He acknowledged that in order to remain viable, the Egyptian real estate market would need the support of the government and the banking system.
“As we saw in the past year, it is easy to knock the real estate sector. However, I think it is recognized as a driver of foreign investment, as well as an important source of employment. The sector as a whole makes up 9 percent of GDP, while our company alone employs 10,000 workers… so any government that comes in will look at that, and they will want to feed the population, and they will know the importance of our sector.” He acknowledged the necessity of the hoped-for IMF loan in allowing promised financial support from Gulf governments, which would increase liquidity and encourage Egyptian banks to lend to potential buyers.
Other developers, especially those catering to the more bullish 2008-9 market, face harder times. Real estate developer Porto employed clowns, magicians and stilt-walkers in an attempt to draw attention to its booth at CityScape. However, the demand for second homes on the Red Sea and the Mediterranean has experienced a serious downturn. CityStars’ new resort in Sharm El Sheikh will take a different approach.
One of the primary attractions of the new resort will be La Voile Rouge, an exclusive club on an island in the center of a 120,000-square-meter lagoon, the world’s largest man-made lake of its kind. La Voile Rouge executive, Arnaud Guilloteau, decided two years ago to bring the legendary beach resort in St. Tropez to Egypt. “It will be an elite destination—celebrities, VIPs, et cetera—we will be able to control who comes to island and who does not.”
CityStars’ Sharm resort will include a Colin Montgomerie golf course, an international tennis academy, 22 km of beaches and 1.2 million square meters of man-made lagoons. Further on the horizon is CityStars’ planned 6th of October location, which will incorporate shopping, residential and office space, similar to its current Heliopolis location. Guilloteau acknowledged that the past year slowed construction at CityStars’ Sharm resort, but expressed confidence that “we will soon make Sharm a world class destination.”
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