Because the troubling inflation in Egypt is predicted to soon decline, more domestic and foreign investors are looking into Egyptian real estate.

1. Spotlight - Why Are
Investors Excited about
Egyptian Real Estate?
DR. EHSAN BAYAT

2. Spotlight - Why Are Investors Excited about
Egyptian Real Estate?
 Earlier this year, the future of the Egyptian real estate industry was largely
up in the air, and a number of challenges threatened its recovery.
However, international investment institutions now believe that the
country will experience significant foreign investment starting next year.
Foreign investors have expressed interest in a range of different sectors,
from consumer products to energy. In addition, the real estate market is
attracting a number of potential investors from both domestic and
foreign parties.

3. The Current Financial Health of the
Egyptian State
 One reason that analysts expect foreign money to flood into the Egyptian
market is that they predict inflation rates will fall sharply throughout the
country’s markets in the coming months, leading the Central Bank of Egypt
to lower interest rates from the current rate of nearly 20 percent to about 10
percent by the beginning of 2020. This decline would make the cost of
construction, especially expenses involved with raw materials, more palatable
for development companies.
 Renaissance Capital, a London-based investment firm that focuses primarily
on emerging markets, believes that the Egyptian government paying down
its debts to international oil companies will spark the interest in foreign
investment. New discoveries of oil and gas fields will bring in new money, but
the real estate industry will help sustain foreign investment in the nation.

4. The Current Financial Health of the
Egyptian State
 According to Capital Economics, Egypt’s central bank will address its
monetary policy before the end of 2017. The firm expects that the bank’s
monetary policy committee will cut interest rates even more than previously
expected, which will boost both domestic investment and foreign investment
in real estate. Capital Economics predicts a fall in interest rates to 12.75
percent by the end of 2018 and 10.20 percent by the start of 2020.
 Recently, the monetary policy committee decided not to change lending and
deposit rates in the face of significant recent inflation. However, the policy
committee at the central bank denied the need for additional policy
restrictions, which permitted the monetary policy committee to fix the
interest rates, which could in turn drive down inflation. Analysts at Capital
Economics believe that inflation in Egypt has peaked, and the coming decline
will make the investment situation very favorable for foreigners.

5. Foreign Investors Begin to Invest in
Egyptian Real Estate
 Already, foreign companies are considering the possibility of major real estate
investments in Egypt. For example, the Saudi Arabian firm Third Millennium
Group is already preparing to open a branch in Egypt that will drive a
number of different real estate development projects. According to the
company’s chairperson, Abdullah Al-Qatami, Third Millennium Group has
begun looking into a new project for 6th of October City.
 Already, Third Millennium Group has opened a location in Morocco—its first
venture in North Africa. The company was attracted to this area because of
declining business volumes in the Gulf countries and increasingly attractive
deals in North Africa, particularly in Egypt. Al-Qatami has stated that the
company is interested in working with the Moroccan government in its
investment efforts and hopes to form a partnership with Egypt’s Ministry of
Housing. While the firm is conducting commercial studies of the Egyptian
market, it believes that public-private partnerships could be lucrative for all
involved.

6. Egyptian Organizations Invest in
Domestic Real Estate
 Domestic companies are also increasing their investment in the real estate sector. This year, the
managing director of Al Ahly For Real Estate Development Company announced that it would invest EGP
2.5 billion in real estate project and complete contractual sales totaling EGP 3.5 billion. Much of this
income, the managing director said, is due to its participation in domestic and foreign exhibitions. The
company currently has 12 million square meters of land under development and a portfolio of 56
projects.
 Currently, Al Ahly is focusing on areas with the greatest purchasing power, including plots in the Delta
and Upper Egypt. The company’s managing director is reaching out to foreign investors, especially in the
Gulf countries, to draw them into Egypt by citing the currency devaluation and Egyptian citizens’
tendency to purchase rather than rent property. Also, Egypt currently boasts a stable political
environment, which would also attract foreign investors.
 The Egyptian government is also playing a role in providing affordable housing for its citizens. In
response to Egyptians’ preference for buying over renting, the government recently undertook a major
project in the New Administrative Capital to build residential units and sell them at prices most
developers would struggle to match. Currently, the parliament’s Housing Committee is discussing new
real estate development laws, including building-quality regulations that could address many of the
barriers to further development, such as the lack of connected land with utilities.