Construction & Real Estate
From The Report: Egypt 2016
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The government’s push to stimulate the economy after a turbulent post-revolutionary period is good news for Egypt’s construction sector. Dozens of planned mega-projects and public works initiatives mean that the contracting industry is facing a sizeable project pipeline across all segments of the market. Large-scale plans for a new capital city and the expansion of the Suez Canal, coupled with rather more prosaic infrastructure upgrade requirements, promise a welcomingly busy few years for Egypt’s construction firms. As the problems facing material producers subside, it is expected that prices will also flatten out. Property is one of the few areas that has benefitted from the uncertainty and instability of post-revolutionary Egypt. As investors have become jittery and the government has introduced capital controls, money has flowed into real estate. It is unsurprising then that the sector has witnessed strong growth in 2014-15. However, the market is bifurcated, showing two distinct dynamics at opposite ends of the spectrum. Rising prices and increased supply in the upper end of the market combined with the apparently growing appetite for flipping properties could pose as an early warning sign of a bubble forming.

This chapter contains interviews with Hassan Allam, CEO, Hassan Allam Construction; Mohamed Mohsen Salah El Din, Chairman, The Arab Contractors; Magued Sherif, Managing Director, SODIC; and Tarek Abdel Rahman, Co-CEO, Palm Hills Developments.

Articles from this Chapter

Overview

Grand designs: A raft of planned projects and initiatives pose a capacity challenge for the sector
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The government’s push to stimulate the economy after a turbulent post-revolutionary period is good news for Egypt’s construction sector. Dozens of planned mega-projects and public works initiatives mean that the contracting industry is facing a sizeable project pipeline across all segments of the market. Large-scale plans for a new capital city and the expansion of the Suez Canal, coupled with rather more prosaic infrastructure upgrade requirements, promise a welcomingly busy few years for Egypt’s…

Analysis

Expanding Suez: A new canal opens and ongoing canal-side projects offer great potential for development
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In August 2015 Egypt opened the new Suez Canal axis to much fanfare. An Egyptian project that was managed, financed and executed entirely by Egyptians in record time elicited extensive media coverage. This is understandable given that the project had become a symbol of political and economic rebirth, but also, just as importantly, given that it constituted a remarkable feat of construction. Initial Plan The original Suez Canal opened in 1869 as a groundbreaking addition to global shipping routes…

Interview

Building it better: OBG talks to Hassan Allam, CEO, Hassan Allam Construction
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Interview:Hassan Allam Which sectors offer the greatest opportunities for contractors in the near term? HASSAN ALLAM: We currently see the greatest potential in the energy, infrastructure and industry sectors. The government’s recent push to add generation capacity and its implementation of a feed-in tariff for renewable projects have made the power sector especially promising. For example, we recently qualified to develop 50 MW of solar energy and are looking to co-invest in a number of…

Analysis

Thinking big: The government is planning a new capital city in the desert
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In mid-March 2015 Mostafa Madbouly, Egypt’s Minister of Housing, Utilities and Urban Development (MHUUD), announced a plan to build a new capital city to replace the country’s current capital, Cairo. The project, which was introduced at an investment conference in the Red Sea resort town Sharm El Sheikh, is expected to be immense. The government estimates that initial work will cost upwards of $45bn and take 5-7 years to complete. This will result in a built-up area of 105 sq km, which represents…

Interview

Factoring in growth: OBG talks to Mohamed Mohsen Salah El Din, Chairman, The Arab Contractors
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Interview:Mohamed Mohsen Salah El Din Given strong growth in the past year, how can the construction sector further boost the economy? MOHAMED MOHSEN SALAH EL DIN: We are at a growth stage in which the country needs many mega-projects to reinforce Egypt’s overall wealth. The economy today is supported by those projects that attract investments and investors, and such projects are thus the result of government policy to boost the country. We are focusing on infrastructure needs, such as…

Analysis

Lights out: Building material producers are turning to coal for feedstock as Egypt faces energy shortage
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Egypt’s basic building materials producers are expected to benefit from a transition to coal-fired energy going forwards, as well as government efforts to import more liquefied natural gas. However, all materials producers, including the steel and cement industries, have faced significant challenges over the past 24 months in terms of fuel supply and price increases. Contractors will be keeping a close watch on market trends going forwards, given that any price rises are likely to directly affect…

Overview

Interesting times: Two-tiered sector resulting in diverse challenges and opportunities
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Property is one of the few areas that has benefitted from the uncertainty and instability of post-revolutionary Egypt. As investors have become jittery and the government has introduced capital controls, money has flowed into real estate. It is unsurprising then that the sector has witnessed strong growth in 2014-15. However, the market is bifurcated, showing two distinct dynamics at opposite ends of the spectrum. Rising prices and increased supply in the upper end of the market combined with the…

Analysis

Stand and deliver: Looking at ways to address the housing deficit
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Egypt has been living with the azmit al iskan (housing crisis) for more than 30 years. Inadequate stock, overcrowding and a lack of affordability have become the norm, and while successive administrations have paid lip service to reform and solutions, the housing deficit has continued to grow and the existing housing stock has degraded further. The top end of the real estate market may be thriving, with the title to properties yet to be built changing hands every few months, but in the middle- and…

Analysis

Financing demand: Rising demand for affordable housing causes Egypt to address home financing
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Housing has risen to the top of the policy agenda in Egypt, and for good reason. According to Jones Lang LaSalle (JLL), the country has the largest deficit in the MENA region, with a requirement for 1.5m new units, an affordability gap and under-funding of the sector. According to Marja Hoek-Smit, director of the International Housing Finance programme at the University of Pennsylvania, out of the entire population 65% is unable to afford a property produced by the private sector. While there is…

Analysis

Improved supports: Efforts are under way to transform existing land regulation and increase transparency
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The current administration has announced a number of initiatives to support the development of the real estate industry, as well as improve the provision of housing for the general populace. Land One of the biggest issues of the last half-decade has been land. Many of the leading developers have very substantial land holdings. According to the report “Industry Insight on the Real Estate Sector” by the American Chamber of Commerce (Amcham) in Egypt, as of June 2014, Talaat Moustafa Group had…

Analysis

Two-tiered demand: Demand is healthy at both the high-end and affordable housing segments of the real estate market
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With economic growth steadily picking up, real estate developers in Egypt are looking to opportunities at opposite ends of the real estate spectrum, with a range of both affordable and luxury housing projects in the pipeline. Affordable Demands Despite growth in supply in recent years, developers continue to see significant untapped demand in the market. “Residential demand is driven by very strong underlying demographics across all income segments,” Magued Sherif, managing director of developer…

Analysis

Trending upwards: Mixed-use retail and residential developments are expanding
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Benefitting from rising disposable incomes, a large, young consumer base, and a gradual return to political and economic stability, Egypt’s retail real estate market showed impressive expansion in 2015, with rental rates rising and vacancy rates falling even as the supply of formal, high-end retail supply increases. Foreign investors have flocked to the market in recent years, launching a number of ambitious mixed-use projects offering an array of recreational activities and international brands,…

Interview

Meeting demand: OBG talks to Magued Sherif, Managing Director, SODIC
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Interview:Magued Sherif What factors are driving demand for new residential developments across income segments? MAGUED SHERIF: Demand is driven by strong demographics. Egypt has a population of 90m, of which half are under 25 years old. There are also more than 800,000 graduates and a similar number of marriages every year looking for new units. The accumulated housing gap is reported to be 3m units with another 300, 000-500,000 units added every year. Private developers collectively bring…

Interview

A new cityscape: OBG talks to Tarek Abdel Rahman, Co-CEO, Palm Hills Developments
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Interview: Tarek Abdel Rahman What trends are you seeing in terms of demand in the residential real estate market? TAREK ABDEL RAHMAN: One of the current big trends is the movement of the middle and upper-middle classes from the city centre of Cairo to its suburbs, in pursuit of more breathing space, less pollution, proximity to schooling and better housing supply. Gated compounds in the suburbs, on the other hand, are green and have new infrastructure, private schools and easy access to…