Addressing an audience of real estate developers and investors, Egypt’s Minister of Housing, Utilities and Urban Development Mostafa Madbouly stressed the importance of expanding the market of affordable housing and improving the infrastructure.
Madbouly spoke at Egypt’s third Real Estate Summit (7-9 April), which opened on Monday, to discuss the country’s most pressing market issues.
“On the one hand, housing projects are expensive, on the other, the purchasing power of Egyptians is low, which is why there is a huge gap between supply and demand in the market,” Adnan Ghoshesh, senior MENA advisor at the Affordable Housing Institute in Jerusalem, told Ahram Online on the sidelines of the conference.
The last Jones Lang LaSalle report on the country's real estate sector issued two years ago showed a shortage of 1.5 million units, according to Ayman Sami, head of the firm's Egypt bureau.
The Egyptian real estate market requires 500,000 new units each year, at least 65 percent of which in the low-income category, Madbouly said.
Praising the Central Bank of Egypt's mortgages initiative, the minister assured that its success would bolster the mortgages market in the country and, consequently, the real estate sector.
The CBE recently announced an initiative to give banks LE10 billion to be loaned as mortgages to low- and middle-income categories at low interest rates over the span of 20 years.
However, the initiative limits the financing option to units in new urban communities built on the outskirts of cities.
“Sustainable models for affordable housing must take into consideration residents’ sources of living and economic aspects,” said Ghoshesh, adding that a balance should be struck between new towns and urban habitation when stimulating mortgages.
The minister also suggested partnerships with the private sector and the revival of the cooperative housing authority.
Citing other countries' experiences, specifically Bahrain's, Ghoshesh noted that partnerships between the public and private sectors are more likely to fail in countries with no institutional maturity or market capacity.
“Encouraging the construction of new towns from scratch allows for one entity to take up the whole project on its own,” he commented.
Infrastructure remains, however, yet another obstacle facing real estate development. On this issue, the minister assured that land will be offered for usufruct once infrastructure projects are completed.
Expressing his concern over the lack of infrastructure, specifically drainage systems, in 88 percent of Egypt’s rural area -- nearly 4000 villages out of 4600 – the minister said the government would need to spend between 15 to 20 years to resolve the problem at an LE120 to LE140 billion cost.
“I wish companies would start taking up their social responsibility and assist in the construction of drainage systems in Egypt’s villages,” said Madbouly.
The government is currently working on generating urban communities outside Egypt’s Delta and Nile cities, namely Al-Alamein, Halayeb and Shalateen, as well as cities surrounding the Suez Canal, the minister announced.