Egypt’s construction industry expected to grow following last year’s dip: Egypt’s construction sector is set for a recovery and is estimated to grow consistently until the end of the decade, global real estate consultancy JLL said in its Construction Market Intelligence Report (pdf) for 1Q 2024. The report pointed to government spending, public-private partnerships, focus on infrastructure development, and rising foreign direct investment inflows collectively positioning the country to become an appealing destination for future investments.

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By the numbers: The construction industry in Egypt is expected to see a compounded annual growth rate of above 8% until 2029, JLL said, citing projections from market intelligence and advisory firm Mordor Intelligence.

This would be a big improvement of where the sector was in 2023: The total value of awarded construction projects last year was down 50.3% on the year before, coming in at USD 15.9 bn for the year, according to MEED Projects. The construction sector came in as the largest sector in this regard, contributing USD 7 bn to the total figure, while the remaining awards were distributed across sectors that include transport, oil, gas, and utilities.

There’s plenty of untapped potential and reasons to believe we could see an uptick in awards: Egypt’s share of the total pipeline value of unawarded projects in the MENA region is estimated at around USD 515 bn — 12% of the USD 3.9 tn projected for the region. Residential projects in the country make up USD 36 bn of this share, while mixed-use projects contribute around USD 115 bn of Egypt’s share.

But a newly introduced cap on public investments could complicate things: The state’s newly imposed EGP 1 tn cap on public investments for the current fiscal in response to the International Monetary Fund’s request to slow spending on infrastructure projects and rationalize fiscal policy, has left some contractors that work on infrastructure projects unsure as to how much work coming their way from the government they will continue to see. Many local contracting companies that have historically relied on the government for projects are now going to have to increasingly look elsewhere to find contracts to ink.

In terms of real estate, rising prices also present a challenge that needs to be addressed by the construction sector: The real estate sector is in the process of adapting to rising prices and a drop in financing to stop growth rates falling, industry players told Enterprise. Aside from a select number of projects that have attracted foreign clientele, the market as whole has undergone a general stagnation in sales, industry sources told us. Some companies have also resorted to promoting special offers wherein they reduce the prices of down payments and increase the size of installments as a means of hedging against rising prices, New Cairo Developers Association chair Mohamed El Bostany tells us.

Contractors have been quick to react: Industry players have taken several different paths towards ensuring the creation of 23k jobs for contracting firms across the country, Egyptian Federation for Construction and Building Contractors (EFCBC) head Mohamed Sami Saad told Enterprise. The sector could remain unaffected if firms are willing to shift from government contracting entities to an open market, Saad added.

There are a number of different ways for the industry to pivot away from relying on the government contracts, Saad added. One way according to the EFCBC official was partnerships with local and foreign real estate development firms to implement their investments, akin to the Ras El Hekma agreement and other large real estate projects. Saad also suggested working with international financing entities on funded projects in Egypt — such as drinking water and sewage projects.

The sector should also think about looking abroad for work: Saad recommended looking out for projects abroad, emphasizing that there are “significant” contracts to be inked in neighboring markets. Some contractors have already started doing this, with Arab Contractors set to build three road and infrastructure projects in Libya’s Derna and areas affected by Hurricane Daniel, the company announced in a press release last month.

This also applies to the real estate sector more broadly: With the Egyptian market becoming increasingly saturated with real estate investment, the way forward for the market is for firms to export real estate and hold real estate exhibitions abroad, El Bostany said. Holding exhibitions abroad, he added, will help companies sell a larger number of units and will attract FX inflows that would allow for even more growth in the sector.

Attracting new clientele could also play an important role: Companies also have to begin looking for new clients, El Bostany added, saying that firms are already looking to attract clients from neighboring countries, as well as international students and foreign residents — which he said has become easier due to residency and citizenship facilitation from the government. Developers will also be looking to attract liquidity in the coming period, especially from the Gulf — making luxury housing a key investment for developers, El Bostany continued.

Your top infrastructure stories for the week:

  • Gov’t looks to upgrade Egypt’s silo infrastructure: The ministers of supply investment are looking into pouring investments into the country's silo infrastructure and increasing the storage capacity of silos owned by the Egyptian Holding Company for Silos and Storage. (Statement)
  • Alameda, Dell are launching a data center: Local healthcare services provider Alameda Healthcare and Dell Technologies are launching a data center in Cairo aimed at transforming digital healthcare.
  • EV charging is coming to District 5: Leading fintech player Valu and solar energy company KarmSolar are setting up an EV charging network in New Cairo’s District 5.
  • Gov’t wants to allocate more land for new industrial zones: Cabinet’s National Center for Planning State Land Uses and the Federation of Egyptian Industries are looking into allocating 43 plots of land in 16 governorates for new industrial zones.
  • Updates on CSCEC’s planned medical city: The General Organization for Teaching Hospitals and Institutes inked an MoU with Chinese state-owned construction firm China State Construction Engineering Corporation (CSCEC) to design and construct its planned medical city off the Ain Sokhna Road.
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