Egypt raises housing unit prices by 30%.. Is the era of cheap housing over?

CAIRO -

 The Egyptian government has broken the barrier to fixing the prices of housing units for low and middle incomes;

To keep pace with the prices of building materials, which have witnessed a significant increase since the beginning of the year, affected by the global economic crisis resulting from the Russian-Ukrainian war.

The government has agreed to increase the maximum selling price of residential units that will be put up for sale in the future, so that it becomes 450,000 Egyptian pounds (approximately $24,000) for units consisting of three rooms and a hall, and 400,000 Egyptian pounds (approximately $21,000) for two-room units. And a hall, for the low-income category, while the selling price of the unit will become 1.7 million pounds (approximately $90,000) for fully-finished units with an area of ​​150 square meters, for the middle-income category.

It is estimated that the maximum selling price of residential units will be increased by 30%.

The government justified its decision - at its meeting a few days ago - that it coincides with the change in the cost of constructing housing units that are being implemented and put forward, in an effort to revitalize the real estate finance sector and achieve the sustainability of social housing projects.

End of the era of cheap housing units

The head of the Building Materials Division at the Cairo Chamber of Commerce, Ahmed Al-Zayni, said that “the era of subsidized housing unit prices is over, but it remains the best option for young people who do not have to pay the price of a housing unit in cash or on short periods because the government provides them in installments extending over long periods, but the Egyptian youth remains one of the Ultimately, he bears the price difference.

He explained - in statements to Al Jazeera Net - that the government housing sector is the least affected, and provides facilities for those wishing to obtain fully finished apartments, because the state owns the land and does not bear the cost of its purchase and has the financial ability to build;

These features are not available to real estate developers in the private sector.

Al-Zayni pointed to a problem that he may not notice, which is the decline in the supply of raw materials and finishing materials, whether local or imported;

Not because of the rise in the price of the dollar against the pound, but because of the restriction of imports, noting that abundance and an increase in supply will undoubtedly help in the decline in prices.

With regard to the private sector, there is a stagnation in the real estate market throughout the country, and some developers sell at pre-increase prices due to the need to provide liquidity, and therefore some of them do not achieve real profits, especially small investors and real estate developers, and this may lead to the exit of a large number of them. from the market.

Investing in banks or real estate?

Last March, Egyptian President Abdel Fattah al-Sisi renewed his call for his citizens to deposit their money in banks and benefit from their profits, instead of placing them in building real estate or housing units that do not comply with building requirements, and where no one lives.

At the opening of some housing projects and roads in 6th of October City, west of Cairo, Sisi criticized the phenomenon of unplanned construction of real estate on the ring road, most of which are uninhabited.

He stressed that the state "is able to meet the demands of citizens," noting that "the government provides social housing units for seven years, and there is an initiative by the Central Bank to finance these units at low interest rates."

The Central Bank has introduced a real estate financing initiative with an interest rate of 3% or 8%, for both low-income and middle-income people, and pensioners, but most of the conditions are consistent with housing projects built by the state, as this initiative is limited to state projects and not others.

Random real estate market

For his part, a member of the Board of Directors of the Egyptian Federation of Construction and Building Contractors, Mohamed Abdel Raouf, said that "the government's increase in the prices of housing units came late, and did not initiate an increase in prices at the beginning of the crisis," and believes that it will not affect "low and middle-income people, because they get them through facilities." Financial terms over the largest possible number of years, up to 25 years, which makes its impact limited.

And the most affected in the market, according to Abdel Raouf's statements to Al Jazeera Net, are small companies that suffer from high costs, a decline in sales and the possibility of stumbling.

He indicated that the main problem is that real estate investment in Egypt started late or recently since the nineties of the last century randomly, and it lacked laws regulating its work. Strengths and weaknesses and address them.

Abdel Raouf explained that so far there is no real estate investors’ union, and there is no clear definition of the real estate investor in Egypt, calling at the same time to regulate contracts between construction companies and clients because they are unfair, do not provide sufficient guarantees for contractors, and are in the interest of investors.

support and investment

It is known that the Egyptian government has thrown its weight in the housing sector, targeting in particular low and middle-income people, as it is implementing 1.5 million housing units between 2014 and 2021 at a rate of 225 thousand units annually, in addition to providing 230,000 plots of land (1.7 million units), as well as partnership projects. With the private sector that offers 120-150 thousand units.

In the past seven years, the number of residents of new cities, according to the Ministry of Housing, increased by 3.5 million people;

At a population increase rate of 500,000 people annually, it is expected that new cities will attract new segments of rural and urban residents in the next phase.

According to the government’s plan for sustainable development for the fiscal year 2023/2022, housing, water and sanitation come in second place on the list of priorities after transportation, as the state allocates about 294 billion pounds to the sector, and housing projects will get 33 billion pounds to cover the construction of 306 thousand new housing units and the development of 15 Thousand acres in slums.

Unfair requirements or organization?

The government recently approved the construction and planning requirements for construction at the level of Egyptian cities, as well as the procedures for obtaining their licenses, but it caused a state of stagnation in the real estate market due to the inability of many to implement them, amid popular and parliamentary demands to amend the building regulations, officials said they are already studying, according to Local press websites.

The contracting sector contributes about 17% of the gross domestic product, according to data from the Egyptian Federation of Construction and Building Contractors, which includes under its umbrella about 30,000 companies, of which about 15% to 20% are first-class companies that implement mega projects.

The construction and building sector, one of the largest sectors in the country, has the largest volume of direct and indirect employment, as it exceeded about 17 million workers in all its categories, due to the sector's association with dozens of industries and commercial activities.