“Demand on the real estate sector in Egypt actually surpasses the supply, either for the residential or commercial”B
The Middle East Observer, had the pleasure of interviewing Nehad Adel, President of B2B , Business to Business for investment and Real Estate marketing.
Please, can you tell us more on B2B? its operation and market activities?
We are a real estate investment and marketing hub, all our activities are real estate related, we mainly focus on residential and commercial types.
The residential under its umbrella we operate for primary and resale, while the commercial, we operate for medical, retail and offices.
We also conduct research and development as well as fund advisory.
We help our clients, investors and developers, by doing research for the assets they have related to market entrance, marketing plan, launch, price elevation and payment facilities.
Who are your key clients?
Our key clients,fall within the A class, A+, and B+ class; they represent 15%of our clients.
Expats as well are key clients, specially after the devaluation, the Egyptian market became an attractive market for clients who gets payed in foreign currencies.
As for the residential projects clients, they are mainly investors and end-users; for the past few years Egyptians were focusing to invest in the real estate sector, they tended to buy a unit for example, then wait for a few years to sell it for a high appreciation rate; however, the market has diverted more towards end users; in other words after the price increase, following the devaluation decision, clients who purchase more in the residential projects became the end users; they buy the units for their personal use.
As for the medical towers, its return on investment became higher, so you might find that clients, non-doctors, tend to buy clinics for investment purposes.
In your opinion, is the real estate the ideal type of investment in Egypt?
For sure yes, clients are still eager to buy and invest in ReaI Estate.
I believe that the real estate sector gives the highest return on investment in comparison to other sectors; and let me add that weactually have a gap between the supply and demand; demand on the real estate sector in Egypt actually surpasses the supply, either for the residential or commercial.
Furthermore, the appreciation that took place with the real estate value actually surpasses the appreciation of bank interest. By buying a real estate unit the client gets an annual appreciation, plus rental income if he/she decides to rent the unit.
Also, buying lands or real estate assets have been through the years a crucial element for many Egyptians, we can say it is part of our culture to buy assets. So the cultural part, along with the high marriage rate, plus the increase rate of the Egyptian population, really does make the real estate investment the most secure type of investment in Egypt. However, my advice for any client prior to the purchasing step is to conduct good market research through brokers, or real estate houses.
How come the prices of real estate units became higher and the demand is still relatively high?
Prices have witnessed an increase yes, however, payment facilities are becoming much more flexible comparing to the past few years.
Also clients stopped thinking about the total price of the unit; they think about the installments they can afford to pay monthly or quarterly.
Let me tell you that many projects has 0% down payment; and some projects extend the installments period until 10 years, while some projects has 0% interests.
Due to vigorous competition and the rise of new developers since 2015, like Tatweer Misr, developers tend to give unique payment facilities.
Since the 2011 revolution real estate prices remained sustainable did the devaluation impacted it negatively?
For sure the devaluation affected the real estate sector, it caused what we can call a slow down in purchasing nevertheless, it made the Egyptian market a good opportunity for expats; and for Egyptians who are living abroad; and let me add that the continuous demand that even surpasses the supply protected the sales indicators of the real estate market.
It is excepted that prices of real estate units will witness an increase of approximately 20% due to a forecasted increase in raw materials along with construction fees?
Well if the gas price will witness an increase, for sure the price of real estate units will witness an increase as well, due to the price rise of the raw materials. However we need to clarify that the excepted increase to take place in 2019, will be the least increase to happen for the last 4 years; due the fact that the slow down that took place after the devaluation might have slightly affected the purchase move, so the developer will not increase the price much. The increase might be within 10 or 15% and this increase will be encountered by good payment facilities and better installments and down payment packages.
Some experts claim that Egypt is facing a bubble in real estate what is your opinion and how do you see the future of real estate inEgypt?
Well this for sure does not apply on the Egyptian market. Also, if we take the example of the new Capital city, and examine it, we will find that this project has given a huge boost to the real estate market and even a long -term plan for the old neighborhood to became a new attraction area for investors and for tourists to come and enjoy their stay in the downtown areas.
The bubble is created when the supply surpasses the demand or there is a fake demand from expats who will not stay for long the in thecountry, like what happened in Dubai. This does not apply on the Egyptian real estate market, which has a population of 100 million who occupy only 7% of Egypt’s land. So we have high density in some areas compared to very low densities in other districts.
Furthermore, the marriage rate in Egypt is almost 1 million marriages per year!! With various demands segmented to luxury housing, upscale housing, mid-scale housing, lower mid-scale and economy housing; now the question is does the real estate sector, whether private or governmental, deliver 1 million residential units per year? The answer is NO!
This leaves us with a demand rate that surpasses supply. Noting that the luxurious housing and upscale housing does not monopolize the realestate sector, on the contrary the lower and economy housing built by the governmental sector actually surpasses the other scales, however the government does not advertise for it. So the idea of the bubble does not apply at all.
Furthermore, the high divorce rate in Egypt has created an extra demand, as usually the couple do not go back to live in the family house, however, they tend to purchase new houses.
Which areas do you suggest will boom within the current mega projects scene that the country is witnessing?
Let me clarify first that the real estate sector is expected to witness several changes in 2019; the projects that are likely to boom will be under the umbrella of credible and big developers, who have good history and punctuality in delivery dates.
Projects under the umbrella of Sodic, Palm hills, Mountain view, Tatweer Misr, Allam, Sabbour, are excepted to boom.
Please tell us more about the new capital project?
Currently this project is the biggest real estate project of a new capital under construction worldwide, the landscape of the project is 170 thousand feddans; the old capital, which is Cairo and Giza, is located on alandscape of 50 thousand feddans. October city is constructed on 50 thousand feddans.
It is a big project that will maybe take around 20 years to accomplish and let me clarify that the pace of construction of the first phase is really fast; and I believe within the coming 3 years people will start to move. It is actually considered a new extension of New Cairo and the 5th settlement.
In figures can you provide sales indicators that reflect the increase in real estate sales over the current and past year?
Well, if we examine the sales indicators of City Scape, the biggest real estate event in Egypt, we will find that one of the biggest real estate developers in Egypt, had sold with 800 million EGP. Sodic, Emmar, Palm hills and Hyde park their sales indicators hit the ceiling in City Scape compared to last year; and to be more accurate when the sales indicators of the big names of real estate developers in Egypt, who are registered in the Egyptian stock market and their budgets are supervised by the Capital Market Authority, witness an increase this is a very strong positive indicator.
Sales of new property along with facilities provided have taken a large portion of buyers away from the old property market, how do you see the future of old property in Egypt?
Well, let me clarify that for the last six years the governmental planning has been really strong and fast. The government plan is to lessen the high population density of the old capital and restore its beauty to gain its touristic attraction again.
Moving the governmental entities to the new capital will lessen the density of employees with a round figure of approximately 6 million employees, and around 4 million who used to visit those entities! So moving the governmental entities, and companies and even clinics from the residential old districts to the new city will solve many problems, including unbearable traffic jams and high pollution rates! So the old district and old buildings will regain its glory again by reviving the area with all its touristic attraction spots, like Giza pyramids, Maspero triangle, the Cairo museum and the hotels will operate well to serve the tourists who will be eager to come and stay in a convenient area, with all the entertainment facilities all around. I do expect that the value of the old buildings will increase over the coming few years.
What can the government do to support the marketing, promotion and sales within the new cities being developed?
Well, in my opinion the best support the government should deliver is the good planning as well as selling the landscape to credible developers.
Furthermore building the right product is the strongest marketing tool in my opinion. If we take the example of the new capital I would say that the master planning, is brilliant; it is built according to the standards of a city, which is building a city according to international standards, like Dubai, Gabl Ali and Abu Dhabi.
Also the new city is built under a strict supervision that regulates the building dimensions of the city. So I believe that the government is already performing really well within the real estate sector.