What real estate developers want to see from the real-estate-for-FX scheme: The government last month started looking into a proposed initiative that would allow Egyptian expats and foreigners to purchase properties from private real estate developers in foreign currency. While the government has approved the overarching idea, it’s still studying the exact mechanism, Tarek Shoukry, the head of the Federation of Egyptian Industries’ (FEI) real estate division told Enterprise, adding that the council has submitted its own proposal for incentives offered within the scheme. The planned initiative is the latest in a string of government measures aimed at easing the ongoing FX crunch and could extend a slew of benefits to the sector.

REMEMBER- The government introduced a similar initiative — the expat car import initiative — earlier this year, allowing Egyptians living abroad to import cars tax-free on the condition that they deposit the equivalent of saved duties and taxes in a five-year FX certificate of deposit.

The idea is to channel more USDs into the official banking system: Some USD 6-10 bn already circulate on a yearly basis in the parallel market for real estate purchases, Egyptian Real Estate council Chairman and Tatweer Misr CEO Ahmed Shalaby told us. The scheme would help channel these into the formal banking system, he added. Developers could also offer real estate at reduced prices to expats as part of the scheme in a bid to narrow the gap between the official and parallel market exchange rates, he noted.

One major caveat: Under the proposed plan, the government would need to set up the regulatory infrastructure needed for foreigners and expats to make payments via bank transfers, ensuring that the funds go into the official banking system, Shalaby said.

The ideas on the drawing board: Real estate players have come up with a host of proposals and incentives designed to attract real estate buyers, some of which have been submitted to the government. We spoke with a few of them to get their thoughts on the scheme and what they want to see from it:

#1- 100% cashback: Under FEI’s proposal, home buyers would pay 100% of the property price in cash upfront in exchange for a full refund in 10 years, Shoukry previously told us.

Refund and resale mechanisms TBD: It has not yet been determined whether the deposit will be refunded in FX or its equivalent in EGP at the time of redemption, Shoukry said. The division is also studying whether buyers should be allowed to sell their properties during the 10-year period.

#2- The scheme could offer more citizenship and residence permits: House Housing Committee Undersecretary Amin Massoud proposes a tiered system under which different investment brackets would hand buyers varying degrees of residency, he told us. Under this plan, a purchase of USD 50k would hand the buyer a five-year residence permit, USD 100k a 10-year residence permit, USD 250k a golden residence, and USD 500k or more would grant the buyer a right to citizenship.

The target market: Gulf + European investors and real estate funds: The initiative should target not just individuals, but also real estate funds, particularly those in the Gulf, said Senator and Al Ahly Sabbour chairman Ahmed Sabbour, adding that Saudi Arabia has around 12 of those. The initiative should also include the c.10 mn Egyptian expats in the country, he said. An important market to target for is the Gulf, particularly in Saudi Arabia and the UAE, where demand for Egyptian real estate is highest, said Shalaby. European investors should also be a target, Massoud suggested.

The scheme would come during a good time for our real estate market: The total gross sales of the 20 largest real estate developers hit EGP 448 bn in 9M 2023, up 95% y-o-y, according to a report (pdf) by Cairo-headquartered consulting firm The Board Consulting. The total private-sector market size is projected to reach nearly EGP 1 tn by the end of the year, Shalaby said, noting that the figure excludes projects across other governorates.

The market offers high returns: The economic crisis has driven up demand for real estate because real estate investments — which yield lucrative returns of at least 25% annually on average — pay higher returns in times of economic uncertainty, said Mohamed El Bostany, chairman of El Bostany Real Estate Development and head of the New Cairo Developers Association. Rising demand can also be attributed to the weakening EGP and growing consumer confidence in the local sector, Shalaby added.

Up to half of this demand comes from abroad: Some 30-50% of the market’s total sales are properties sold to foreigners and expats, Shalaby said. Half of Tatweer Misr’s sales in 9M 2023 came from clients outside the country, with expats contributing 39% and foreigners 11% of total sales, Shalaby explained. That’s up from 43% of total sales last year.

The gov’t has had its eyes on FX from the sector for a while: The cabinet in July approved a decision to remove the cap on the number of properties foreigners can own provided that they pay for the properties in hard currency.

But developers want more gov’t support for the sector that would allow them to promote their products abroad: The real estate industry should be added to the state’s export subsidy program, suggests Beta Egypt Chairman and Managing Director Alaa Fikry. Developers should receive cash support proportionate to their sales volumes, an incentive that would help them participate in exhibitions abroad and promote properties to international investors.

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