The real estate market witnessed a remarkable increase in growth, as a result of the efforts of the Egyptian government and private companies in implementing national projects and new cities, fulfilling the government’s promise to provide a housing unit for every Egyptian citizen. President Abdel Fattah El-Sisi directed the Central Bank of Egypt to formulate and launch a real estate financing program for the benefit of low- and middle-income segments, to support their ability to own housing units, with long-term loans of up to 30 years, with low interest, not exceeding 3%.
We had a conversation with economic advisor and banking expert Hany Abou El-Fotouh, who is also the CEO of Alraya Consulting, to understand how this initiative would affect the real estate sector in Egypt. Abou El-Fotouh told us that this initiative will contribute to reviving the real estate market that is suffering after pandemic. “This is due to the incentive factors of the initiative to own housing units, by benefiting from the concessional terms and the reduced interest, which is the lowest in the history of bank financing,” he added.
Terms of the Initiative
In previous statements, the Deputy Governor of the Central Bank of Egypt, Gamal Negm said that the real estate financing initiative is valued at EGP 100 billion, with a decreasing interest rate of 3% over 30 years. The maximum unit price within the real estate financing initiative will be EGP 350,000 ($22,405) for people with limited income, as it is required to benefit from the initiative, that the monthly income be about EGP 4,500 ($288) for individuals, and EGP 6,000 ($384) for the family.
As for the average income, the maximum unit is EGP 1 million, provided that the monthly income is EGP 10,000 for individuals, and EGP 14,000 for a family.
Successive Crises in the Real Estate Sector
The real estate sector in Egypt faced several crises, starting with the flotation of the Egyptian pound, which affected the purchasing power of citizens, and was also significantly affected as a result of the pandemic. This showed in the unprecedented decline in sales. The volume of losses in the first months since the beginning of the pandemic is estimated at about 50% of the value of profits compared to the same period last year.
The Size of the Real Estate Sector
The size of the construction sector represented about 6% of the GDP during the period between 2017 and 2019, while the relative size of the real estate sector reached about 10.4% during the 2017-2018 fiscal year, with the real estate and construction sectors representing about 16.4% in 2017, according to the data of the Ministry of Planning. The real estate sector also accounts for the largest contributor to the job market, employing 5% of the Egyptian workforce.
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