Egypt Real Estate; The Dark Horse!

Politics and economy are two sides of the same coin. Therefore, a state can’t make progress unless there isn’t a democratic regime, which positively reflects on its economy; consequently it attracts investments and achieves big growth rates. On the contrary, the absence of democracy, the prevalence of dictatorship more and above the exclusion policy bring about declining all the state’s resources; investment, tourism and exports.

In fact, this is what Egypt is facing at the present period, so a political will is necessary to adopt a democratic regime which can push the country’s stability forward and contribute to promoting the country through an ambitious economic plan that depends on unaffected by circumstances sectors such as the Real Estate, which still keeps its infrastructure and its whopping investment companies can enable it to recover soon.

As a matter of fact, those who follow up the real estate sector know the challenges facing the real estate markets at the current time. These challenges are represented in the distrust of Egypt’s climate that investors have at the current period, specifically under a government doesn’t respect its contracts along with not having a clear economic vision for reform that can make the local and international investors restore trust in the Egyptian market.

The real estate’s index at the Egyptian Exchange has been negatively affected by the political turmoil in the country as it registered a record low of 38.5% in 2012, falling 492 points to close at 783 points at the end of 2012. The index was about to drop again, but it was relatively boosted in 2012 to register a growth rate of 43% at the end of the year. As the bourse is the mirror of economy, the continuous deterioration of the real estate’s indices will drive investors away from the sector.

The Egyptian government ignores the fact that the real estate sector contributes 15% to the GDP, supports more than 100 industries and creates millions of direct and indirect job opportunities.

The fall of the sector will lead to the collapse of a large part of Egypt’s economy as the real estate industry was the main reason behind the fall of the economies of southeastern Asia in the late 1990s and also led to the global economic crisis which started in the United States in September 2008. These incidents reflect the great impact of the real estate industry on the world’s economies as it is a labor-intensive industry.

Under such proofs, only one question remains unanswered on how to make the Real Estate Sector in Egypt avoid reaching a state of deadlock amid the economic turbulent situation that haunts the current scene. We can make use of the real estate makers’ optimisms towards the future of the sector in the country, despite the current multiple challenges which require an efficient government able to deal with.

It seems so crucial to start now carrying out plans to revive the real estate industry in the country powered by such event CityScape that gathers the optimistic real estate makers including prominent names and developers. The supply and demand as regard to the real estate industry is growing, yet the customer’s decision to buy is encountering obstacles including the stability of political and security situation in Egypt. There are positive indicators which show that the real estate sector in Egypt will reach 2% within 2013.

My point is that the decision makers have to adopt decisive procedures to overcome the existing obstacles, including holding constructive societal dialogue between the regime and the opposition seeking to put their ongoing conflicts aside and to promote a clear vision for the future of the country. The decisive procedures would include a number of crucial points just as follow:

– To face the grave risks of the building materials price volatility driven by the US dollar’s increase. Such volatility has reversely affected the prices of units to put up by 20-25%. This means recession would inevitably haunt again the Egyptian real estate sector.

– To reconsider the Egyptian government’s decree on adopting only the auctions system to sell the lands to the investors. The decree could eventually put up the prices, for the meter’s price has reached EGP 11.000 thousand in the Fifth Settlement district (New Cairo), according to the most recent auctions conducted. Canceling the auction system is crucial, the government has to consider providing the necessary utilities to all the projects accomplished.

– To pay off all arrears worth EGP 13 billion to the contracting companies is a must for there were more than 20.000 contracting firms have exited the Egyptian market, according to a recent memorandum sent to the country’s prime minister.

– The government shall present its plans as regards to offering the lands to the investors. In accordance with a well-defined plan, a specific entity shall be in charge of distributing the lands and defining the projects to be carried out on the those lands.

– To work on restoring the investors’ confidence on the Egyptian market through speeding up the settlement process of the pending disputes between the government and businessmen.