Egypt’s real-estate market is seeing a new phenomenon this year, with all the country’s leading real-estate developers reaping substantial profits, some achieving a 100 per cent increase in earnings compared to the previous year, despite the reduction in the number of units sold.

The Egyptian real-estate market has considerable potential for expansion, and demand remains robust, said Ayman Amer, managing director of SODIC, one of Egypt’s top 10 developers.

Some companies have reported a remarkable 100 per cent increase in sales value during the first half of 2023 when compared to the same period in 2022, Amer said at a session entitled “An Overview of the Egyptian Real Estate Market and Opportunities” that took place at the Cityscape Real Estate Exhibition that ended on Saturday.

Walid Mokhtar, CEO of IWAN Developments, said that “investors exhibited a strong appetite for real estate in the first half of 2023.”

Idris Mohamed of Akam Alrajhi Development attributed the surge in investor interest in the real estate sector during the first half of this year to changes in the exchange rate that had prompted many people to explore real estate as a hedge against low exchange rates and inflation, despite the 100 per cent price increase in units last year.

In mid-August, the Board Consulting, a business consulting company, released a report that tracked an 88 per cent growth in sales for 10 Egyptian real-estate developers during the first half of 2023 compared to the same period in 2022, with total sales surpassing LE168 billion.

“One of the primary factors contributing to the sales upswing is the depreciation of the Egyptian pound, as people are seeking to safeguard their current capital through more dependable investment avenues while capitalising on the anticipated price escalation in the future,” the report said.

While real-estate companies have reported significant profits, these returns are the result of increases in prices per square metre rather than of a surge in the number of units sold during the first six months of 2023, Mohamed Samir, a real-estate finance expert, told Al-Ahram Weekly.

“Not all the figures announced are accurate indicators. Some of the agreements disclosed by the companies are contractual in nature and may undergo changes after a year or more due to the contracting party retracting their purchase decision, despite having paid a reservation deposit,” Samir said.

However, according to Ahmed Mansour, CEO at Cred Developments, the real-estate companies’ performance is commendable, having achieved favourable returns by increasing sales value, even if this growth has been achieved while selling the same number of units as the previous year.

It is the escalation in prices that continues to appeal, especially to foreigners who perceive the impact of inflation, higher interest rates, and lower exchange rates as an opportunity to enhance the value of their investments in Egypt, he noted.

The majority of real-estate developers participating in the 24th edition of the Cityscape exhibition concurred that there is significant demand from foreign investors and emphasising the need to capitalise on this opportunity.

Despite the decline in the number of units sold in the Egyptian market during the first six months of 2023, perceived as a sign of reduced purchasing power, Idris Mohamed said this was a positive opportunity for developers who would be able to readjust their prices according to future market dynamics.

Tarek Bahaa, an expert in real-estate development and a member of the Egyptian Businessmen Association, said the profits declared by the real-estate companies were real. He told the Weekly that this was due to legal requirements prohibiting companies from announcing their profits until after the completion of project delivery.

He added that some leading developers are exploring opportunities in the Gulf, not in order to abandon the Egyptian market, but rather as a way of diversifying their project portfolios, generate foreign-currency revenue, and leverage expertise gained in the Egyptian market in international markets.

Bahaa pointed to the extensive diversity in the Egyptian market, where various types of units, including commercial, administrative, and medical properties, are being offered along with residential properties.

John Gamil, an expert on urban development and sustainable cities, told the Weekly that he does not believe that the decline in the number of units sold in the first half of this year will mean a reduction in the number of units offered for sale until the end of the year, because projects are launched with a predetermined number of units in each.

He said that real-estate projects are typically launched with a predetermined number of units, and pricing is influenced by factors such as the inflation rate and the costs of building materials. These have a more decisive impact on pricing than the quantity of units offered or sold, he said.

The relatively low number of units sold in the Egyptian market at the beginning of the year can be attributed to the attractiveness of the high-yield certificates offered by the banks and the increase in gold prices, as these are seen as competitors to real estate in providing safe-haven assets, Gamil said.

* A version of this article appears in print in the 28 September, 2023 edition of Al-Ahram Weekly