Application of real estate finance law necessary to reactivate market
Egypt, Economics, 7/16/2002

Essam Rashad, Egypt's first undersecretary of Housing, Utilities and Urban Communities, said that the Ministry draws up housing policy, and relevant programs in the framework of the state social and economic development plan.

This envisages a full dressed perspective that observes quantitative, technical, technological, legislative and financing aspects which have direct and indirect effects on reactivating the real estate market.

Elaborating, on the quantitative aspect, he said the plan aims at building 250,000 housing units annually as of the beginning of year 2000 until the year 2017. Of this number the public sector is to build 50,000 units, against 200,000 for the private sector.

Rashad referred to pilot projects such as Mubarak's National Youth Program which has carried out 73,000 units and the Future Generation Association which has carried out 70,000 housing units.

On the technical and technological track, Rashad said the General Organization for Urban Planning is drawing up national, regional and urban plans together with developing slums.

In the field of reactivating the real estate market, Rashad said the General Organization for Building and Housing Cooperatives contributes to the field of housing through providing subsidized housing units to citizens, extending soft term loans to citizens who are willing to build, and maintaining control over 1900 housing cooperative societies.

As for the legislative aspect, he said the unified bill for building is currently being drafted for organizing building, maintenance and demolition.

He said the real estate financing law which was recently promulgated would help banks provide financing through liquidity and profit guarantees, reactivating the real estate market for the limited income brackets.

Mohamed Abdel Halim Omar, Director of the Islamic Economy Center at El-Azhar University said the real estate activity is one of the most important economic activities as it contributes nearly L.E. 25,6 billion to the gross domestic product (GDP).

He said this sector absorbs 10 percent of labor to Egypt and is considered a locomotive for at least 60 percent of other economic activities.

He said the slackness currently witnessed by the Egyptian real estate market was behind laying off 27 percent of labor, which complicates the problem of unemployment and the lack of financing and investment inflows in the field of real estate, due to the inability of real estate companies to repay loans owed to banks.

He offered proposals for reactivating the real estate market mainly changing the structure of the real estate system, whether in terms of providing free of charge new land for low-cost housing, adding costs of utilities to luxury housing, banning speculation on new building lands and extending financial and tax incentives to companies.

He called for reactivating the real estate law, establishing a data bank for the real estate market and using Islamic financing mechanisms in reactivating the market.

Sayed El-Habashy, Chairman of the Board of Directors of Real Estate Evaluators expressed the belief that the real estate market is currently witnessing distortions in the costs of building, as the open door policy and the flow of Arab and foreign investments have increased the prices of building plots.

He referred to the negative practices by housing companies which buy plots and then sell them at exaggerated prices. He said decline of demand on luxury buildings deepened slackness of the real estate market and was behind the collapse of shares of many real estate companies by 50-70 percent.

He called for not giving real estate investment companies licenses for building medium cost and luxury units before orienting part of their investments for building units in new urban communities, adding that those companies could be given facilities in terms of financing and taxation, provided that they should orient part of their activity to limited-income brackets.

He also called for developing survey organization for making detailed maps of lands which are good for building and maintaining stability of building and housing legislation in order to strike a balance between supply and demand.

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