03 june 2017 ig by Omar Ghazal

REAL ESTATE NEWS, REPORTING & ANALYSIS

June 2017 - 40 Pages - Issue 3

EGYPT’S

REFORM PLAN DETERMINED TO PROSPER

THE WATERWAY: UPGRADED LIVING BENCHMARK RESIDENCY-FOR-PROPERTY LAW TO ENRICH THE MARKET

EGYPT’S HOSPITALITY SECTOR ON THE RISE POST FLOAT TOURISM SEGMENT ADJUSTS AS INFLOWS DECLINE OWNING A HOME NOT TOO FAR AWAY FROM HOME

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EGYPT REAL ESTATE

CHALLENGES AND OPPORTUNITIES STRATEGIC ROUNDTABLE

DISCUSSION TOPICS INCLUDE: • Residential Economic Issues & Trends • Commercial Economic Issues & Trends • Federal Legislative & Regulatory Issues • Real Property Valuation • Infrastructure Challenges & Opportunities • Attracting Foreign/International Real Estate Investments • Hospitality/Real Estate Investment in Modern Egypt

OCTOBER 2017 2 | INVEST.GATE | June 2017 - ISSUE 03

For more information contact marketing@invest-gate.me

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EDITOR’S LETTER

General Manager Yasmine El Nahas

WELCOME TO INVEST-GATE Summer season has begun with more exciting investment opportunities across the Egyptian real estate market to explore. In this issue, Invest-Gate takes its readers on several tours across Egypt. This time around, we explore Egypt’s sought-after summer destinations, starting off in Cairo. We visit one of Egypt’s iconic residential projects, The Waterway, and chat with its owner Hossam Hassan, about his vision on modern communal living and how it is implemented in New Cairo. Aside from real estate, InvestGate accompanies its readers on a sightseeing excursion across the capital to visit Cairo’s recently renovated and soon-to-be-completed historical monuments, namely the National Egyptian Civilization Museum, the National Egyptian Museum, along with the many palaces of downtown Cairo, to name a few. Moving out of Cairo, we travel to Egypt’s tourist destinations from north to south and east to west to check on the hospitality industry, foreign tourism and real estate investment, and provide the most affordable travel plan to make sure you get the best out of Egypt for less across the Red Sea, Sinai, North Coast, and Marsa Matrouh.

Sabbour critically enlightens us about the government’s developmental plans that are taking place all over the country and how they are set to contribute to Egypt’s prosperous future. On our journey, as always intended, we never forget the people. We visit Qubix and learn more about its modern take on construction using the Cargotecture method and its adoption in Egypt to save on cost, providing ecofriendly quality. As the Voice of Real Estate, Invest-Gate aims to cater all needs from homebuyers to big property investors. We bring you stories covering Egypt’s most interesting and vibrant sector, as it changes under the current economic environment. With the sentiment on Egypt gradually improving, we are delighted to explore how that impacts the most favorite investment outlet.

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Editor-in-Chief Farah Montasser Managing Editor Yasmin El-Beih Associate Editor Menna A. Farouk Staff Writer Fatma Khaled Julian Nabil Nayrouz Talaat Market Researcher Hagar Magdy Database Executive Taghreed Mounir Operations Manager Liz Hurley Business Development Director Safaa Abdel Bary

So enjoy summer and have a happy Ramadan!

Web Master Ayman Rady Art Director Omar Ghazal

We sit with real estate and construction guru Engineer Hussein Sabbour to learn more about the current status of the property market and get insight on Sabbour’s latest endeavors in Egypt and the Middle East. Furthermore,

Graphic Designer Ahmed Sabar EDITOR-IN-CHIEF

3D Visualizer Maged Makram Events and Logistics Manager Abdallah El Gohary Distribution Officer Mahsoub Kenzi Mohamed El-Sayed

Inside this issue p.14

p.18

Egypt’s Reform Plan Determined The Waterway: Upgraded Living Benchmark to Prosper p.24

p.22

Egypt’s Summer Destinations in a Wrap

p.26

Residency-For-Property Law To Egypt’s Hospitality Sector On Enrich The Market The Rise Post Float p.30

IN PARTNERSHIP WITH

p.28

Tourism Segment Adjusts As Inflows Decline

p.32

p.36

Publisher MOHAMED FOUAD All rights to editorial matters in the newspaper are reserved by Invest-Gate and no article may be reproduced or transmitted in whole or in part by any means without prior written permission from the publisher.

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Egypt’s Vast Museums Across Cairo Renovated to Boost Tourism

Egyptian Entrepreneurs Seek Owning a Home Not Too Cheaper, Eco-friendly Properties Far Away From Home Via Alternative Methods

4 | INVEST.GATE | June 2017 - ISSUE 03

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NEWS

UPDATE

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NEW DEVELOPMENTS TO START IN NEW AL-ALAMEIN CITY Residential towers and hotels are currently underway at the New AlAlamein City, Invest-Gate reports. Funded by the New Urban Communities Authority (NUCA), the Egyptian government is to include approximately 5,000 residential units spanning over an area of two mn square meters, as part of the first phase of its special housing project across Egypt.

all year long.”

NUCA also confirms that the project is to include middle-income housing and high-end residences along with 25,000 hotel rooms on its sea shores.

Touristic Pathway, spanning an area of four kilometers, is currently designated to include hotels and entertainment venues, the minister confirms.

New Al-Alamein City features “a special area for entertainment, historical sightseeing, and a beach,” Minister of Housing Mostafa Madbouly states. “This newly developed area is to be operational

Over 50,000 feddans, New Al-Alamein City comprises a 14 kilometers beachfront, industrial zones, universities, schools, and residential projects, according to a released statement.

A Belarus delegation is to visit Egypt soon in order to scout investment opportunities in the New Administrative Capital, Invest-Gate reports.

SAUDI INVESTORS TO UP EGYPT INFLOWS TO USD 51 BN The Saudi-Egyptian Business Council plans to increase investments to USD 51 bn across Egypt’s agricultural, industrial, tourism, energy and real estate sectors, as well as the Suez Canal Development, Invest-Gate reports. “The government is amending its major laws and general legislation that would provide a regulatory framework for investors,” Minister of Investment and International Cooperation Sahar Nasr says on the sidelines of the 42nd meeting of the Islamic Development Bank Group (IsDB) in Saudi Arabia.

Saudi investors have expressed optimism about the improvement of Egypt’s investment climate.

Egypt expects to receive additional German investments in various fields, following the launch of the EgyptianGerman Business Forum scheduled to be held next month, Invest-Gate reports.

The forum will tackle opportunities of engagement in Egypt’s vision for 2030, according to a released statement. This comes as part of a meeting held

HPD officially announces the launch of Hyde Park New Cairo’s Phase II Park Corner with an investment value of EGP 3 bn. The project encompasses an area of 235,000 square meters and comprises a total of

6 | INVEST.GATE | June 2017 - ISSUE 03

Madbouly has discussed investment opportunities with the Chairman of one of the largest construction and holding companies in Belarus and an affiliate to Belarus’s Ministry of Development, according to a released statement. The company is known for building social housing projects, factories, infrastructure projects, and electricity stations in Latin America. Technical Assistant Khaled Abbas at the Ministry of Housing briefed attendees about Egypt’s ongoing housing projects, including the New Administrative Capital, Al-Alamein City, East Port Said, Upper Egypt, as well as, the renovation of unsafe slum areas.

1,000 units to be delivered 3 years from the contract’s date. The developer also unveils its -1mn square meter- North Coast project, Coast-82, on Fouka Road near Matrouh. Scheduled to be launched later this year, the project will include 1,000 units, a mall, a five star hotel; in addition to, 550 meters of waterfront at a total investment cost of EGP 12.5 bn.

Egypt Property Show (EPS) 2017 has seen the participation of several Egyptian companies, sealing total sales of EGP 1 bn, Invest-Gate reports. The three-day event has concluded its first Gulf Cooperation Council (GCC) edition on Sunday, May 7, at the Dubai World Trade Center. Participants included representatives from Emaar Misr, Sabbour, Madinet Nasr Housing and Development, and Rooya Holding. The next roadshow exhibition will be held in Kuwait, Saudi Arabia and London. In addition, the second EPS edition in Dubai will be held April 12-14, 2018.

MISR ITALIA AND SECON PURCHASE LANDS AT NEW ADMINISTRATIVE CAPITAL Egypt’s property developer, Misr Italia Group, and the Saudi Egyptian Construction Company (SECON) have purchased land plots at the New Administrative Capital spanning an area of 200 and 70 feddans respectively, Invest-Gate reports. Misr Italia has signed a contract to purchase the land plot EGP 2.06 bn ( EGP 113.8 mn), according to Reuters. The property developer says it has paid EGP 310 mn thus far. “Misr Italia’s project comes in line with the Egyptian government’s plans to make urban expansions into East Cairo area,” says Chief Executive of Misr Italia Mohamed El Assal.

The company is working on more than ten residential projects and is planning to complete procedures to annex 300 acres in western Cairo this year. It also plans to “launch a project encompassing villas in 2018,” SODIC Managing Director Magued Sherif says, according to Reuters.

“We are keen on launching more real estate projects to revive the sector, through boosting the national production,” he adds.

Additionally, SODIC is in the process of legalizing the situation of 85 acres in the North Coast to launch a project by the summer of 2018. The real estate developer is in negotiations with a local bank to receive a credit facility “worth less than EGP 500 mn before the end of Q3 of 2017 to finance projects,” Sherif notes.

Rimco EGT Investment bought 15.58 mn shares for EGP 230.37 mn, equivalent to EGP 14.87 per share, according to an EGX statement carried by Reuters. between CEO of the German-Arab Chamber of Industry and Commerce Andreas Hagen and Minister of Trade and Industry Tarek Qabil. During the meeting, both discussed ways of boosting economic ties, conditions of German investments taking part in Egypt and the means of bolstering economic relations.

EGYPT PROPERTY SHOW 2017 ACHIEVES EGP 1 BN DEALS

Egypt-based real estate company, Sixth of October Development and Investment Company (SODIC), plans to buy new land plots worth EGP 600 mn in north and west Cairo, Invest-Gate reports.

Meanwhile, Rimco EGT Investment is increasing its stake in Sixth of October for Development and Investment (SODIC) to 7.44% from 2.89%.

HYDE PARK DEVELOPMENTS UNVEILS PARK CORNER PHASE II AND PLANS IN THE NORTH COAST Egypt’s real estate developer, Hyde Park Developments (HPD), showcases their newest real estate projects during the “Egypt Property Show” (EPS) held from May 5 to 7 at the Dubai World Trade Center, Invest-Gate reports.

The announcement comes as part of a meeting between Minister of Housing Mostafa Madbouly and Belarus Ambassador to Egypt Sergei Rachkov. The Belarus delegation also plans to cooperate with Egypt’s Arab Contractors and be acquainted with investment opportunities in Badr City’s social housing projects.

SODIC SEEKS TO BUY LAND PLOTS IN NORTH AND WEST CAIRO

EGYPT TO RECEIVE MORE GERMAN INVESTMENTS SOON

The trade exchange between Egypt and Germany recorded EUR 5.56 bn in 2016, while German investments in Egypt hit a total of EUR 619 mn. The investments cover the sectors of chemical materials, automobiles, communications, petroleum, gas, steel and iron.

BELARUS DELEGATION TO SCOUT INVESTMENT OPPORTUNITIES IN NEW ADMINISTRATIVE CAPITAL SOON

THE LONG-AWAITED INVESTMENT LAW NO.8 FINALLY APPROVED Following months of preparation, the Egyptian Parliament has finally approved the long-awaited Investment Law No.8 of 2016 and to be declared by President Abdel-Fattah El-Sisi soon, Invest-Gate reports. Minister of Investment and International Cooperation Sahar Nasr says, “The long talks that took place prior to passing the law resulted in adding key articles in terms of governance, transparency, and investment incentives.” Nasr adds that the law will thoroughly end bureaucracy by enabling investors to finalise any required procedures in one day through different accreditation offices, affiliated to the Ministry of Investment and International Cooperation. Through the new investment law, a ministerial committee has been established to settle disputes among disputed parties. Administrative bodies must abide by rulings issued by such a committee and enforce it within 15 days. Egypt’s investment law was first issued by the government in 2015 and later amended. The law aims to facilitate business-related regulations and licenses. It has long been demanded by the Egyptian business community.

Chairman of SECON Darwish Hassanein says, “The company will use the land to develop residential, commercial and office spaces.” Egypt’s plan to build a new city 45 km (28 miles) east of Cairo was announced in March 2015 at a Sharm al-Sheikh summit held to attract foreign investors, who had pulled back from the country after the 2011 revolt against the government.

TATWEER MISR PLANS TO ESTABLISH UNIVERSITY FOR ENTREPRENEURS Egypt’s real estate developer, Tatweer Misr, is seeking to collaborate with international universities, focusing on entrepreneurship and the development of Micro - Small and Medium Enterprises- in order to establish a university specialized in the field, Invest-Gate reports. “Our aim is to create partnerships with those institutions that will allow us to establish a unique university that focuses its learning on graduating the next generation of entrepreneurs,” Tatweer Misr Managing Director and ICSB Board Member, Ahmed Shalaby, says at the International Council on Small Business High-Level Knowledge Summit held May 11 . Taking place at the UN headquarters in Cairo, the event commemorates the adoption of a UN resolution designating June 27 as MSMEs Day. The new university will be the first to provide premier educational institution of its kind in innovation, entrepreneurship education, and SME development across six main schools.

EMAAR MOROCCO TO OFFER HIGH-END VILLAS AT AMELKIS RESORTS Emaar Morocco offers fully-furnished and decorated villas in its project, Marrakech Palm Grove, located at Amelkis Resorts, Invest-Gate reports. The Hattan villas range in floor plans from 300 to 400 square meters and are situated on land plots ranging from 650 to 1,300 square meters, while villas vary from 900 to 1,200 square meters, according to a released statement. The luxurious residential complex

includes amenities such as a golf course, a luxury hotel, restaurants, and a club house.

UAE COMMERCIAL PROPERTY TO SEE MODEST DEMAND IN 2017 The UAE commercial real estate industry will continue to witness “soft” demand in 2017, Invest-Gate reports.

Expectations of stable supply in 2017 could push up rates towards the end of the year, the report adds.

The market activity is limited by slow oil price recovery, regional economic uncertainty, and lower foreign sentiment, according to a report from London-based research firm BMI Research. Supply influx is expected to put downward pressure on office rentals and industrial sub-sectors this year, while retail will remain stable due to steady tourism and good consumer spending.

DUBAI’S ARABTEC WINS AED 1.46 BN FOR 2020 TOWER Dubai-based real estate developer Arabtec Holding won a contract worth AED 1.46 bn for the construction of 2020 Tower, Invest-Gate reports. The contractor’s volume of projects is worth AED 17 bn, CEO Hamish Tyrwhitt says. Arabtec’s portfolio comprises 22 projects under construction, according to the company’s released statement.

WORLD’S TALLEST TOWER DUE IN SAUDI ARABIA, 2019 The first stage of the - one kilometerhigh- Jeddah Tower, set to be the world’s tallest building, is due by 2019 after financial issues with contractor Saudi Binladin Group (SBG) were resolved, Saudi Gazette reports. Speaking to the press at the project’s construction site on the 28th floor of Jeddah Tower, Prince Alwaleed Bin Talal, Chairman of Kingdom Holding Company, confirms that the Jeddah Tower is going to be the tallest in the world despite the recent announcement of Dubai building the tallest tower in the world. “It is a solid, concrete building unlike the one announced in Dubai, which is considered a skeleton. This is why our tower will be the tallest in the world,” he says. Bin Talal adds that the final height of the building will not be revealed even to project partners until six months before its completion, when the size of the spire at the top will also be revealed. The Saudi prince also points out that the tower is expected to progress slowly and steadily. “Construction of the Jeddah Tower will rely on cutting-edge technology,

including the high-strength reinforced concrete and the pumps used to elevate it to record heights,” he says. THE VOICE OF REAL ESTATE | 7

NEWS

UPDATE

MARKET

OLX LAUNCHES STORIA NEW SECTION TO FOCUS ON TOP 9 PREMIUM LOCATIONS IN EGYPT Global online marketplace OLX announces the official launch of a new premium property section “Storia” as a platform to list properties in premium areas in Egypt, Invest-Gate reports. “Storia” new section on OLX Egypt will help buyers and sellers locate the next property in premium areas. In 2016, OLX Property alone recorded 41 mn visits. In addition, 2.4 mn listings were added to OLX Property, proving the maturity and growth of the real estate market. The new property section benefits property developers, brokers, and users who are looking to buy, sell, or rent their next property in premium areas. Momtaz Moussa, OLX Egypt’s general manager, says, “We monitored the industry closely in Egypt and found the need for

a new section dedicated to properties in premium areas to cater directly to users, and help brokers and developers showcase their properties. The new section is the most convenient and userfriendly solution for Egyptians looking for their next opportunity in real estate in premium areas.”

TMG POSTS NET PROFIT OF EGP 288.5 MN IN Q1

STATS

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NEW BURJ AL ARAB

EVENTS UPDATE

GEOMEAST CONFERENCE THEME: INNOVATIVE INFRASTRUCTURE GEOTECHNOLOGY

474,000 acres

Urban Mass

Total Area

27,934

267,000 acres

25,150

Completed Units

Under Construction Units

Sharm El-Sheikh DATE: JULY 15-19 VENUE: INTERNATIONAL CONGRESS CENTER, CAIRO

1.29 bn in Q1 compared to EGP 1.21 bn a year ago, according to the TMG’s financial results report. Sales of all projects hit EGP 4.28 bn, the report adds. Last month, Talaat Mostafa purchased a 500-feddan (acre) plot in the New Administrative Capital for EGP 4.4 bn (USD 243.77 mn).

ADMINISTRATIVE CAPITAL TO FEATURE FIRST HIGH-END RESIDENTIAL COMPOUND

A high-end compound, entitled Midtown, will be constructed in the New Administrative Capital, Invest-Gate reports. The compound, developed by Better Homes Real Estate Consultancy and Developer, will feature luxurious villas that have floor plans starting from 300 square meters and are near to EXPO City, according to its official Facebook page. “The project is expected to be finalized within three years and already more than 8 | INVEST.GATE | June 2017 - ISSUE 03

half the villas are sold with prices start at EGP 3 mn,” Osama Mahmoud, an official at Better Homes, tells Invest-Gate. The 390 villas range in floor plans between 300 to 500 square meters. The newly anticipated project will include twinhouses and townhouses as well. Midtown will offer potential buyers a chance to provide a 10% down-payment and installments over six years.

2334 km

Area of Sewage Network

Area of Water Network

Area of Electrical Network

UKRAINIANS

BRITONS

227,000 tourists

226,000 tourists

74,000 tourists

The government is offering the sale of social housing units in USD for Egyptian expats, Invest-Gate reports. The state-run, Social Housing Fund, has recently determined the final selling prices for the units and said that it would be offering 50 homes to Egyptians, suffering from difficult living conditions, according to a released statement. The prices of the units range from EGP 165,000 to EGP 220,000 and are offered in several cities nationwide, including Alexandria, Qalyubiyah, Obour City, Al Fayoum, El-Minya, Assiut, Qena, Aswan, Luxor, Red Sea, and Marsa Matrouh.

Area of Executed Network

Infrastructure projects

EGP 1.5 bn

ONLINE MONTHLY SURVEY

New Administrative Capital

46 %

23 %

EGP 2 bn

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HOW DO YOU FEEL ABOUT THE NEW ADMIN CAPITAL? Negative for Egypt

Agriculture projects

EGP 74 bn

EGP 22 bn

Positive for Egypt

Area of Communications Network

TOTAL INVESTMENT EGP 105 BN

Housing projects

FIRST PHASE OF I-CITY KICKS OFF IN 6TH OF OCTOBER The first phase of the residential project I-City is to be launched in 6th of October City, Invest-Gate reports. The project is worth over EGP 50 bn and spans an area of 500 feddans. It is part of a partnership between New Urban Communities Authority (NUCA), Mountain View, and Saudi Sisban Holdings. Approximately 80% of the project contains residential units while the remaining 20% is for multi-purpose use. I-City October comprises various types of residential projects, public services, commercial areas, entertainment and educational areas, and greenery, according to a released statement. “This is a great start for partnership projects between private developers and NUCA. The public-private partnership will contribute to boosting real estate investments and developments,” Minister of Housing Mostafa Madbouly says.

437 km

30 June 2016

WWW.GEOMEAST2017.ORG GERMANS

581 km

INVESTED BUDGET IN MADBOULI'S TERM

TOP THREE VISITING NATIONALITIES TO EGYPT IN Q1-17

GOV’T OFFERS SALE OF SOCIAL HOUSING UNITS IN USD TO EXPATS

Egypt’s real estate developer, Talaat Mostafa Group (TMG) Holding Co., posts consolidated net profit after tax of EGP 288.5 mn in the first quarter of 2017, compared to EGP 207.8 mn in the same period a year earlier, Invest-Gate reports. Meanwhile, the company’s Q1 consolidated revenue accounts for EGP

425,127 km

655,913 km

WHERE ARE YOU MOST LIKELY TO INVEST IN PROPERTY IN 2017? I don't know

31 %

26%

North Coast

19%

New Cairo

16%

Ain Sokhna

6th of October

The new cities

7% Others

HOTEL OCCUPANCY RATES IN JANUARY 2017 I-City New Cairo is one of the many projects NUCA has launched with private developers following agreements signed in 2015. According to the agreements, NUCA provides developers with land plots through feasible payment terms and methods in return for acquiring a certain share from the sales of the units. “Implementing these projects is based on modern ideas of constructing a sustainable integrated community offering a variety of homes such as duplexes, residential buildings, and villas,” adds Madbouly.

EGYPT

CARIO

HURGHADA

47.50%

68.60%

40%

24.3% y-o-y increase

20.6% y-o-y increase

SHARM EL SHEIKH

29.90%

ALEXANDRIA

75%

THE VOICE OF REAL ESTATE | 9

Real Estate Market Snapshot

ANALYSIS

AREA

Real Estate Snapshot REAL ESTATEMarket MARKET SNAPSHOT

Vacation Homes Market Findings

Market Analysis

Vacation Homes, Egypt 2017 Overview

L E V E L

Top Destinations on Map

Who

Type of clientele who purchase/rent vacation homes

Mediterranean Sea

Vacation homes in Egypt are mainly occupied by locals except for Gouna, home for many foreigners who work there. Recently, almost all top developers in Egypt have or are in the process of developing projects in Sahel, Sokhna, and Gouna (the top 3 destinations for a vacation home) introducing a diverse number of units and payment terms to attract specific clients. Each destination has its own characteristics; the criteria for staying in these destinations differ from one location to another, for instance, most people who stay in Gouna prefer hotels, whereas in Sahel, people prefer to either rent or stay at a friend/relative’s home until they reach a specific age or level that allows them to purchase a unit

Sahel

EGP 14,000/m2

EGP

The Shore

Swan Lake

Fouka Bay

Upscale Compounds

Seasonal Facilities

Water Sports

Relaxation

Entertainment/ Nightlife

150+ km Shoreline

Crystal Clear Waters

Fitness Services

Amwaj White Bay

Jefaira Caesar

Hacienda Bay

Telal 2

B+

Summer Spot

Marassi Stella Hacienda Diplo 3 White

City Stars

Clientele Type

Palmera Ein Bay 1 & 2 Marina Wadi Degla

Blumar Azha

Stella De Marie 1 & 2

Short Drive to Cairo

Deep Sea Fishing

Camping

Therapeutic Tourism

Wind & Kite Surfing

Sightseeing

Relaxation

Underwater Photography

Red Sea

Ein Hills Mada

Sokhna

Little Venice

IL Monte Galala

The Groove

Jebal

All Year Round

La Siesta

Porto Sokhna

Blumar

Telal Lavista Topaz

Mangroovy Beach Marina Portside

Sabina

Waterside Condos

10 | INVEST.GATE | June 2017 - ISSUE 03

Cabana

Leisure

Private Villas with Water Fronts

Entertainment Options

Short Flight from Europe

24,000 Residents

International Tournaments

International Marina

Commercial Downtown

Many Hotels & Resorts

Red Sea Winter Spot

B+

Clientele Type A+

4 Years

With Garden

With Roof (Penthouse)

Investment

70%

Remote Work

15% 10% 5%

Retirement

3 Years

2 Years

1 Year

Number of Bedrooms 1

3 Other

2 Bedrooms

Locals

1 Bedroom

3 Bedrooms

4 Bedrooms

Foreigners

Very few locals above the age of 70 tend to purchase units in Egypt as a retirement plan; they prefer to stay in the capital which is not the case for citizens above thirty who buy units for frequent getaway trips and seasonal vacations

60% 25% 15%

Many old foreigners in or outside Egypt pick the country to be a perfect retirement plan utilizing its great weather, low cost of properties and standard of living (benefitting from EGP floatation), and significant low taxes compared to their home countries

Destination Rankings According to Driving Factors 3

Entertainment

Community

Distance

Affordable Price

Investment

Nightlife 3

S A H E L

Tawila

Villa

Cash

Unit Characteristics

The destination has not been considered as a first home yet and not expected to be, in the near future at least, given the rare job opportunities, weather in the winter, shortage in services (such as hospitals, schools, universities) in the area. This leads to limited investment opportunities other than the summer season

3 2

Sahel

Gouna Fanadir Bay

Swan Lake

Clientele B+ Type

Lavista 1 & 2

Fanadir Bay 2

Activities

Installments

Unit Type

Foreign Tourism

Laguna Bay

Joubal

Facilities

Chalet

Reasons for buying vacation homes in Egypt

Lavista 6

Lavista Gardens

G Cribs

A+

Community

All Year Round

A+

Bo Islands

Amego 1, 2 & 3

Why

Stella Heights

Telal

Delivery Period

Red Sea

Sahel (North Coast)

Mountain View

Payment Type

Top Destinations Overview and Respective Trending Projects

Locals

Compound Characteristics

Gouna

20,000/m2

35 +

Given the higher youth percentage in population, most of the vacation destinations are occupied by youngsters who seek leisure in target seasons or sometimes if they are working remotely

Ranking of target locations and units preferred by clients

442 km 4hrs 30min

NATIONALITY

Most clients start purchasing or renting when they reach a specific level of income which allows them to meet the monthly installments/ rent starting the mid thirties in addition to clients who purchase as a retirement plan

What

EGP 12,000/m2

G E

Sokhna offers a wide range of prices and payment terms that are affordable for people slightly lower than the middle class; Sahel comes next, however Gouna is more sufficient for A class clientele

Sokhna

129 km 1hr 15min

B – A+

Cairo

286 km 3hrs 15min

Mediterranean Sea

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1 Sokhna

Vacation Homes as First Homes

SOKHNA

Very soon, the destination will be considered the primary residence for many as a result of the existing projects and developments in progress, such as the Galala City which will include a major hospital and university and the New Administrative Capital (35 km from Sokhna), which will allow a good investment opportunity all year round

Gouna

GOUNA

Considered a first home for many; projects are on the rise on the coast starting from Gouna all the way to Sahl Hashish which drove developers to have presence in the area to cater for clients interested to buy. Also, freelancers and online service providers took Gouna as their primary residence. Therefore, Gouna allows a good investment opportunity anytime of the year, also, given the good standard of living for locals and expats

For more details, please contact | Ashraf Warida, CEO Email | ashraf.warida@cb-egypt.com

Tel | +2010 2555 6673

Website | www.cb-egypt.com

THE VOICE OF REAL ESTATE | 11

VOICE OF THE EXPERT

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Confident that Egypt foresees its future and is capable of combatting obstacles along the way, Invest-Gate meets with real estate tycoon Eng. Hussein Sabbour. In an illuminating discussion with the property market guru, Sabbour gives a comforting view on Egypt’s economic reform strategy and its developmental plan in progress. Generously, he shares his firm’s future endeavors in Egypt and across the MENA region. How do you view the Egyptian economy today? Throughout my 60 years spent in the real estate market and construction, we have come through many economic obstacles and what we witness today is not as harsh as those of the past. We always manage to overcome problems. This is not Egypt’s first drop and, by all means, not its worst. Take the 1967 War, for instance, during Nasser’s reign, he said, “No voice is louder than the sirens of the battle,” meaning that all of the country’s capital is to fund and serve the Egyptian army to end the Israeli occupation of Sinai and the Suez canal’s eastern cities of Port Said, Ismailia, Al-Arish, and Suez. Back then, like many young engineers and developers, I moved my business to Libya. You can imagine what a difficult time it was for all of us! Today, I do not fear the future and am very hopeful that, for the first time, the Egyptian government is on the right track with a true development plan amid its drastic economic decisions. Previous governments used to ignore problems to keep on going, but no reform was ever put strategically until the problem escalated to what we face today. Now, we are facing the problem - yes we are suffering - but I believe it will pay back in the end. I am confident in the Egyptian crisis management and its reform strategy that is put in affect now. I am very optimistic about the future and do not fear of what is to come.

How do you view the investment climate in real estate? The Egyptian real estate market is, nonetheless, the most guaranteed type of investment regardless of the economic condition unlike many developed countries. USA’s economic crisis back in 2008 hit the US real estate market hard for its dependency on mortgage plans unlike what we witness in Egypt today. To our benefit, our national banks never buy international bonds, especially, those of super powers. Economic drops at any country can affect

EGYPT’S REFORM PLAN DETERMINED TO PROSPER BY FARAH MONTASSER

12 | INVEST.GATE | June 2017 - ISSUE 03

some Egyptian industries like manufacturing, for example. In recent years, the economic drop in the south East Asian markets, along with their currencies, attracted many businessmen in Egypt to import Asian goods and sell them here for their cheap prices despite average quality. Importing from Asia was somewhat cheaper than manufacturing and supplying Egyptian goods in the market; and this affected the production business of Egypt and raised competition. I am not worried at all about our real estate market because of the ongoing high demand given the country’s demographics. We have an estimated 800,000 marriages each year, especially in the big cities, and of course, all seeking first homes, which are about 400,000 units each year in spite of the size and location. Aside from marriages, we still have the demand on residential units from residents of demolished old buildings, and Egypt’s commuting workforce, who seek homes close to their source of income. So, the demand is there and will always be there. We only need to study the market well and determine its needs every now and then, putting into consideration the economic status and the average income of individuals. This business can drop at times, but there will always be a demand on real estate.

Developers always work on supplying classes A and B while class C is left to the government. Is there a way developers can help the government to meet the demand of class C? Honestly speaking, we only focus on classes A and B to generate revenues and flourish businesses. Classes A and B purchase first and second homes among other units for future investments instead of depositing it at banks. The value of the real estate in Egypt is way higher and at a frequent rate than any bank’s interest rate.

Of course, class C is in need of shelter and given the conditions, not today, but throughout years of neglect by consecutive regimes, it had become unaffordable until recently. Today, the government is focusing on meeting the demands of this class with its ongoing urban development projects that are spread all over the country; and to make this happen, the government called in the private sector to take part. Now, many lands across new cities are offered to the private sector at cheap prices in spite of its true value to provide multi-use neighborhoods that include residences, retail, and public services. I find that this is an excellent move by the government and hits two birds with one stone as they say! The government guarantees its fulfillment of its role in serving its people, the private sector are racing to own massive lands to expand their businesses, and the people are to benefit, too, by obtaining proper living conditions at reasonable costs with low installment interest rates.

And is this what Sabbour did in the New Ismailia City? Not at all… New Ismailia City is the government’s project and the Sabbour Firm is only the consultant for the project, but not the developer. We supervise the project, but are not to own land or build projects.

Are those newly amended regulations by the government part of its ‘One Million Units A Year’ project? No. The ‘One Million Units A Year’ project is a solely governmental plan.

Do you believe that the government is capable of supplying one mn homes a year? Of course not… Neither previous governments nor the private sector have ever achieved such number. And even if both collaborated, this number is too high to achieve annually.

Previous governments used to ignore problems to keep on going, but no reform was ever put strategically until the problem escalated to what we face today. Now, we are facing the problem - yes we are suffering - but I believe it will pay back in the end.

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VOICE OF THE EXPERT What do think of the megaprojects of the SCZone and New Administrative Capital? I believe that the SCZone is the most important project for Egypt. Previously, the revenue of the Suez Canal was USD 5.2 bn at a time when a small country like Singapore, for instance, could generate around USD 30 bn from its seaports. I can determine that unlike previous regimes, this government is starting to utilize the Suez Canal area in a proper manner. Today, the development plan of the Suez Canal Industrial Zone is to have the international pharmaceutical center in the region. China, too, is to develop its industrial zone as part of the SCZone development and Sabbour is named its consultancy and contracting firm of the project. China is to develop a motorcycle factory, and also another one for car parts. However, I still see that a lot could come out of this project. We have the world’s sought-after seaport between the Far East and the West, why not call on shipping countries to export their products in pieces and we assemble them here, given Egypt’s low currency value! The producing countries will cut costs and we will generate more income and create more jobs. If Japan, for example, is shipping its computers to Europe, why not let Japan send its products in pieces and the Egyptian workforce assemble them here and ship to Europe. This is one of the ideas that can utilize the canal better. Egypt never made a proper use of the world’s most strategic and dynamic port, which is the -200 km-long- Suez Canal. Cargo ships never get fuel or maintenance here, for example, due to the lack of service facilities along its - 400 km - banks. If those 400 km are put in proper use, we can develop ship production, containers, or even have maintenance and service facilities for those containers. At this stage, Egypt is signing investment contracts with its counterparts, but I believe that a door should open soon for the private industrial sector as well.

And as for the New Administrative Capital...

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The New Administrative Capital is a great expansion out of the condensed city of Cairo. The government is keen on completing this project and has recently offered many land plots to private developers given its reasonable prices, which again a number of developers are racing after. Among the government’s plans is to include a number of universities at the new capital as well. Egypt has set a new standard for all new universities, which is that any new establishment is to partner with a top ranked university from around the world. A lot of people have pursued to open universities there, already, at this stage. So, I can say from what I am seeing today that most - if not all - highly trust this project.

Is Sabbour taking part in the new capital? No. However, our partner, Al-Ahly Bank, has bought a land plot for development and for sure we will play a role. Also, we are currently in talks with a number of developers, requesting our services as engineering consultants in their projects.

If we are to analyze the government’s reform plan, especially its development plan, what are the hits and misses? The government’s hits include housing, developing slum areas, and urban development. The spread of slum areas has grown tremendously in recent years that it has occupied half of the population in a city. Another hit is the government’s land reclamation and development plan; in addition to infrastructure projects that are across the country.

China, too, is to develop its industrial zone as part of the SCZone development and Sabbour is named its consultancy and contracting firm of the project.

Again this government, unlike its predecessors that ruined the North Coast, is aiming at reviving the Egyptian coasts. The government, today, is working on attracting foreign tourism to our Mediterranean shores and stop focusing only on locals. According to the plan I know of, the North Coast is to be

Given the development plans in Ain Sokhna, can it attract first home buyers next year as market experts anticipate? If we approach Ain Sokhna in a scientific manner, as is the case with the North Coast today then it can happen. We need to attract foreigners, have conferences, and exhibitions hosted there, for example, to divert the interest to Ain Sokhna. As for locals, given its proximity to Cairo, yes it can be a first home to many, but we have to take care of the city itself by providing services and facilities.

Still the government is targeting Egyptians abroad to invest in our real estate market. What is your comment on that? And how can we attract foreign investors? With the low value of the pound today, Egyptians abroad can afford to own good to high-end homes in Egypt. Here, the government has offered two services to its people living abroad. First, it guarantees revenues in foreign currency and have it available again inside the country; and second, it offers cheap residences for Egyptians abroad so why invest elsewhere! For foreign developers, Egypt has become profitable for them as people here invest in real estate. A number of foreign companies have invested in Egypt like Emaar, for example. As for foreign homebuyers,

The only miss I see, today, is ignoring manufacturing, factories, and production.

How do you view the North Coast’s urban development plan? And how can it put Egypt on the touristic world map and be accessible all year round?

currently negotiations between Egypt, Great Britain, and Germany are taking place to get them to clean the desert from the remaining minefields of the Second World War and prepare lands for agriculture. For the first time, the North Coast is being scientifically studied and developed.

divided in clusters starting by its shores, moving backwards till the middle of the desert. The first cluster is to include international hotels to open directly on the coast. The second part is to include entertainment and retail facilities. The third part is to feature permanent housing followed by acres and acres of agricultural lands. Mind you, European wheat was planted all over Egypt’s North Coast during the ancient times as it depended on rain. Today, studies are made to sanitize seawater for North Coast agriculture fields; and of course

we have to look at our past experiences, namely in Sharm El-Sheikh. Half of the units were sold to locals of Sharm El-Sheikh and to the -not- so- privileged Europeans, as their second home, for its cheap cost relatively speaking to their currencies and this helped with the tourism flow and foreign real estate investments in the country. So, I believe we need to update our marketing strategy, today, given all the developmental projects in the country that are currently taking place.

What does Sabbour have in the pipeline in Egypt and abroad? We are currently working on a deal in Saudi Arabia. The Saudi Ministry of Housing has signed a contract with Sabbour to develop a major project in Saudi Arabia. Aside from that deal, Sabbour is to partner with a Saudi developer to consult and develop a residential project of 100,000 units, entitled Baladein, in Dammam and Al-Kharj. We are also planning to expand in Algeria. Algeria is a rich country but lags behind in many things. The Algerian Council of Commerce has invited Sabbour for future developmental projects. Among our pending projects in Algeria, is a partnership with a Russian developer on a real estate project. In Egypt, Sabbour’s sales revenues in 2016 reached EGP 3bn. This year, we are to extend beyond EGP4bn. In the North Coast, we are completing and delivering our project Amwaj and embark on another one that is to be announced soon. Furthermore, Sabbour is in talks with a governmental entity on a major project that is to be revealed soon as well.

THIS BUSINESS CAN DROP AT TIMES, BUT THERE WILL ALWAYS BE A DEMAND ON REAL ESTATE.

The Algerian Council of Commerce has invited Sabbour for future developmental projects. Among our pending projects in Algeria, is a partnership with a Russian developer on a real estate project. 14 | INVEST.GATE | June 2017 - ISSUE 03

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THE WATERWAY:

Upgraded Living Benchmark BY FARAH MONTASSER

Aiming to explore new trends, ideas, and what is on offer in the Egyptian real estate market, Invest-Gate sits with the visionary The Waterway CEO Hossam Hassan, who moved from real estate marketing - for Lake View and Downtown, to name a few - to developing his first “Boutique Compound” as he calls it. The Waterway is a new, uplifting project, featuring an integrated community and residential apartments in New Cairo. It will also hit the northern shores of Egypt soon. Hassan shares his gem of a creation and opinions concerning the current selling points of Egypt’s property market today. How do you view the investment climate in the real estate market today? The problem in Egypt lies in the absence of firm rules and regulations, or a proper system to be strictly followed. Even when the government sets its laws, it is the exception that usually rules. In Egypt, some investors get away with everything; in the end we see that the bad outshines the good by selling dreams and not reality. You find them selling more facilities on very “unrealistic” long-term payment methods, including zero down payments, whereas the good sticks to the surrounding environment and tries to make it better, considering the expenses and costs of today given the current state of the Egyptian economy.

What do you mean exactly? How can you generate business with ten-year instalment plans and a zero present value given the country’s inflation rates and the EGP float that affected prices of daily expenses, let alone construction materials in the property market! So, how can you pursue business, when you come out losing and not gaining! Today, no one can anticipate next year’s prices. No one can guess the uptick to costs of commodities and services, including electricity, water, food, and transportation, let alone property.

How do you see this phenomenon or trend coming to an end? The problem lies mostly on the fact that the government does not restrict developers or contractors. The law clearly states that no developer is to announce the launch of a project or market units without the following: the approval of New Urban Communities Authority (NUCA) on all project designs, including units, infrastructure, and landscape; the installment of a foundation base for the building project to prove seriousness; the opening of an official bank account of all bought properties. Still, some find ways to launch projects and sell units without fulfilling these requirements. We see that they fall into trouble after some time. It is unfortunate that the local is the one suffering at the end. Exceptions must end and the law must be enforced in order to combat this trend and save the sector. This takes me back to the first factor causing the problem, which is that Egyptians do not have proper knowledge in regards to real estate investment.

The problem with real estate today is that people seek to invest rather than buy homes, fearing the perpetually decreasing value of the local currency. Most of them even buy properties just because of the easy payment plans on offer. Despite their inability to afford the entire amount of the property, they choose to pay a down-payment today and continue on installments, thinking that after a year or so they will still be able to sell their units at a profit without bearing in mind the consequences should this unaffordable unit remain unsold, leaving them in debt.

The Waterway is different than any other project across Cairo and was delivered in a very short amount of time. How did you make this happen? What makes it so special?

Another major problem we face today is the fact that almost 90% of those with purchasing power are legally uneducated. They come in to sign 40-page contracts they do not even read; and if so, they ignore the fine print. This presents a problem with the developing company, where the consumer loses their rights as a homeowner. Unfortunately, most developers today bet on this fact. They sell dreams and misguide people; buyers fall for the bait. Not only that, but given the market drop as well, buyers find developers extending payment plans to attract new buyers and they succeed. So, why would they go for a resale when the developer himself is offering new units with flexible payment plans!

Aside from the legality of The Waterway, our main objective is our renovated vision of urban living in Egypt and how we place ourselves in the market. We chose to supply the market with a modern, communal living area on a small, fully-integrated, and equipped piece of land instead of competing with others on mass projects.

How long will this trend continue for? I expect this phenomenon to gain traction in the upcoming period since developers now understand and bet on the psychological aspect of purchasing power. I hear that those mythical plans have increased to 12 years, which I find unreasonable. Since developers today follow such new selling strategies, they fail to meet their deadlines and deliver projects on time, leaving serious buyers grappling - as the value of the property maximizes - between whether to sell their unit (on the 16 | INVEST.GATE | June 2017 - ISSUE 03

secondary market) or wait on the developer. Mind you, most contracts do not give rights to owners if the developer fails to do so. This is another problem that needs to be looked at since there is no law that protects the end buyer.

We were and continue to be serious in the market. We follow the law religiously. We started back in 2011. Of course, after the government’s design approval, we installed the project’s foundation and we did not market it until the base was ready. We only marketed the units afterwards as the law indicates.

We sought a design consultancy firm in the USA and another in Singapore for our landscape to present a picture-perfect compound matching our initial design sketches. We gave those designs to Egyptian consultants, including Engineer Raef Fahmy, Engineer Mahmoud Hussein, and Professor Hatem Gheith to transform our vision and the western designs, fitting Egyptian nature and lifestyle. To our privilege, we started when the Egyptian uprising took place, when most renowned developers put their projects on hold or fled the country, fearing what the future could bring. This made way for us to be present in the market. My main goal was to present to my clients the exact same picture they saw in the brochure, including the layout, landscape, paint, fountains, gardens, even lightshades. Everything you saw in picture was to be converted to reality, unlike most companies today,

who choose to sell off-plan projects. The Waterway awaited realistic implementation of its designs as we aimed to meet the criteria we publicized. The Waterway is also special in terms of its community. It is a small compound, as I said, and we were very selective with the clientele, to whom we marketed.

What do you mean? Offers for investment purchases of many units or entire buildings were refused. We do not and will not sell more than two units to a single buyer. We do not want it to go commercial, or for us lose grip on the standard we provide. It is a boutique compound of 600 units in total. Other projects may be cheaper to purchase, but we seek perfection and value for the money you pay. This is how special The Waterway is, in my opinion. We unify the look of the entire compound and set rules for all residences, including the lighting of the terraces, garbage baskets, and doormats, to name a few. This is how we got involved into the details of modern living, ensuring that the compound image remains in line with our vision. We successfully sold 70% of the project and the remaining 30% are to be sold to an (undisclosed) international entity. They chose us and not other big name - companies in the market because of our concept, which we stick to and eagerly continue to serve.

What is in the pipeline for The Waterway? We are currently awaiting official approval for our next project in the North Coast on a -60 feddanland plot. The designs and vision are ready, but we are awaiting approval to begin with the foundation. The project follows our start here in Cairo. It is also a small beach home compound of maximum 600 fully-finished seaview chalets and villas in proximity to Cairo via the new Dabaa’ Road that is being constructed today. The Waterway North Coast will be finished and delivered within two years. I am not to extend the project. I want it a small “boutique” as I dream. We will be, again, selective in our clientele and seek to provide all residences with the beach life of Egypt of the past such as Aida in Alexandria and Ras El Bar, for example. We want to revive the beauty of Egypt’s shores as in the past.

How do you see the future of the North Coast? Could it be open year-round and compete with those of Europe? We have everything. Our hotels are better and our beaches are, by far, the best, but we need a modern strategy and for the law to actually be enforced. We could be better than Nice in France, Monaco, and Ibiza in Spain and compete with other international touristic destinations only if legislation is applied and we stick to development plans no matter how long they take. We need laws, a vision, a strategy, and persistence. I believe that the new generation is capable of making this dream come true. Stay tuned for more on The Waterway North Coast in our next “North Coast Special” issue... THE VOICE OF REAL ESTATE | 17

CITY

SPOTLIGHT

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The European Bank for Reconstruction and Development (EBRD) has also expressed willingness to fund the establishment of a railway line, connecting Ain Sokhna, New City, 6th of October City, and Al-Alamein, InvestGate previously reported. Several developers in the area are offering waterfront chalets with feasible payment methods, including real estate developer, Misr Italia, with its project, Mousa Coast, at the nearby Ras Sedr.

EGYPT’S SUMMER DESTINATIONS IN A WRAP

s the value of the local currency declined in recent months, trips abroad became less affordable to Egyptian nationals, leading to an increase in inbound bookings during national and religious holidays nationwide. For international visitors, Egypt had become more attractive that inflows rose to around 1.7 mn visitors in Q1 of 2017, a relatively strong improvement from 1.2 mn visitors reported for the comparable period in 2016, according to a Tourism Ministry source speaking to Ahram Online in May. Tourism revenues amounted to USD 1.6 bn Q1 of 2017, growing y-o-y from USD 1.5 bn. Germans, Britons, and Ukrainians comprised the bulk of international tourists. In light of this recovery, Invest-Gate highlights the updates and developments taking place across Egypt’s summer destinations. Egypt plans to promote religious, medical and luxury travel, and continue developing new markets in India and Eastern Europe. The current regime is working to ease travel for GCC residents through an e-visa program, in line with efforts to boost tourist inflows. Fly Dubai, Emirates, and Al-Jazeera Airways are also reportedly moving to increase scheduled weekly flights to Hurghada and Sharm El-Sheikh. Additionally, the Tour ‘n’ Cure hepatitis C medical tourism program, promoted through a recent visit by Barcelona FC star Lionel Messi to Egypt. The House of Representatives is also working to draft new legislation, promoting and organizing Egypt’s medical tourism segment. Numerous tourism companies have also reported being more profitable with the market recovering. Marsa Alam for Development Tourism posted a net loss of EGP 617,633 during the first quarter of 2017, compared to a loss of EGP 6.2 mn last year. Governorates of South Sinai and Red Sea Today, most of the South Sinai region is buzzing with tourists, primarily locals arriving from Cairo and other Egyptian cities. Whether en route for a hike to Dahab’s remote neighbor of Abu Galloum or a signature dive at the Blue Hole a few kilometers east of town, tourism destinations in the peninsula have witnessed increased bookings by Egyptian nationals during the past couple of years and in recent months. “The campsite, here, was entirely inhabited by Israelis and Europeans until five years ago when Egyptians became all over Sinai,” says Ibrahim, a Bedouin from Mezeina Tribe working at Blue Lagoon, the iconic kitesurfing destination a few kilometers further east from Dahab’s neighboring Abu Galloum campsite. “I think Egyptians have definitely developed a newfound appreciation for our tourist destinations in recent years.”

waters of Hurghada, El Gouna, and Marsa Alam maintain their appeal to all kinds of tourists with a much older profile and a higher budget. Large tourist resorts have replaced most of the eastern coast campsites, today. Marsa Alam, the host to Wadi El Gemal National Park, Qulaan Islands, and an astronomy center, is acclaimed for its sandy beaches and coral reefs; and is home to numerous highend hotels, maintaining its appeal among circles of nature lovers. Heading north, Orascom’s El Gouna boasts superb infrastructure and excellent services, according to the resort town’s website. Inflows of visitors are kept steady with the appeal of frequent sports and nightlife events, including the likes of El Gouna International Squash Open and Nacelle’s Sandbox Music Festival. Just a few kilometers further south, the Egyptian Resorts Company’s Sahl Hasheesh holds an annual triathlon, organized by the Trifactory. Summer temperatures in those areas are at around 30°C with lower humidity levels- in comparison to Cairo or Alexandria- making the escape to the Red Sea, even during the summer months, ideal for city dwellers. “With tourism picking up, the overall sentiment on Egypt will improve... people will look at this country in a safer perspective and this should change how people view Egypt,” says Orascom Hotel

BY YASMIN EL-BEIH

Developments’ Head of Investor Relations Sara El Gawahergy. A total of seven investment projects, worth of EGP 4.1 bn, have recently been signed for implementation in the Governorate of Red Sea, as per a meeting held between Red Sea Governor Ahmed Abdallah and the Minister of Investment and International Cooperation Sahar Nasr on February 27. Currently, around 42 foreign companies are investing in mega projects across the governorate at a total cost of EGP 50 bn. Ain Sokhna Given its close proximity to Cairo, Ain Sokhna is an ideal destination for short weekend or dayuse getaways. With a mere hour-long drive, Cairo residents and tourists land at the national hotspot for deep-fishing, pristine beaches, snorkeling, and desert adventures. Local and international tourists alike enjoy jet-skiing, paddle boating, or visiting malls, restaurants, and spas. Ain Sokhna is also a great stop for those intending to visit the Suez Canal. The area is seeking heavier investment inflows, with President Abdel Fattah El-Sisi announcing the new -200 mn-square meter- industrial zone currently being built. Exciting new developments are coming up, such as the Santorini Project by Amer Group through a partnership with Porto Group Holding.

“I can confirm that we constantly receive several requests from foreign investors of different nationalities aside from the GCC countries, including British, German, and Dutch, to name a few. Their main objective in the area is to buy retirement homes by the sea,” Chairman of the Ain Sokhna Tourism Investors Authority, Mohamed Roshdy, previously told Invest-Gate. “Today, the wheels have changed to our favor. Foreigners are coming back and are asking about Egyptian destinations, as well as, looking for ways to invest in the country, whether as corporates or individuals.” The year-round winds at Ain Sokhna also make it a closer destination for those interested in windsurfing than Ras Sedr or other locations further away in Sinai. Various schools such as FlyKiteSurfing offer courses at the nearby Zafarana. Ras Sedr and Ain Sokhna are both hubs of secondary home ownership, which Egyptians largely account for while international investors amount to merely 2% of secondary home ownership in Egypt. Mediterranean Sea The northern Egyptian shores from Alexandria to Marsa Matrouh have always been a haven to local tourists. In recent years, areas including Al-Alamein, Sidi Abdel Rahman, Sidi Heneish, and Ras El Hekma have seen more developments than ever, including Etap Resort, Mountain View, and Fouka Bay. Nightlife across the many seaside resorts have become popular amongst the Egyptian elite, making the North Coast popular especially during the summer weekends. Likewise, the public sector is heavily investing in the area. Government developments and construction in the Al-Alamein area are to support the heavier tourist flows further west from Alexandria. The New Urban Communities Authority (NUCA) is funding the construction of residential and hospitality projects in New Al-Alamein City, “featuring 25,000 hotel rooms and many entertainment venues,” Minister of Housing Mostafa Madbouly announced earlier this month. The New AlAlamein City is to include an industrial zone, universities, and schools, according to the ministry’s released statement. Additionally, over 2,000 social housing units are currently being built to accommodate the lowerincome population, serving developments in the area. Marsa Matrouh is also to see some major developments, including the government’s latest project entitled Jarjob City & Port. Hyde Park Developments (HPD) has recently announced its latest project, Coast 82, encompassing a thousand units, a mall, a five star hotel; in addition to, 550 meters of waterfront at a total investment cost of EGP 12.5 bn. Coast 82 is to be launched later this year. Another developer implementing a similar project is Tatweer Misr Developments with its Fouka Bay residential project at Ras El Hekma, comprising a variety of fully furnished waterfront homes. The project includes waterfront villas, double-decked twin houses and townhouses, spacious chalet cabins, and bungalows overlooking the beach. With its developmental reform plan across the country, the Egyptian government is to put Egypt on the world tourism map and make its coastal cities operational all year round.

Along the Red Sea’s western coast, the crystal clear 18 | INVEST.GATE | June 2017 - ISSUE 03

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VOICE OF THE MARKET

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program”.

DESPITE POUND DEVALUATION, Q1 FINANCIAL RESULTS SHOW CONFIDENCE IN REAL ESTATE MARKET

It adds, “In January 2017, the company acquired 190 feddans in West Cairo from the Egyptian Ministry of Housing, which is considered a natural extension to Palm Hills Golf Views and Golf and Golf Extension. We are in discussions to acquire several new parcels of land including land in Alexandria and 6,000 feddans in West Cairo. BY NAYROUZ TALAAT

lthough a state of uncertainty has dominated Egypt’s real estate market as the purchasing power of Egyptians has declined, Q1 financial results of top developers demonstrate confidence in the sector with new projects’ launches and continued strong demand.

SODIC SODIC’s net sales hit EGP 1.2 bn in Q1 of 2017, rising 64% y-o-y, a bourse statement says. The company

Yasseen Mansour, Palm Hills Chairman “As we continue to spend on construction and accelerate the pace of handovers, the company expects to fully complete a number of projects during FY2017 including Palm Hills Katameya, Palm Hills Katameya Extension, Village Gate, Casa and Hacienda White 2.” Samih Sawiris, Chairman of Orascom Development and design prices,” says Bahaa Eddin, analyzing how real estate developers have reacted to this. Why Developers Are Still Gaining Financial expert Bahaa Eddin says that most developers are keen on avoiding any financial losses during this period when the Central Bank of Egypt (CBE) is taking new monetary decisions. “To avoid this, developers are directing their attention to new markets that will help such plans be achieved. The Gulf market was the most attractive to big developers, as many Arab investors found that the Egyptian real estate sector was a safe haven due to the devaluation of the local currency versus most of the stable Gulf currencies,” he notes.

had earlier announced that it plans to invest EGP 3 bn during 2017. “With the devaluation behind us, we look forward to a more stable operating environment. We are aware of the challenges ahead for the economy, but we believe that challenging operating environments create opportunities for well-capitalized and experienced companies like us with our strong track record of performing in even the most turbulent times,” SODIC’s financial report notes.

SODIC will target EGP 5.6 bn in net contracted sales in 2017 and it expects to continue its timely delivery of 1,150 units across its projects. Palm Hills Palm Hills Developments recorded net sales of EGP 3.1 bn in Q1 of 2017. Palm Hills Developments Company says its record new net sales of Q1 of 2017 grew 58% y-o-y to EGP 3.1 bn. The company also reported an increase in the new 2017 full-year sales target to EGP 9.5 bn from EGP 8.5 bn previously announced.

Hadeel Saleh Kamel, Vice Chairman of New Ismailia Urban Development “The pound floatation decision has not affected the company’s financial results for the financial year ending on December 31 … the firm’s accounts do not have balances in foreign currency; consequently, it has not been affected by foreign currency differences.”

according to Reuters. With paid-in capital of EGP 563 mn, Ismailia currently owns around 20 buildings in downtown Cairo. The real estate company is focusing on the acquisition of prime real estate in downtown Cairo for the purpose of restoring the buildings and upgrading the infrastructure to suit contemporary requirements for residential, commercial, and cultural spaces while celebrating the original edifices comprising downtown’s architectural significance.

The report adds, “We continue to believe in the depth of the real estate market in Egypt and the value of our brand equity that will continue to set us apart from the competition.”

“The strong uptick reaffirms the strength of demand across our target segments and the fact that our products continue to enjoy the market’s favor.”

“Egypt’s decision to float its currency can already be declared a success but it will take time for investment flows to return and revive its battered economy … now the investment appetite has become bigger … people will start looking at the various opportunities given to them.”

“Moreover, real estate developers have started to

During February, SODIC successfully launched two new projects in West Cairo: One16 in SODIC West and October Plaza on the 30-acre plot in 6th of October. Both launches have been met with strong demand despite the different price points for each project, according to the company.

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Developers have their say on EGP float, future projects

Losses of ُُEgypt-listed real estate company Ismailia Development and Real Estate narrowed in Q1 of 2017 as the net loss totals EGP 438,305 compared to EGP 593,328 in the same period the previous year,

Despite increased prices, local demand for residential units continued to be strong and is expected to remain steady, as shown in the Q1 financial results of top developers in Egypt. According to the overall results trend, the float of the local currency last November has created a more stable operating environment, which developers say will boost the real estate sector and increase investor confidence in the market.

Despite the uncertainty and rise in construction costs, the financial statements of top real estate developers for the first quarter of FY2017 indicate that Egypt’s property market remains resilient.

Bahaa Eddin confirms that developers have started to set installments over a longer period, reaching up to 10 years instead of five and three years previously, in order to counter reduced sales levels and help purchasers cope with the high prices of residential units.

“We expect to launch the first phase of apartments in Palm Hills New Cairo, the second phase of Capital Gardens, Hacienda West, and the 190 feddan during FY2017. The company expects to finalize all construction works of Village Gate and VGK Malls during FY2017, and to be operational during FY2018. It is currently in active negotiations to acquire 130 feddans in Alexandria on a co-development basis, the company’s financial report said.

In the beginning of 2017, prices of units increased by 20% on average with the expectation of another 40% hike by the end of this year.

Spotlight on top developers financial statements

How Developers Deal with Local Purchasers

Ismailia Development and Real Estate

The EGP float has had a direct impact on the real estate sector, increasing the costs of construction materials and consequently, residential units, as well as perplexing the calculations of big developers about their existing and future projects.

Notably, the market has also been boosted by Egyptian expat and foreign investors, for whom purchasing land became increasingly cheap overnight.

diversify their product offerings and focus on more touristic destinations such as the North Coast, rather than focusing only on new cities such as New Cairo and 6th October,” he says.

Emaar Misr for Development Emaar Misr for Development posted a 72% y-o-y increase in profits during the quarter, according to the company’s financial statement.

“Despite the challenging market conditions following the floatation of the EGP and the resulting inflation, we still expect sales growth in FY2017, buoyed by the launch of Palm Hills New Cairo in November 2016, where we sold 157 standalone units worth EGP1.0 bn in one week,” says Palm Hills Chairman Yasseen Mansour. According to the recent Palm Hills report on its performance, the company “continues to reap the benefits of its strategic direction of increasing construction spending while delivering record results driven by the accelerated construction

Emaar Misr for Development’s net profit during Q1 of 2017 totaled EGP 437.9 mn, compared to EGP 254.48 mn in the same period a year earlier, the company’s financial statement adds. Revenues increased to EGP 668.69 mn, up from EGP 597.42 mn in the same period last year. Analytic Overview According to Mohamed Bahaa Eddin, Head of Research and Investment in Al Marwa Brokerage, there are main economic factors that impact all sectors, including the real estate sector. “The main variable was the Egyptian pound devaluation versus the USD as it has reflected on the costs incurred by real estate developers with the rise of cement, steel, THE VOICE OF REAL ESTATE | 23

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RESIDENCY-FOR-PROPERTY LAW TO

ENRICH THE MARKET

BY MENNA A. FAROUK

gypt’s economists and real estate experts are lauding new amendments to legislation, allowing foreigners to receive a one-year residency in Egypt in return for owning properties worth of USD 100,000; and expecting it to boost the national economy and the country’s real estate industry. Invest-Gate explores more of this newly drafted law and how it should serve the real estate sector. “The new draft law would provide the country with much-needed hard currency, bolster the national economy, reinvigorate the Egyptian real estate market, and make it a large contributor to the gross domestic product,” Chairman of the Real Estate Development Chamber affiliated to the Federation of Egyptian Industries (FEI), Tarek Shoukri, tells Invest-Gate. As the Chairman and CEO of Arabia Group Developments, Shoukri expects that after the law goes into effect, the government could generate USD 4-5 bn in revenue within a one-year timeframe. He also forecasts that parliament and the President will approve the law within two months. “Such an approach would help lessen USD demand in the local market and boost the country’s foreign reserves,” he says.

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In coordination with the Ministry of Housing and the country’s security apparatuses, Shoukri proposed such amendments to make way for foreign entrepreneurs to start their businesses, following their official one-year residency and building their lives in Egypt. “Granting residency is safety to foreigners…Now they can start doing business in Egypt,” he notes, adding that Egypt has a great chance to capitalize on this by increasing the value of properties required to receive a residency. According to this newly drafted law, foreigners seeking five-year residency are required to invest a minimum of USD 400,000 in the real estate market. The draft law stipulates that the money should be transferred from abroad to the Central Bank of Egypt (CBE), which would convert it into EGP. Then the bank will give the money to the foreign investor or businessman, who will buy properties in Egypt. If ratified by parliament, the draft law would have to be approved by the President before it comes into force. Fathallah Fawzi, CEO and Chairman of MENA group, points out that apart from injecting hard currency into the state’s coffers, the newly drafted law would push up sales of real estate companies, create more

job opportunities, increase housing projects, and further stimulate Egypt’s property market. “An uptick in the real estate market will take place, especially amid growing intention by Arab residents in Egypt to buy properties. This would create a state of stability for them, encourage the injection of additional investments in the Egyptian economy, and create more jobs for the country’s

The EGP floatation has encouraged those with USD savings to increase their investments in the country’s property market.

youth,” Fawzi also asserts.

to other countries,” he comments.

Real estate investors have expressed optimism about Egypt’s property market after the CBE floated the local currency in November last year, stating that the float has led to a more stable operational environment and created opportunities for wellcapitalized and experienced companies.

On May 4, the cabinet approved amendments to the draft legislation. Previously, the suggested amount totalled just USD 50,000. Given the current value of the Egyptian currency, the parliament decided to double it. “The new amendments would still encourage foreigners to buy residential properties in Egypt, as well as, cope with price hikes in the country’s real estate market,” the cabinet’s statement read.

“The EGP floatation has encouraged those with USD savings to increase their investments in the country’s property market. Now, the investment appetite has become greater and people will start looking at the opportunities given to them,” Head of Saudi Egyptian Construction Co. (SECON) Darwish Hassanein tells Invest-Gate. Hassanein adds that the new amendments to the residency law will encourage many foreigners to invest in real estate “as for them, USD 100,000 and USD 400,000 is not a big deal and getting a residency for USD 100,000 is not much compared

The new amendments would still encourage foreigners to buy residential properties in Egypt, as well as, cope with price hikes in the country’s real estate market,

Going through its worst economic crisis in decades, Egypt has been actively working to attract foreign capital owners and investments to the country in order to ease the currency crunch and stimulate economic growth. The country’s currency peg and decline in foreign investment and tourism after the uprising in 2011 drained the central bank’s foreign reserves. Since 2014, the government has been pushing ahead with an ambitious economic reform plan, aiming to reduce budget deficit, lower unemployment rates, and kick-start the national economy. In recent months, foreign currency flows have gradually been boosted, following an agreement with the International Monetary Fund for a USD 12 bn and a - three-year - loan program. The agreement calls for aggressive economic reforms, including energy price increases and the introduction of a value added tax. By the end of April 2017, Egypt’s foreign reserves had edged up to USD 28.641 bn from USD 28.5 bn by the end of March of the same year, according to CBE. The country had roughly USD 36 bn in reserves before the 2011 revolution scared away tourists and foreign investors, the country’s key sources of hard currency.

Globally, economic programs allowing foreigners to legitimately purchase citizenship or a residency permit in return for substantial investment has been booming in recent years. Last year, the International Monetary Fund highlighted the rapid growth of this trend, suggesting that in the current geopolitical climate, people are looking for “political and economic safe havens.” Despite their recent proliferation, these programs have been in place in several countries for decades; the dual island nation of St. Kitts and Nevis, for instance, has had one since 1984. Citizenship selling is a predominantly European and Caribbean phenomenon. Such programs exist in Canada, the United States, Australia, Turkey, Singapore, and New Zealand, whereas the European Union grants residency permits to foreigners owning properties worth of EUR 500,000. The USA and the UK have had systems in place since the early 1990s. In the US, a seven-year residency costs USD 500,000 while a six-year residency in the UK is granted to the GBP 1 mn property owners. The cheapest option is in the Dominican Republic, according to a BBC report published back in 2016. Foreigners are granted citizenship following their USD 100,000-investment (plus fees) and an in-person interview. All in all, the proposed new law is expected to enhance the appeal of investing in Egypt’s real estate sector, with developers encouraged to start new residential projects and expand local businesses.

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monetary stability to lower inflation levels, according to a released statement. In 2016, the EGP float resulted in a “sharp” rise in hotels’ average daily rate (ADR) when reported in local currency to reach EGP 793.97. And year-end ADR growth was 2.5% when calculated in USD, according to STR. Supply and Demand In line with the EGP devaluation, hotel supply rose in 2016 and is expected to see higher growth rates as new hospitality projects are launched in the upcoming few years to meet projected higher demand, a report by BNC, a construction business platform, highlights. “Egypt now has around 220,000 ready hotel rooms and another 230,000 in the pipeline,” Montasser confirms.

The hotels’ supply in the capital already grew by 3% in 2016 after the opening of numerous locations such as Steigenberger Hotel El Tahrir, Westin Golf Resort, Westin Katameya Dunes, and Nile RitzCarlton, Colliers International said in its 2016 review on Egypt. The first quarter of 2017 also saw the opening of the Westin Golf Resort in New Cairo. The capital will see further growth in its hospitality supply in 2017, with the scheduled opening of St. Regis Cairo this August, along with expectations of the planned airport in 6th of October City attracting hotel investors to western Cairo, the report adds.

EGYPT’S HOSPITALITY SECTOR ON THE RISE POST FLOAT BY JULIAN NABIL

gypt’s hospitality sector is taking an upward trend after the Central Bank of Egypt (CBE) decided to float the local currency, making the country cheaper than ever and more appealing to tourists, accordingly increasing demand from international investors and tourists. Invest-Gate gives an overview on the sector pre-and post the devaluation of the EGP. “The EGP floatation has affected the hospitality sector in terms of costs and services prices. The devaluation led to increased costs, thus leading to a rise in the prices of services offered yet still reasonable for tourists,” Chairman of Egyptian Experience, a real estate developer, and British Egyptian Business Association (BEBA) member Mohamed Montasser tells Invest-Gate. Montasser adds that hotels will manage to cover their costs and generate higher revenues if the number of tourists increases during the upcoming period. EGP Float Impact on Hospitality sector The hospitality sector is seen to be gradually

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in 2017 as foreign airlines from major markets, including Russia, the UK, and Germany resume flights to the country’s tourist attraction, according to Tourism Minister Yehia Rashed. Revenues from these markets account for more than 40% of total tourism inflows to Egypt in past sessions, Rashed adds.

improving following the EGP float as the country has become a competitive destination and is now more affordable to foreign markets, in addition to the state’s efforts to address issues like sociopolitical unrest due to high-profile security incidents and terrorism threats. The stabilization of the exchange rate - standing at around EGP 18 per one USD by the end of Q1 of 2017 - has lured foreign investments into the sector, reflecting a positive outlook for the country’s economy, according to the Jones Lang LaSalle (JLL) Q1 of 2017 report. The new exchange rates are likely to provide higher income in local currencies, which will have a positive effect on hotels’ bottom lines, the report states. Meanwhile, the devaluation of the Egyptian pound has led to a significant rise in average daily rate (ADR) figures - measuring the average rate paid per night - to reach EGP 1,276.25 in January 2017. However, ADR decreased 19.1% when reported in USD, a report by STR, a hotel data company, adds.

In the first three months of 2017, the country generated USD 1.6 bn worth of tourism revenues from around 1.7 mn inbound tourists compared to around 1.2 mn in the same period last year, according to official data. Germans topped the list of tourists with 227,000 visitors in Q1 of 2017, followed by Ukrainians at 226,000 tourists, and Britons at 74,000. “There has been an increase in tourist inflow from Japan and China recently, who account for a large part of the sector’s growth,” Montasser says. “A recently signed deal entails 65 flights to Luxor, with 16,000 Japanese tourists on board,” he adds. The sector is expected to see “massive” recovery

January saw an improvement in occupancy from the very low levels in the last 15 months. Occupancy rates rose 24.3% y-o-y in January 2017 to reach 47.5% when compared to the same period in 2016, STR figures showed.

The Hospitality Sector Prior to EGP devaluation In the past two years, the industry saw a slowdown, especially, after some European countries like Russia and Britain suspended flights to Egypt due to security concerns following the 2015 crash of a Russian passenger flight in Sinai. Between 2015 and 2016, tourism income also declined by 44.3%. The inflow of tourists fell 40% to 5.3 mn visitors in 2016, according to a report by BNC Network. The number of tourists fell from 15 mn before the 2011 revolution to reach below 1 mn annually, and plunged further since then. In addition, Egypt’s revenues from tourism dropped 44.3% y-o-y to USD 3.4 bn in 2016, according to CBE data. As a result, occupancy rates fell 14.5% y-o-y to reach 45.8% in 2016 as compared to 2015, according to STR. Demand was also down 15.3% for full-year 2016. The hospitality sector has suffered financial pressures in the past period due to their commitment to pay salaries and other expenses despite low income levels resulting from a demand decline, according to Montasser. Challenges and Potentiality “The sector is expected to pick up in 2017, targeting a return to tourism market levels seen in 2010, a peak year for tourist numbers which neared 15 mn visitors,” Montasser says, adding that “We did it before with the same conditions, so it is possible’”. “Egypt has what it takes to regain tourism as it has airports and hotels with sufficient capacity to meet traffic, in addition to the recovery of security conditions,” Montasser explains.

Sharm El Sheikh saw an increase of 3% in 2016 in its supply, following the opening of the 610-bedroom 5-star Steigenberger Alcazar. Supply is expected to continue to rise at the same rate until 2019, in line with the expected launch of the 250-bedroom expansion of Hilton Sharks Bay hotel in 2017, Colliers anticipates.

The government should put in efforts to revamp the country’s image and regain stability, including “promoting good news, events held in Egypt and visits, by internationally acclaimed figures such as the recent one by Pope Francis, thus sending a positive message to the rest of the world,” Montasser notes.

The government is launching initiatives, aiming to support hotels’ supply across the country. For example, CBE has proposed to fund the refurbishment of worn-out hotels, whose owners are unable to renovate them by providing EGP 5 bn worth of loans with an interest rate of 10%, according to JLL. This will allow hotel owners to create value from more efficient operations from these hotels, which will be more appealing to the tourists.

On another note, Montasser believes that the country should find a mechanism to offer financing for closed hotels, cruises, and other tourism institutions, which need around EGP 204 mn to reopen. Cities on the Red Sea coasts such as Sharm El Sheikh, as well as the busy capital of Cairo are expected to be the most attractive destinations to tourists, head of the Tourism Investors Association in South Sinai, Hisham Ali, told local media.

Cairo is considered one of the most attractive tourism destinations in Egypt to foreigners. STR says that Cairo hotels posted a 20.6% y-o-y increase in occupancy to 68.6% for the month, with Colliers’ forecast that occupancy rates would reach 73% in 2017. Similarly, Sharm El Sheikh’s occupancy also rose to 29.9% and is expected to reach 41% in 2017. Hurghada and Alexandria’s occupancy rates are projected to reach 40% and 75% respectively, and they are expected to see constant supply in 2017.

Once travel bans are lifted from countries like Russia and Britain, the number of tourists is expected to rise to 10.5 mn in 2017, up from 5.3 mn last year, local media quoted an official at the Egyptian Tourist Authority (ETA) as stating. Russia was the number one source of tourists to Egypt, comprising approximately 68% of Egypt’s tourist inflows in 2015.

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TOURISM SEGMENT ADJUSTS AS INFLOWS DECLINE

ith the advent of the summer season, real estate developers rush with marketing campaigns luring consumers to their projects at discrete touristic destinations. Due to the country’s low rates of tourist inflows, real estate developers diverted their attention to promoting residential projects across Egypt’s tourist destinations although they still face challenges. Invest-Gate digs deep into the tourism segment’s obstacles and its imminent outlook. “The tourism segment is facing uphill challenges due to the drop in the country’s tourism industry, deteriorating security conditions, declining travel flows, and unstable monetary policies,” real estate expert Tarek Shoukri tells Invest-Gate. Red Sea Vs. The North Coast According to local real estate experts, touristic real estate projects are currently recording low rates of foreign residents compared to Egyptians and Arabs. Data released by Sakan Real Estate show that touristic real estate projects are attracting foreigners to the Red Sea coast, while

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Arabs are mainly investing in the North Coast, which is the most active tourist destination during the summer season. Meanwhile, Shoukri explains that real estate developers investing in touristic destinations need to work more “on PR campaigns...the country has to carry out more infrastructure projects and provide additional facilities to attract the purchasing power of international investors,” he comments. Real estate expert and CEO of Sakan, Mohamed Tharwat, says, “The North Coast attracts 60% of the volume of vacation home purchases, while the remainder mainly comprises destinations on the Red Sea, such as Hurghada, El Gouna, Sahl Hashish, or Soma Bay.” “Ain Sokhna is also now fiercely competing, particularly with the onset of developmental projects such as the Suez Canal Economic Zone, the New Administrative Capital, and upgrades to infrastructure...which will be a magnet to both international and Arab investors,” Tharwat notes. The common trend when analyzing the market

is that international tourists are still more attracted to the Red Sea coasts and favor the winter season as opposed to the summer. Egyptians and Arabs, on the contrary, are fond of Egypt’s northern shores, namely Alexandria and the North Coast. Sales and Marketing Director of Egyptian real estate developer The View Hurghada Resort, Mohamed Lamara, tells Invest-Gate, “It is known that destinations such El Gouna, Sahl Hashish, and Soma Bay are more attractive to non-Arab foreigners, compared with the North Coast, which is more of an attraction to Egyptians and Arabs than the Red Sea.” “The percentage of foreign purchasers is still so low compared with the percentage recorded before the revolution,” Lamara clarifies. Before the revolution, the country received nearly 15 mn tourists a year. By 2013, tourist inflows fell by one-third to under 10 mn annually and numbers have undoubtedly slumped further since then. “While foreigners comprised 60% of the portfolio in terms of real estate project back in 2009, now they only amount to 15% of

purchases,” Lamara notes.

travellers.

“Before the revolution, foreigners contributed over 60-65% of the portfolio [of those purchasing homes in El Gouna],” Head of Investor Relations department at Orascom Development Holding Sara el-Gawahergy, told Invest-Gate earlier this year, noting positive outlook for the tourism and real estate sector.

To face the challenge...

Focusing on the North Coast, it is believed to have a promising future due to the New Alamein city on-going project, the Dabaa Nuclear and infrastructure project, the Ras El Hekma development, and the expansion in Borg Al Arab Airport. Running on over 50 km, Ras El Hekma bay is one of the largest on Egypt’s Mediterranean Sea coast. At the same time, Minister of Tourism Yehia Rashid anticipates massive recovery in the tourism sector this year as foreign airlines from the major markets, including Russia, the UK and Germany, are to resume flights to Egypt’s tourist destinations this season. Shoukri notes that it is time to attract more tourists from Western Europe, the most frequent international

Addressing the impact of the new governmental projects on the touristic segment, experts say that projects like al-Dabaa, the ElAlamein Airport, the Dabaa Road linking 6th of October City and Marsa Matrouh, along with the Fouka Road to link New Cairo with North Cast, as well, will have a positive effect on the North Coast’s real estate projects as they will help attract investments from both locals and foreigners. Meanwhile, the law governing foreign residency in Egypt has been amended. Lamara of The Hurghada View says, “Such legislation is a good step, helping encourage more foreigners to purchase residential units, bearing in mind that the USD 400,000 amount is still very affordable compared with the value of this price in their countries.” Another major factor affecting touristic real estate projects is pricing policy. According to both experts Invest-Gate spoke to, most of the purchasers from the local market are still

BY NAYROUZ TALAAT

worried about the current ups and downs of the country’s monetary policies, especially given the steep decline in the value of the local currency. Experts say that purchasers are unsure whether the current prices are a reflection of real value or if there is an exaggeration in prices. Lamara says that the challenges facing new projects can be resolved if the government provides a long-term strategic plan guaranteeing proper facilities, convenient means of transportation, and proximity to industrial zones and developmental projects. “It is high time for more partnership between the private and public sectors in large projects in order to lessen the burden on facilities supply as well as to make purchasers feel more confident about injecting their money into those projects,” Lamara adds. In order to cope with the current situation, most real estate developers will heavily depend on the local purchasers, while hoping that the government will do more towards infrastructure and services nationwide in order to attract further investment inflows.

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museums being renovated to revive its original outlook dating back to 1903. “The first renovation phase includes developing the inner walls, ground floors, and window glasses,” Moamen Osman, general manager of the Renovation Sector in the National Egyptian Museum, tells Invest-Gate. The glass has been replaced with an advanced type of glass that prevents ultraviolet radiation and is heat insulated. Osman also adds that the display rooms and galleries within the museum will also be renovated in the near future along with the museum’s entire lighting system. “We started off with Tutankhamun Hall in the upper floor,” adds Osman. “The next renovation phase will be enhancing the wellbeing and organization of exhibition halls based on their historical references, as they are currently overcrowded.” Khedive Cairo Among the other touristic sites that are being developed is Khedive Cairo, in downtown Cairo, linking Islamic Cairo with the Modern Cairo of Khedive Ismail in the 19th Century. The development plans, which will be completed next month, include enhancing Falaki Square and its historic properties, overlooking El-Bustan Street and Tahrir Street, green spaces, and improving the lighting system, according to Cairo governorate’s released statement. Great Pyramids of Giza Another strategic touristic point that is being developed is the Giza Pyramids Area at a cost of EGP 349 mn. The Ministry of Tourism allocated EGP 51 mn to build an administrative building, secured gates, public services, and a civil protection building. The country plans to develop the Pyramids Area to be labeled as the top touristic destination in the country along with the National Egyptian Museum, according to a report released by the General Organization for Physical Planning (GOPP).

EGYPT’S VAST MUSEUMS ACROSS

CAIRO RENOVATED TO BOOST TOURISM

s the world awaits the completion of the Grand Egyptian Museum this year, spanning an area of 117 feddans near the pyramids and hosting artifacts belonging to the vast Egyptian civilizations (some have never been revealed to the world before), Egypt is determined to boost tourism and upgrade its services, renovating many of Cairo’s historical sights. Invest-Gate is pleased to take you on a tour across the capital to explore its best and most unique historical monuments. National Museum of Egyptian Civilization Invest-Gate starts its tour with the National Museum of Egyptian Civilization (NMEC), covering an area of 33 feddans,. Strategically located in Cairo’s Fustat, the magnificently-built museum features the transformation of Egyptian civilization throughout the centuries. Touring the museum, one could not help but notice how its architectural design depicts Egypt across its many civilizations, from the glass pyramid on top of the main entrance till the Egyptian-Roman amphitheater. “Ghazali Kessiba designed the project to fit the theme of Egyptian civilizations, portraying the Giza Pyramids in glass as one of the prominent cultural aspects,” Mahrous Saeed, the general manager of NMEC, clarifies. The project is being developed over three phases

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BY FATMA KHALED

with a total investment value of EGP 800 mn; and is expected to be fully operational by 2019. At a total cost of EGP 376 mn, real estate developer, Misr Sons for Development, completed the first phase, featuring buildings, facilities, rural sanitation, and electricity. “The second phase of the project is worth EGP 400 mn and will include an administrative building, comprising renovation labs, scientific research facilities, and antiquities storage. The third phase will include the completion of the exhibition halls and galleries,” Saeed tells Invest-Gate. As visitors tour NMEC, they will come across a welcoming reception area, museum stores, educational services, cafeterias, coffee shops, a 3D educational cinema, a theater, along with more than 40 retail shops that will be offered for rent to carry out activities aligned with the museum’s vision. With various activities available onsite, the museum features an edutainment platform for adults and children, offering a pleasant experience of antiquities’ for amateurs, tourists, and locals. With a multi-cultural platform, visitors can rediscover Egyptian history through nine exhibition halls, rich in historical facts and displays. The exhibition halls will be constructed in the museum apart from the current temporary open exhibition hall. The galleries/ exhibitions will feature the Medieval, the

Archaic, the Ancient Egyptian, Greco-Roman, Coptic, Islamic, and Muhammed Ali dynasties, ending with our contemporary period as well. “The reason behind opening a temporary hall was to encourage investments to the project. The government responded by allocating EGP 800 mn to the project, and the Armed Forces Engineering Authority will commence the remaining construction of the project based on presidential orders,” adds Saeed. Saeed notes that the museum could encourage high touristic turnout and tackle challenges of the tourism sector with its rich cultural platform that targets antiquities’ lovers worldwide. “This is the first civilization museum in the Middle East, thus the idea is new and seeks to attract Egyptians, expats, and foreigners who live in Egypt as well.” The idea of the project began as a collaborative effort with UNESCO, back in 1978. In 1984, an architectural design competition was offered and renowned architect Ghazali Kessiba won the designs for the museum. Implementation of the project only began in 2004, following the completion of tender documents. National Egyptian Museum The famous National Egyptian Museum in Tahrir Square, downtown Cairo, is also among the

The plan includes turning the area into an open museum and connecting it to Mansouriya water course that branches from the River Nile. The project will also include a hotel complex managed by GEM hotels. GEM Plaza will feature the museum’s gardens, Khufu Plaza, a boulevard, and Esplanade, a touristic walkway, a public services area near the Sphinx, new roads, along with an on-site electric eco-bus. Construction of the archeological site within the project began in 2009 to also include an administrative building for the Antiquities Ministry that will be opened within the coming weeks, while the entire project is expected to be finalized this year, according to state-owned EgyNews. In efforts to cater to the demands of the newlyanticipated project, the governorate of Giza is cooperating with the Egyptian Tourist Association (ETA) and the Hospitality Faculty in Helwan University to launch a two-week traineeship to train 1,400 workers in the antiquities field within the Pyramids Area, according to a statement released by Giza Governor Kamal El-Daly. The training program, entitled Tourism is our Future, will provide workers

and vendors in the area with enough touristic awareness that will soon demolish negative impacts that affect touristic turnout today. Furthermore, the Egyptian government will be allocating EGP 1.72 bn to fund projects carried out by the Ministry of Antiquities, including Baron Palace, Al-Kassan Palace, Mohamed Ali Palace, the Jewish Temple, and the Romanian-Greek Museum. According to state-owned Al Ahram Egypt is expecting a high touristic turnout this summer with

the Egyptian Tourist Association (ETA) launching a new promotional campaign to attract a larger number of tourists. The country has accommodated approximately two mn Arab tourists last year, amounting to more than 65% of the total number of tourists visiting Egypt, and increasing the touristic turnout rate to 13% in 2015. The country is expecting 9 mn tourists to visit Egypt this year as the Egyptian government continues to promote Cairo to be among the top touristic destinations worldwide in efforts to boost its tourism.

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Egyptian Entrepreneurs Seek Cheaper, Eco-friendly Properties Via Alternative Methods

BY MENNA A. FAROUK

rising costs of traditional building materials and increasing prices of residential units, the new concept could be very successful in Egypt and could generate high consumer demand. “Every container we use saves up to three tons of steel that would have otherwise been thrown out,” Rafla says. Egypt abandoned its currency peg of EGP 8.8 per USD 1 back in November 2016 and committed to a number of economic reform measures in order to secure a USD12 bn loan program from the International Monetary Fund (IMF). The move has pushed up construction costs by 20-30% and consequently prices of residential units.

wo young Egyptian entrepreneurs are introducing the country’s residents and real estate developers to cheaper and more environment-friendly properties by transforming old steel shipping containers into living spaces, offices, homes, shops, restaurants, and possible governmental projects. Invest-Gate sits with Qubix Founders Karim Rafla and Youssef Farag to explore their new inspiring project. Egyptian startup Qubix focuses on Cargotecture, a portmanteau of cargo with architecture, using steel intermodal containers as a structural element. “We breathe life into containers, which are abandoned once they end their shipping life,” says Karim Rafla, the company’s co-founder. While studying global engineering in London, Rafla saw the idea of making properties out of old containers. “There, I found an entire city made out of containers… Everything, including restaurants, homes, offices, and coffee shops, was made out of old containers. I thought to myself, why not create something similar in Egypt?” After moving back to his native Cairo, Rafla along with his friend Youssef Farag, who had studied finance, began to brainstorm how they could convert this sustainable form of architecture into reality. “We spent a few months testing different materials, techniques and insulation methods on a 20-foot container that we bought and kept in Farag’s backyard,” Rafla tells Invest-Gate. 32 | INVEST.GATE | June 2017 - ISSUE 03

Qubix, which began working on its prototype back in March 2016, delivered its first order in August last year. Within six months, Rafla and Farag delivered a fully-functional home in Beni Sueif, a BeFit training facility in Maadi, and are now working on a restaurant; in addition to working with a number of undisclosed real estate developers to design their offices. The use of containers as a building material has become increasingly popular globally in recent years due to their inherent strength, wide availability, and relatively low expense. However, the concept had never previously made it to the Arab world, especially Egypt. Homes have been built with containers because they are seen as more eco-friendly than traditional building materials such as brick and cement. “Shipping containers are in many ways an ideal building material. They are designed to carry heavy loads and to be stacked in high columns. They are also designed to resist harsh environments such as an ocean-going vessels or sprayed with road salt while transported on roads,” Rafla explains. He adds that the construction of a home, an office, or a restaurant out of a shipping container is faster, cheaper, sustainable, stronger as a structure, and adaptable to any industry. A home made of containers takes about one month to be completed with furniture, lighting, ceramics, and all other home finishing done.

Given the low cost of cargotecture, Farag and Rafla confirm that the concept can also be an innovative solution to the country’s informal housing problem. There are 351 slums deemed structurally unsafe in Egypt, most of them in Cairo. Some 850,000 people are believed to live in these dangerous neighborhoods, some of which lack basic amenities. “It can be a long-term solution to a problem, the Egyptian government has been trying to solve for decades. It is fast and cheap. By using cargotecture, we can build a whole community of homes, restaurants, schools, hospitals, among others,” believes Farag. No official from the Ministry of Housing was available for comment.

“Cargotecture is very safe, and we are very willing to collaborate with the government to support in resolving the issue of unsafe slums. This will show the world that the country is thinking out of the box when it comes to resolving a housing issue by utilizing a young, global idea,” comments Farag. Through working with innovative new businesses such as Cargotecture, the Egyptian government could resolve many of its chronic housing sector challenges by relying on the minds of the country’s young people, who often take a creative approach to addressing societal problems.

The concept of repurposing discarded containers to give them a second life was first conceived in the United States. In 2006, Southern California Architect Peter DeMaria designed the first two-story shipping container home in the US as an approved structural system under strict guidelines from the nationallyrecognized Uniform Building Code (UBC). According to Rafla, cargotecture can work well in Egypt because it is fast, mobile, and the cost of labor and building is cheaper than in any other country. The entrepreneur adds that with

Shipping containers are in many ways an ideal building material. They are designed to carry heavy loads and to be stacked in high columns.

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HOW TO: EXPLORE EGYPT’S TOP

SUMMER DESTINATIONS FOR LESS With high inflation rates, upped costs of living, and declining purchasing power, tourism is one area that remains affordable for both local and international tourists looking to explore. Here are Invest-Gate suggested itineraries guaranteed across Egypt’s destinations for EGP 2,500 or less.

BY INVEST-GATE TEAM

SOUTH SINAI If you wish to explore the Sinai desert, the St. Catherine area offers stunning hiking trails and mountainous landscapes. For as little as EGP 50 per night, you can stay at hotels, hostels, and camps across the elevated village. Trips from other locations such as Sharm El-Sheikh and Dahab cost EGP 80. You can get a guided bedouin day tour for EGP 200. Buses to the St. Catherine village from Cairo cost EGP 75 for Egyptians and EGP 85 for foreigners. Explore the underwater world of the Blue Hole dubbed the “World’s Most Dangerous Dive Site” (a mere six km walk from the city center of Dahab) and the Abu Galloum National Park located just another 8 km eastwards. A single room in Dahab costs as little as EGP 70 per night, offering minimum amenities. However, the EGP 250-350 per night range guarantees uplifted

room amenities. To the west, beyond the crystal clear waters of “The Lagoon”, the secret gardens of the Wadi Genai Valley are something out of every nature lover’s wildest dream, and a popular spot for rock-climbing. Windsurfing is another popular activity Dahab has to offer. For an active nightlife, head to Sharm El-Sheikh’s iconic discos and casinos, although prices are far higher than the neighboring rudimentary destinations. Booking rates in the resort town certainly do not fall below EGP 200 per night, while dinner and drinks at any of the nightspots on the Laguna Bay are unlikely to cost less than EGP 300 per person.

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RED SEA On the Red Sea’s western coast, destinations such as Hurghada, ElGouna, and down to Marsa Allam offer excellent opportunities to explore underwater marine life while providing the resort town atmosphere. ElGouna, in particular, offers iconic nightlife spots, be it at the hubs of Kafr elGouna (or Downtown) or Abu Tig Marina, which offer endless outlet choices from lounges to dance clubs. Travellers pay an average price of EGP 523 per night per person at Bedouinthemed hotels, enjoying lagoons, pools, and serene beaches. The resort town’s Zeytuna Beach is an ideal spot for kitesurfing. El-Gouna’s golf courses are some of the best in Egypt, given the stunning views and are suitable for men and women across different levels of expertise.

For history fanatics, Marsa Matrouh is among the utmost sought-after destinations for many tourists. Rent a car and visit the Rommel Museum and the hot dunes of ancient Egyptian Queen Cleopatra, known as Cleopatra Bath, and take the Memorial Day Tour at the Private El-Alamein WWII. If you have more time, drive a bit further to Alexandria, Egypt’s second largest city which was once its capital during the Greek and Roman dynasties. Alexandria’s signature museums include the Alexandria National Museum, the Royal Jewelry Museum, and the Graeco-Roman Museum. Bibliophiles and culture geeks should not leave without exploring the major library and culture center, Bibliotheca Alexandrina. For some of the best seafood cuisine in the country and an afternoon swim near the breathtaking view of Alexandria’s port, head to the Greek Club

Further south, Hurghada’s Mahmya Island is a protected area with spots usually booked in advance during national and religious holidays, so be sure to book at least a few days ahead. Day use runs at a cost of EGP 400 per person, and includes the price of the boat trip from Hurghada, a towel, and a premium spot. Hurgahda is also home to Makadi Bay Water World, Egypt’s largest waterpark. Hurghada stretches on a 40 km coastline and booking prices per night run as low as EGP 350 per person. Marsa Alam’s is ideal for those seeking relaxation or water-sports activities. Accommodation can exceed a minimum of EGP 650 per pax, but campers can get EGP 250-350 a night at any of the local camps, slightly more expensive than equivalent options in the South Sinai region.

near the Citadel of Qaitbay. Accommodation rates run from EGP 250 per night in both cities. The stretch of land running between both cities, the Alexandria-Marsa Matrouh Road, runs for over 250 km along the coast. With a small budget, it is possible to explore the wide range of beaches the North Coast has to offer. Within budget, tourists are guaranteed many sightseeing tours, museum visits, and a variety of entertaining venues across both its major cities. A recommended budget of EGP 700 is required for a trip of two nights and three days in each of Marsa Matrouh and Alexandria, and a minimum of EGP 1,000 for a trip of the same length in any of the North Coast’s medium-tier resorts.

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established real estate holdings in their home countries, to diversify geographically and Greece is a natural choice for Egyptian investors,” she says. According to CBRE, the Bank of Greece noted by the end of 2016 several consecutive quarters of zero percent property price movement and the y-o-y change was just -0.4%, marking the lowest drop since 2009. The Global Property Guide notes that with prices adjusted for inflation, the real estate market increased by only 0.03%. A June 2016 analysis by the Bank of Greece shows that between 2008-2015, EUR 18 bn (or 8.2% of GDP) investments in construction

While house prices in Spain and Italy seem to have adjusted to the economic conditions, in Greece they have become slightly cheaper

OWNING A HOME NOT TOO

FAR AWAY FROM HOME

were lost, slowing further the economic activity. Housing market prices dropped more than 5% from 2011 onwards, while the total house prices contraction accounted for 41%, especially in the urban centers during the same period. Moreover, transactions volume (property deals) of dwelling stock dropped about 19% and shrunk by approximately 72% in total.

“The taxation of real estate property rose by six times comparing to 2010 to almost EUR 2.5-3 bn,” the analysis reads. Moreover, London-based professional services network PricewaterhouseCoopers (PwC) confirms the significant slowdown witnessed in the Greek housing market during the same period, highlighting the tax increase, “representing almost 2% of the disposable income per capita”. Comparing the Greek market to Spain and Italy, PwC report claims, “While house prices in Spain and Italy seem to have adjusted to the economic conditions, in Greece they have become slightly cheaper” to those with disposable income. House supply is dominated by the existing dwelling stock, 55% of which has been built before 1980. The existing dwelling stock continues to expand at a slower pace. Ahmad confirms, “Concerns of oversupply have completely dissipated as building permits have dropped to around 12,500 units compared to 70,000 to 80,000 permits issued annually between 2004 to 2007.” With Greece’s high tourism flow, Bank of Greece states that the country’s economy has increased to 2.7% this year and anticipates it to go over 3% in 2018. Ahmad believes such factors are the trigger to the recovery of the real estate market. “These factors signal the recovery of the housing market with economists agreeing that the market has now bottomed out. This year, we are expecting to see modest price growth, which we can expect to gather pace thereafter,” she tells Invest-Gate. With relatively low property prices and affordable taxes when compared to the Egyptian real estate market, Egyptians’ interest in investing in Greece alarmed agencies like CBRE. Ever since, the agency’s participation in

Between 2008-2015

Investments Losses in Construction EUR 18 bn (8.2% of GDP)

Housing market prices

Transactions Volume by (Property Deals) 72%

by The Total House Prices Contraction 41%

The Taxation of Real Estate Property

6 times

BY FARAH MONTASSER

n small islands over the Mediterranean Sea with houses, shops, hotels (basically all buildings) colored in white and blue, capturing the country’s iconic flag and keeping its culture alive, people from around the world fly to explore the magnificent Greek civilization that has been kept preserved throughout the years as it copes with today’s modernity. Egyptian travelers, on the other hand, have started to buy properties in the Greek islands rather than just going on summer vacations. Invest-Gate looks into this common trend among wealthy Egyptians that has been growing over the past year or two. Over the past few years, and especially after Greece’s recession in 2008, travel agencies across Cairo have been working closely with those in Greece to tailor holiday packages for the exploration of the Greek islands of Mykonos, Santorini, Glyfada, and Lefkada, to name a few. The more Egyptians are traveling, the more popular Greece is becoming in terms of buying properties and even holding wedding ceremonies. For

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wealthy Egyptians, it has become a common phenomenon to hold wedding ceremonies during the summer season across the many Greek islands. Mykonos, for instance, has popped up on the radar following last year’s island wedding ceremony of businessman Karim El-Chiaty, owner of Travco Group Holding in Egypt, and “the number of requests for villas on this island has increased tenfold,” according to CBRE, the world’s leading commercial real estate adviser. Greece’s real estate market has become accessible to Egyptians thereafter. Talking to the Head of Residential Agency at CBRE Safina Ahmad, she highlights the similarities the world’s oldest civilizations of Greece and Egypt share that made Egyptians feel home away from home. “There are many reasons why Egyptians are interested in buying properties in Greece. It is the friendship between the two oldest civilizations of the world that is deep rooted and echoed in their cultural similarities,” she expresses. “Egyptians feel very comfortable in Greece.”

“The buyers we have met travel to Greece several times a year. Some have children attending schools or universities in the country or plan to send them,” Ahmad tells Invest-Gate. “It is common for those, who have already

There are many reasons why Egyptians are interested in buying properties in Greece.

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CityScape Egypt last March, it has been “registering over two hundred enquiries a month from Egypt alone.” “We received overwhelming responses from local clients. Egyptian buyers have an interest in investing in Greece mainly due to its amazing investment value,” expresses Fong Fong Lee, public relations consultant at Euroterra Capital, the reputable Greek developer behind the marketed Crystal Waters project in Lefkada, and participant at this year’s CityScape Egypt. Among the projects that are highly promoted among Egyptian property investors in Greece today is the Crystal Waters in Lefkada Island, claiming to be a preferred second home destination “among sailing enthusiasts,” claims Ahmad. Crystal Waters comprises 100 boutique residential villas and apartments, capturing the traditional architecture of the island. All units overlook the Skaros Mountains, and are just 50 to 200 meters away from the beach. This gated community also enjoys a wide range of luxurious amenities, “epitomizing the very best of Greek living,” Lee demonstrates. To interested Egyptian investors, this new project, as Lee puts it, “provides the very best amenities, including dedicated five star concierge service, a swimming pool, an outdoor restaurant, and meandering communal gardens,” in addition to the project being offered to Egyptian buyers on a - 7%- installment plan - over five years with rental guaranteed! On the other hand, Ahmad confirms that Euroterra

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Capital is a trusted developer among interested Egyptian buyers with a wide portfolio across Europe, including Central London. CBRE also confirms that it has received purchasing requests from Egyptian buyers in other destinations, including Glyfada Island in Athens and some offmarket villas in Mykonos as well. Another key factor that drives Egyptians to Greece is the chance of becoming residents at the European Union with EUR 250,000 only, unlike many other member countries across the union like that of France, requesting a total investment of EUR 500,000. “Residency is a selling point to around 50% of the Egyptians enquiring about and buying in Greece,” Ahmad admits. Indeed, such a residency program allows visafree travel to 26 Schengen countries, “ideal for those, who need to travel throughout Europe for business,” Ahmad states; but is an annual income tax in a foreign currency put into consideration when buying a property? “Many Egyptians we have seen aim for investment. They either pursue a better quality life in Greece with its sun and sea… or invest for capital gains and rental returns,” assures Lee. “Many of them are businessmen, entrepreneurs and investors.” According to Lee, the real estate market today has attracted Egyptian individuals more than local developers. “We have not yet seen moves on the part of developers in Egypt to promote the market or their products to Greek buyers. The majority of their external marketing activity has been focused on the Middle East, where there is great demand for property, particularly in Cairo,” Ahmad tells

Invest-Gate. Coming out of a recession and opting to recover, Greek developers have managed to gain trust from the outside world, allowing Egyptians - with similar economic conditions - investment opportunities in the country. But turning tables, Egyptian developers are doing nothing to attract the Greek population to the local market and only focus on Arab investors. It is ironic how the wheels have turned. Egyptians today are to dominate the Greek property market, when Egypt was once home to a huge Greek population that now dwindled to around 10% of its peak.

This year, we are expecting to see modest price growth, which we can expect to gather pace thereafter

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