Interview: Magued Sherif
How are the development of new cities and demographic changes reshaping market demand and impacting real estate in existing cities?
MAGUED SHERIF: People have been migrating out of the congested centre of Cairo for more than two decades. The new cities on the outskirts offer a greatly improved quality of life due to the planning that has gone into the development of these districts, which include open green areas and public spaces. Now, with the rollout of the fourth generation of new cities such as the New Administrative Capital and New Alamein, public awareness has been the true driver of demand, especially as Cairo remains under pressure from its density.
Relevance is everything in the housing market, and with over 50% of Egyptians under the age of 25, the new generation of home buyers entering the market in the next decade will constitute the majority of our customers, and they are already reshaping the kind of properties and communities that are in demand. This segment is conscious about sustainability and climate change and more focused on the living experience, so they are looking for efficient spaces, green products, and to be connected to an ecosystem and a community they relate to. Some of them are renters rather than owners and prefer communal services with smaller private units – quite different than older generations that sought large, more independent properties. Efficient and solar-powered homes are increasingly in demand, as are the incorporation of electric charging stations and functional, connected outdoor areas.
To what extent is affordability influencing the uptake of smart technologies and environmentally friendly designs in new developments?
SHERIF: Affordability is a growing concern in many parts of the world, and is likely to be even more so in light of the economic repercussions of Covid-19. The developers that will succeed are those that are able to offer relevant solutions at accessible prices. People will always need homes to live in: this is a basic need, and in our market the underlying demographics are strong. It is about unlocking demand, and responsiveness to buyers’ changing needs is a key part of that.
Egypt also has significant potential to attract foreign investors. European countries often offer residency for foreigners who purchase property and Egypt is not operating in a vacuum, so in order to compete effectively we need to find a unique selling point. Having more mature mixed-use coastal destinations with competitively priced homes will attract Europeans, but it will be necessary to have the right infrastructure in place. High-quality hospitals and schools and safe road networks would go a long way in encouraging uptake, particularly in an age when people can work remotely.
What risks are posed by the extension of payment terms for off-plan sales, and how can mortgages and project finance offer a solution?
SHERIF: Property development is a cash flow game, and extending payment terms to eight or 10 years definitely poses a challenge. The market has been flooded with new entrants over the past few years, many of them disrupting the system with high bids on land plots, underpriced offerings and extended payment terms as the market becomes more competitive. This has put pressure on more established players to also extend their payment terms, even if to a lesser extent. In the end we believe the market will correct itself and a large number of these new players will fall out, but in the meantime developers must manage extending terms without allowing this to affect profit margins. Egyptian and foreign investors are looking for healthy returns, so businesses must find ways to build resilience into their model in the face of these market dynamics. The current Covid-19 pandemic also presents a challenge for many businesses across the board and ultimately it is the prudent who will prove to be resilient and survive in these difficult times.
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