Over the past six months, real estate development projects on the North Coast have ranked high on Prime Minister Mustafa Madbouli’s agenda.

Egypt and the Abu Dhabi Sovereign Wealth Fund inked an agreement to establish the Ras Al-Hekma real estate project in the area with investments amounting to $35 billion a few months ago.

The South Med project, a collaboration between Egypt’s public sector and the Talaat Mustafa Group, was announced last week. This project, to be built on 5,000 feddans of land, is located east of Ras Al-Hekma.

These developments, backed by substantial investments, raise questions about the future of the real estate market on the North Coast. It is developing fast, with new pricing mechanisms, clientele, and financing strategies emerging.

The marketing campaign for the South Med project focuses on attracting foreign buyers, aiming to position the development as a competitive international tourism destination in the Mediterranean. The use of international celebrities in the marketing for the project highlights its ambition to compete with top destinations elsewhere in the Mediterranean.

Real estate development expert Tarek Bahaa believes that the extensive media focus of the South Med project is appropriate for a development on this scale. South Med is set to be over three times the size of the Marassi resort, also on the North Coast, twice that of Rehab City, and the same size as Madinaty in New Cairo.

The development is expected to take at least 15 years to complete, and its significance is amplified by the involvement of the government as a key partner, Bahaa said. The government is partnering in the project with a developer of proven financial solvency and capabilities, he added.

“The project targets a wide range of clients, including Egyptians, expats, foreigners seeking real estate investment in Egypt, and tourists interested in buying property in Egypt,” Bahaa said.

“As the initial marketing campaigns are focused on selling to foreigners, I anticipate the project will attract the highest percentage of foreign sales in the Egyptian market compared to competing projects. However, it cannot solely rely on foreign buyers and must also include sales campaigns targeting Egyptians and Arabs.”

Major projects on the North Coast developed through partnerships between the government and the private sector enrich the real estate market, attract new customer segments, and enhance market competition, Bahaa added.

Foreign buyers counted for 14 per cent of all the sales in the first phase of New Alamein city, another partnership between the state and private sector developers that lies on the North Coast and is built on an area of more than 48,000 feddans.

The success of such projects will serve as a strong incentive for foreign investors to engage in real estate and tourism development projects in Ras Al-Hekma, Bahaa said.

Mohamed Samir, a real estate finance expert, said that the new projects on the North Coast will positively impact the real estate sector in Egypt. They will change the views that foreign investors and tourists have of the North Coast, particularly since the price per square metre, ranging between $3,500 and $4,000, remains competitive compared to other similar destinations in the Mediterranean, he said.

Attracting foreign clients to the Egyptian real estate market will lead to a significant recovery in the real estate financing sector and will support innovation in it, Samir added.

Real estate financing is an accepted part of acquiring property for foreigners, especially Europeans, who generally do not buy property in cash and instead take out mortgages and make monthly repayments over extended periods.

This segment of foreign clients possesses strong and stable purchasing power but may face bureaucratic challenges when acquiring property in Egypt. Developers will need to adopt a fully finished model when selling real estate to this sector instead of the semi-finished one that prevails in other markets, Samir said.

“Expanding real estate financing options will also enable Egyptian customers to buy units. Financing is the key to stabilising the market, regardless of selling price and whether to Egyptians or foreigners,” he added.

Osama Saadeddin, executive director of the Real Estate Development Chamber in Egypt, said that the “government’s partnership with South Med is a pivotal experience that demonstrates Egypt’s potential to capture a share of the real estate export market in the Mediterranean and Middle East regions.”

“There are ample opportunities and resources, but an effective marketing strategy is needed,” he added. “Public-private partnerships can bolster the confidence of local and foreign clients in real estate development projects complete with integrated services.”

Such partnerships also signal the government’s intention to remove the obstacles facing Egyptian real estate when sold to international buyers.

It is an approach that aligns with the Real Estate Development Chamber’s demands over the past four years to establish an entity under the prime minister’s leadership that would include representatives from all the parties involved in real estate export procedures, ensuring quick completion and capturing sales opportunities, Saadeddin concluded.

* A version of this article appears in print in the 11 July, 2024 edition of Al-Ahram Weekly