Interview: Ashraf Dowidar
What are the largest projects driving the Egyptian real estate sector?
ASHRAF DOWIDAR: Currently, the government is focused on two large-scale national projects: the New Administrative Capital and the Suez Canal Area Development Project. We are in the early days of the New Administrative Capital, which present enormous opportunities for the entire real estate sector, and is currently enjoying widespread support from both the government and residents.
However, it is important to note that when major construction projects such as these get under way, other sectors are also directly and indirectly stimulated. Although the New Administrative Capital will undoubtedly have a significant impact, the Suez Canal will have the largest effect on the overall economy. That said, both present significant opportunities for our sector and are expected to lead the market for the next four to five years.
How have recent economic reforms and the currency float affected the market and what does it mean for the near future?
DOWIDAR: The flotation of the Egyptian pound has led to a variety of challenges, such as increased land prices and surging construction costs. Although the market will eventually adjust, in the short term it will make it very difficult for the average Egyptian to buy any decent house in the New Administrative Capital. If we are to move more than 6m residents there it will require a significant effort; and as yet, we have to figure out who will be able to go and live there.
Although the current focus is understandably on construction efforts, we must prepare ourselves for what is to come after, particularly in the low-income housing segment. In addition, some of the physical mechanisms are not yet clear, and we must work to ensure that roads and auxiliary infrastructure are both up to standard and able to be maintained.
How can the government encourage and attract new investment into the sector?
DOWIDAR: Currently, the government is studying each sector in order to create a holistic strategy. Realistically, this will take some time and we will likely need a few years. We know that costs in Egypt are low, but the whole system needs adjustment. Flotation will help sustain the Suez Canal project, but stability, together with the availability of labour and the repatriation of foreign funds, are the most pressing issues. Although the new Investment Law will be a major driver and serve to encourage foreign direct investment, it is crucial that Egyptians lead the example by investing in their own country.
What would help boost the real estate sector from a policy perspective?
DOWIDAR: We are looking for reforms within the banking system. Currently, it is very difficult to get loans, especially for lower-income segments. While there has been recent progress, much more remains to be done, particularly in regard to interest rates, which remain relatively high. The same applies for bureaucracy – there has been progress, but challenges remain. Realistically, we don’t need overall reform, but strategic changes in the banking system.
Is there a gap between supply and demand in residential real estate and can it be closed?
DOWIDAR: The gap in the residential segment is there and it continues to increase. With a growing population, Egypt needs 600,000 to 700,000 units a year. Right now we are only currently able to produce – at the best of times – 300,000 units per year. With demand clearly outstripping supply, prices are soaring for any units that are available. However, as the government is currently the only supplier of land, we think there exists an opportunity for collaboration between the public and private sector.
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