What’s in the cards for Egyptian real estate? The real estate sector has seen rapid development in recent years as the government has shifted its focus toward regulating building operations across the country. The Madbouly government is now backing the sector with new measures and simplified procedures, as the headwinds that real estate operations have faced over the past two years begin to recede. This new impetus is fueling growth in property, contracting, and construction materials markets, officials and industry insiders tell Enterprise.

Remember: Global real estate consultancy JLL said in its Construction Market Intelligence Report for 1Q 2024 that Egypt’s construction sector is set for a recovery, with the firm penciling in a compounded annual growth rate for the sector above 8% until 2029. The report highlighted government spending, PPPs, infrastructure development, and rising FDI inflows as positioning the country to become an appealing destination for future investments.

PERMIT ISSUANCE TO RESUME-

Positive movement on long-awaited construction permits: The Local Development Ministry is set to roll out much-anticipated measures to resume issuing construction permits in various governorates, head of the House’s Housing Committee, Mohamed Attia El Fayoumi, told Enterprise. These measures will significantly boost construction activity and reduce the violations that emerged during the four-year period in which permit issuance was suspended, El Fayoumi added.

Refresher: The government imposed a suspension on building permits in 2020, initially expected to last six months, in response to continued building code violations. The suspension seriously hurt real estate companies’ bottom lines, with contractors facing challenges liquidating letters of guarantee and finding themselves short on liquidity.

The new rules will see permits issued within 26 days: El Fayoumi highlighted that easing building requirements will enable applicants to obtain permits within just 26 days, which is expected to alleviate long-standing issues in the construction industry.

Streamlining building regulations: Local Development Minister Manal Awad confirmed that the number of procedures required to obtain a building permit in cities will be cut from 15 to 8 steps. This simplification aims to ease the process for citizens and shorten the time needed to secure a permit.

Plus, longer permit validity: One of the biggest wins for the sector is the government extending administrative building permits’ validity to five years, up from just one, Tarek Shoukry, chairman of the Federation of Egyptian Industries’ (FEI) real estate division, tells Enterprise. This will give developers more flexibility to manage projects, Shoukry added.

More permit issuance will revive stagnant industries: The expected decisions will stimulate construction activity and demand for building materials, head of the Cairo Chamber of Commerce’s Building Materials Division Ahmed El Zeiny told Enterprise. This comes as cement manufacturers have been reducing production due to limited demand, which was previously offset by investment demand that also took a hit due to rationing measures. El Zeiny stressed that resuming construction permit issuance with proper support from the government will revive an industry that serves over 90 other trades.

MEASURES ARE IN THE WORKS TO HELP CONTRACTORS-

Support for the contracting sector: The contracting sector is working to regain balance amid changes in economic conditions like the recent FX shortage and many companies’ shift from now-scarce government projects to those led by the private sector, Egyptian Federation for Construction and Building Contractors (EFCBC) head Mohamed Sami Saad told Enterprise. The government has capped public sector investment spending at EGP 1 tn in FY 2024-25 to control the budget deficit and stop the development of new projects.

Tackling liquidity issues amid soaring inflation: Saad also noted that the current challenges facing the sector are rooted in liquidity shortages and delayed dues payments, compounded by high inflation and rising costs. EFCBC has received assurances from Housing Minister Sherif El Sherbiny that the ministry will consider several sector proposals, including:

  • Issuing a circular for projects with a completion duration of six months;
  • Reviewing penalties and project withdrawals;
  • Following up on compensation and price differentials, including approving submitted compensation, releasing retained securities, and fast-tracking the approval of final statements;
  • Forming a coordination committee between the EFCBC and the Housing Ministry to monitor implementation;
  • Addressing issues related to e-invoicing, balanced contracts, and exiting unfunded projects without cashing in on guarantees for delayed work;
  • Expanding the number of contractors working with new city authorities by preparing a list of qualified companies for infrastructure, housing, utilities, and other projects.

Ras El Hekma is a bright spot for a recovering sector: EFCBC board member Shams El Din Youssef told Enterprise that the sector had seen a significant reduction in small contractors and challenges in project execution during the FX crisis. Companies still in operation today have two windows of opportunity, however: they can execute large-scale investment projects like those in Ras El Hekma City, or they can export expertise to neighboring countries.

Remember: Ras El Hekma is expected to attract USD 150 bn in investments as it’s built out, with investments expected to come at a rate of USD 3-4 bn per year, Prime Minister Moustafa Madbouly said earlier this year.

Fixed pricing for land in new communities: The Housing Ministry has resolved one of the most significant issues facing the real estate sector — changing land prices over time in new urban communities. The ministry has approved fixing land prices, Shoukry told Enterprise, mitigating potential pricing risks. This sentiment was echoed by Fathallah Fawzi, chair of the Real Estate Development Committee at the Egyptian Businessmen's Association, who emphasized that changing the land price at the time of the final contract harms the project's investment costs.

Fast-tracking nearly finished projects: Shoukry also told us that the government’s move to classify projects that are 80% complete as “finished” is a substantial support measure that will push real estate companies to complete their projects.

FINALLY, FINANCING-

Locking in interest rates at 15%: The Housing Ministry has agreed to cap the interest rate on installments for real estate developers at 15%, which will reduce financial burdens and allow for faster project completion, according to Shoukry.

Ring a bell? This step resembles a EGP 120 bn program approved by Prime Minister Moustafa Madbouly in March that offers subsidized loans for manufacturers in freezones, players in the agriculture industry, and renewable energy companies at an interest rate of 15%.

Your top infrastructure stories for the week:

  • Egypt to help develop Sierra Leone’s roads: An Egyptian delegation will visit Sierra Leone next month ahead of a planned cooperation between the two sides to develop the country’s roads and bridges. The two sides are also looking to set up a shipping line connecting them. (Statement)
  • Three maritime terminals seeking operators: Alexandria Port Authority is gearing up to hand over three maritime terminals to local and foreign operators before the end of the year.
  • Dry port and logistics zone in Borg El Arab: The Transport Ministry got the thumbs up from the cabinet to proceed with contracting an unnamed company to finance, design, establish, manage, and maintain the planned dry port and logistics zone in Borg El Arab.
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