Cairo – Decypha: For some time now the Egyptian real estate sector has seen the lion’s share of GCC investments in the country. In fact throughout 2016, the real estate sector has been the one shining beam in Egypt’s struggling economy; with the decision to float the Egyptian pound further boosting the sales of real estate companies.
To better understand what the state is planning to do to ensure the sector continues to receive investment from neighboring countries, Decypha sat with Walid Abbas, the Vice Chairman of New Urban Communities Authority (NUCA), for an interview.
Abbas began the interview by noting the authority’s efforts to enhance the investment climate in the sector. He highlighted a new mechanism just established that facilitates the procedures of issuing real estate licenses, where paperwork could be handled via engineering firms instead of the investor.
Foreign Direct Investment
When asked about foreign direct investment (FDI) flow from neighboring countries, Abbas highlighted the lack of interest from UAE-based real estate companies to invest in Egypt, as opposed to the prominent FDI flow from Saudi Arabian companies.
A key issue raised was the easy of capital flow into and out of the country. Several foreign companies in the Egyptian market have raised significant issue with the limitations imposed on international transfers. Commenting on the topic Abbas said that the authority and the ministry are working on developing solutions that would assure foreign investors the freedom to move money into and out of the country.
According to Abbas one of the most frequently asked questions from foreign investors revolve around how to get their money abroad and ease of transfer. “We inform them that we are waiting for the new investment law which guarantees the ease of money transfer in and out of the country; we have additionally informed the prime minister of the importance of resolving this issue for investors.”
Floating of the Pound
The floating of the Egyptian pound has positively contributed towards the rise of real estate sales, mainly as an escape for Egyptian residents from the devaluation of their savings. However, the floating of the pound may have negatively affected the real value –in terms of profit—for the industry. Decypha asked Abbas on his evaluation on the effects of the currency devaluation, for which he answered by highlighted the sharp increase in the cost of building materials which negatively affected profit levels.
Abbas noted that the significant increase in the cost of construction material has strained the housing ministry in terms of social housing projects. “On the other hand, the floating of the pound represents quite a positive impact for foreign investors who’s currency values have increased in the Egyptian market,” he explained.
Investment Opportunities
In terms of investment, Decypha asked about the city in Egypt currently receiving the lion's share of foreign investments, for which Abbas stated “Badr City, partly due to its proximity to New Administrative Capital, in addition to a number of real estate and service projects that will be announced over the next few weeks […] which include An education complex, medical complex, and various other projects that would put the city at the forefront of the new cities.”
Last year Egypt witnessed its largest public tender of more than 21,000 plots of land being auctioned off in one go. The Egyptian government then expressed its intention to keep expanding the amount of land tendered for investment purposes. When asked about the upcoming public land offering, Abbas confirmed that the authority is working on tendering 2,500 pieces of land, divided into 66 plots. “The utilities of these plots will be offered to investors as soon as the new investment law is finalized within weeks. The land will be sold using the public auction system. In addition to 15 other pieces that will be tendered in the public private partnership system in New Cairo and 6th of October cities,” he explained.
Last summer the ministry positioned New Alamein City as a global investment opportunity, when asked about the upcoming city Abbas explained that as the first phase of the social housing has been completed the city will begin to see residence in 2017. On the side of real estate investment projects he expects the city to witness several launches within this year.
While Egypt’s economy is currently experiencing volatility, the economy in general provides fertile land for foreign investment as the impact of other currencies has more than doubled. One key industry will always be real estate, as it is widely accepted as a safe means for preserving or appreciating ones savings, a factor that investors have capitalized on for the past couple of years.
By Decypha Editorial Team
