Egypt’s Mortgage Finance Fund (MFF) has received 180,000 real-estate financing requests for residential units in the third phase of the “Housing for All Egyptians” programme in Upper Egypt, the Delta, and cities far from the capital.

The demand is unprecedented, especially since previous promotions in the same areas attracted only 13,000 requests under the same housing programme.

According to a report by the Egyptian Financial Regulatory Authority on non-banking financial activities, 16 real-estate financing companies made LE8.1 billion in loans to customers in 2021, up from LE3.4 billion in 2020, or a growth rate of 138 per cent.

The increase in requests is attributed to rising confidence on the part of individuals and companies in the finance companies, the success of programmes designed to raise awareness and build confidence in the system, and the recovery of the real-estate market from the repercussions of the coronavirus pandemic.

Mai Abdel-Hamid, CEO of the MFF, said that “real-estate financing is the state’s primary tool to implement low- and middle-income housing programmes. The government’s housing programmes benefit from the Central Bank of Egypt’s [CBE] initiatives to support the sector and to those members of the public who qualify to purchase a low- or middle-income residential unit.”

The MFF said in August that “22 national and foreign banks participated in real-estate financing initiatives, in addition to eight real-estate financing companies operating under the umbrella of the Financial Regulatory Authority, providing financing services to 500,000 Egyptian families.”

“These entities have made loans worth more than LE50 billion over the past eight years.”

The figures prove that real-estate financing and the government’s housing programmes have won people’s confidence, Abdel-Hamid added. They also prove that the Housing for All Egyptians programme, launched by President Abdel-Fattah Al-Sisi, has provided financial advantages to the middle classes through units that range in size between 100 and 120 square metres and achieved balanced demand.

However, the increasing demand for real-estate financing in Upper Egypt has a cultural dimension as well, said Mohamed Samir, an expert on real estate. The concept of the large family house in which several related families live, previously common in Upper Egypt, is now waning, he said.

The younger generations want to live with their families away from the family house, preferring life in the new cities to the bustle of the old city centres.

“Both the government’s Housing for All Egyptians programme and the CBE’s initiatives to support real-estate financing explain the success. They have been able in recent years to spread the culture of real-estate financing and raise the confidence of low-income citizens in the system,” Samir said.

“This confidence has been contagious and has spread among the middle classes, who have also begun to demand similar opportunities.

“The harmony between the CBE initiatives and the housing programme has achieved three goals for the state. The first is economic, since it has doubled the provision of residential units on an annual basis in order to meet increasing demand. The second is social, since it improves people’s quality of life by providing better, more sustainable, and better-planned urban communities while at the same time bolstering social and thus political stability.

“The third goal is political, since the ongoing cooperation between the government, the International Monetary Fund [IMF], and the World Bank has led the government towards increasing support for lower-income strata who are more vulnerable to fluctuations in the international economy.”

Although the government has intensified real-estate financing since 2014 by amending the relevant laws and launching initiatives through the CBE to encourage the public to purchase residential units, it still only contributes one per cent of GDP.

However, Ayman Mohamed, manager of real-estate financing at the United Bank, believes that this in itself is a major step forward, especially as it has been achieved in just 10 years. He expects the contribution of the sector to GDP to double in the next few years, based on a spread of awareness in areas outside Cairo.

The state’s building of new national universities in the new cities over the past year will also raise growth rates, he said. Demand for housing units near the new universities will increase through the provision of greater financing opportunities for real estate.

“The private sector has an opportunity to provide housing units in the new cities in Upper Egypt, in line with the conditions of the CBE initiatives, and it should be easy to market them to middle- and low-income people,” Mohamed said.

The latest CBE initiative offers residential units on 30-year installment plans and at an interest rate of three per cent. It is an opportunity for real-estate developers to build trust with consumers and to find a foothold in the market.

Nonetheless, Samir believes that there could be other hurdles standing in the way of real-estate financing becoming accepted as the best way to purchase a housing unit, among them elevated interest rates at the banks.

These reflect global challenges and are thus out of the hands of the public, the state, and investors and are immune to government policies to increase financial inclusion.

*A version of this article appears in print in the 24 November, 2022 edition of Al-Ahram Weekly.