Egypt: Real Estate Finance System Obstacles In Egypt

Real estate in Egypt is considered one of the main industries that have a significant effect on the gross domestic product and according to the world folio the growth rate of real estate sector in Egypt accounted 8 % in the 2013 GDP also, this sector absorbed about 14.9 % of the employment.

The Real Estate is not only building houses or new cities, but also it's considered as the start button for many other industries such as furniture, ceramic, aluminum and also its one of the solutions to solve the issue of unemployment.

Real Estate sector nowadays is so active in Egypt especially after Sharm El-Sheikh Economic Summit as it took the loin share in this conference and the government is focusing on the real estate projects in order to balance between the growing growth of population and the properties available.

Many projects are launched in the future in the field of real estate, but the only obstacle remain is the real estate finance system as its contribution in the real estate sector is only 1 % which is extremely low comparing to many other countries

There are many borders that stand between the real estate finance system and individuals. These borders are the bureaucratic system, long procedures and lack of public awareness.

The bureaucratic system of Real estate finance

One of the main issues is the registration of the property or the real estate in Egypt as the owner should go and register in two different places which are not coordinated or related to each other.  The two places are the Egyptian Survey Authority which belongs to the Ministry of Irrigation and the Notary Public which belongs to the Ministry of Justice. However, Mr. Asherf Slaman the Minster of Investment admitted that this issue is one of the main obstacles of the real estate finance and he said that he will discuss with the Prime Minister in order to organize both authorities under one umbrella. This solution will help in solving the issue, but we need to also  search for another solution such as registration  through the internet. For example, in Malaysia, you could open a company and receive the registration certificate through the internet not registering an apartment or a real estate.

From our experience as a law firm dealing with many Egyptian and foreign clients, the client is normally confused by the bureaucratic system of the registration of the real estate in Egypt. Therefore, the government shall consider ways of fast resolution of the matter to facilitate the process for the real estate owners by introducing online registration and providing one-stop Authority dedicated for processing real estate related registration documents. 

The long procedures to obtain the real estate finance

In 2014, the Central Bank of Egypt realized that there is a real issue in the procedures of getting a loan for real estate. The 12 procedures applied used to take a long time in order to obtain the loan. The Central Bank has resolved this issue by shortcutting them into five procedures only.

The Central Bank also submitted a new initiative which will help in solving and encouraging real estate seekers to get loans easily, the new initiative is decreasing the interest rate to be 7% for the low income citizens and long term finance up to 20 years.

This initiative could help in refreshing the market of the real estate finance as the majority of population are low income citizens and most of them are seeking for loans or finance in order to buy an apartment.  The Central Bank also held a meeting with the CEOs of the national and private banks in Egypt in order to stand on the obstacle that faces the banks in order to activate the loans, the CBE promised that it will cooperate with the Ministry of Justice in order to set a timeline for the registration; also the CBE said that it will discuss setting a registration fee and providing new units as this will help in achieving the goal of the CBE in providing loans for low income citizens. The CBE also forced the banks to to speed and facilitate processing of requests of the clients as this  will  encourage  clients to apply for the loans. Moreover, the CBE provided 10 billion Egyptian Pounds for the initiative and is also in the process of amending the initiative before launching Phase Two.

The CBE is working on solving the issues that faces the real estate finance in Egypt, but there is also one main issue that still no solution for it that 10 banks and real estate companies that works with the real estate finance system and they mainly pay the highest amount from the total of the property and then the real estate seeker payback the debts over many several years that could reach 20 years , so the CBE and the government should work on encouraging the companies to work with the real estate finance system as only 10 companies is a very small number compared to the ambitious plan of the government and CBE to support real estate finance.

Lack of public awareness

Due to the long procedures to get the loan for the real estate and bureaucratic system many citizens are not interested in the real estate finance system. The government is trying to encourage the citizens to  apply for real estate finance, but the only issue is that there are no media campaigns that help in informing citizens of the benefits of obtaining real estate finance from the banks. Media campaigns could significantly help in replacing the negative image held by the citizen   about the real estate finance, but in order to start the media campaign the government and CBE should remove all the obstacles that face citizens in applying and obtaining the loans.

Real estate sector is obviously one of the main industries in Egypt that can help refresh the Egyptian economy and in order to help this sector to expand one of the main tools is the real estate finance. If the percentage of citizens receiving real estate finance increases this will lead to raising funds for the new projects and  encourage  foreign and national investors to invest in the real estate sector. Sooner a new Egyptian real estate union will be announced to coordinate with all the channels in order to help in promoting and solving real estate finance issues. Eventually, if the government managed to solve all issues, Egypt might become one of the top countries in the real estate investment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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