The Central Bank of Egypt (CBE) launched a LE50 billion initiative earlier this month to fund middle-income Egyptians wanting to buy residential units with a 10 per cent interest rate that decreases over time and in 20-year installments.
The CBE’s initiative stipulates that the monthly incomes of beneficiaries should not exceed LE50,000 for a family and LE40,000 per person. The price of the units should not exceed LE2.25 million, and customers should not have previously benefited from housing support nor purchased units allocated for the low or middle-income classes.
Beneficiaries should also pay a 20 per cent down payment.
The residential units should be fully-finished, registered at the real estate registrar and not exceeding 150 sqm in size.
Mamdouh Badreddin, chairman of the board of the Real Estate Investment Division at the Cairo Chambers of Commerce, said that “the proposed interest rate is lower than the average rate in the market. This will encourage buyers to purchase units and revitalise the primary and secondary real estate markets.”
Beltone Financial Holding, an investment bank, stated in a recent report that Talaat Mostafa Holding, the Porto Group, Heliopolis Housing and Development and Nasr for Housing and Development were the main beneficiaries at this stage of the CBE initiative.
The middle classes have not benefited much from previous CBE initiatives because real estate funds support fully-finished units, the majority of which are allocated to the low-income classes, said May Abdel-Hamid, chairman of the board of the Fund to Guarantee and Support Real Estate Financing.
Alaa Fikri, a member of the Real Estate Investment Division, said the effects of the CBE initiative on developers would not be significant, because real estate developers are used to selling units before and during the construction phase, adding that the majority of real estate development companies do not sell fully-finished units.
“The initiative will revitalise the secondary real estate market, however. Many owners want to sell houses that are fully-finished, and this could cause real estate marketing companies to boom as well,” Fikri added.
Khaled Abbas, deputy to the minister of housing for national projects, said the majority of units the ministry offered for sale in the Sakan Masr, Ganna and Dar Masr projects met the conditions stipulated by the CBE.
The CBE targets to fund some 50,000 or 60,000 clients through the initiative.
Deputy Governor of the CBE Gamal Negm said that the beneficiaries would not be able to sell the units before five years from the date they had bought them. Should these conditions be violated, the units would be taken from the buyers and the 20 per cent down payment refunded.
If after five years the buyer wanted to sell the unit, the prevailing interest rates in the market would be applied to installments.
Negm said the CBE initiative targeted the social strata above the low-income groups. The latter, he added, were covered by the social-housing project initiative.
The Ministry of Finance has announced it will continue its initiative of real estate funding for low-income brackets. This initiative is based on a family’s income being less than LE5,000 and an individual’s LE4,200.
Fikri said the CBE initiative decreased by about 50 per cent the interest a potential buyer could pay if he resorted to the regular real estate funding system, the interest of which is set at 16 to 17 per cent.
Ayman Sami, head of the Egypt office at JLL, a real estate services company, said the CBE initiative would boost the secondary market and benefit small and medium-size developers.
Large real estate companies would not benefit from the initiative, he said aside from the Talaat Mostafa Group, which sells units that meet the conditions of the CBE initiative.
Such units are available in Badr City, the New Administrative Capital and New Cairo, for example. Smaller units, more like studios, are available in projects in New Giza and Palm Hills, among others.
Experts put the monthly income required for the CBE initiative to purchase a unit at a maximum of LE2.25 million, with a maximum of LE21,924 as a monthly installment over 20 years.
*A version of this article appears in print in the 19 December, 2019 edition of Al-Ahram Weekly.