Gulf real estate's towering ambition in Egypt With resources becoming increasingly expensive in the UAE, real estate developers from the country are on the look out for large domestic markets with low input costs and relative stability. And this has made Egypt a major target for Gulf real estate development projects.
Tarek Ali, real estate investment management analyst from EFG Hermes told AME Info that the level of acceptance for these projects by the local market surpassed his expectations.
'It was quite surprising to see so many Egyptians interested in buying properties that these UAE firms have developed and the volume of sales for companies like Damac and Emaar have really been setting records,' he said.
Dubai-based real estate giant Damac has entered the market with a $15bn development on 29.7 million square metres in Gamsha Bay, about 60km north of Hurghada.
The high-end residential tourism project, one of the largest in the Middle East, represents a new course for Damac, which is better known for its modern tower developments in Dubai.
So far the company has acquired the land in Gamsha Bay for a peppercorn rate, adding to the project's profitability. 'Damac paid $1 per square metre for the land in Gamsha and that is nothing compared to the prices of land in the UAE,' said Ali.
Selling price But given the selling price of these properties, not many Egyptians would be able to afford a Dhs1m home, as about half the population struggles to make ends meet, earning less than $1 a day. This puts many under the UN defined poverty line. 'Even though the prices are high to the average Egyptian, around 50 to 70% of the properties sold are to Egyptians,' said Ali.
Dubai's Emaar Holdings subsidiary Emaar Misr will soon start a project in Marassi, an expansive residential tourism community built around a 7km area at Sidi Abdel Rahman. The company paid $175m for the undeveloped land, which it won in an auction two years ago.
Emaar also has plans for five other developments in Egypt, which reflects its confidence in the country's real estate's sector growth, which Ali believes to be growing at a rate of 40%.
The company also plans to build a self-contained residential community close to the Smart Village on the Cairo-Alexandria Desert Road. Which in itself marks a significant step towards the development for the city, as the government has been pushing to decentralise the now over congested city centre.
Ghost town Yet challenges still lay ahead, as most of the companies that have attempted to develop real estate projects on the outskirts of the country have ended up being 'ghost' communities.
'People buy these properties and lock them up all year long, so what you end with is a ghost community. The real challenge here is for companies to encourage people to stay in these homes and make services accessible to them,' explained Ali.
Another challenge that still lies ahead is expanding the target market for these developments. 'Right now all we are seeing is property aimed at the A class and nothing for everyone else. You end up with people owning three to five homes where the B class has a shortage in supply.'
It means that for the Egyptian real estate market to continue to grow, it must bridge the gap between supply and demand.
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