The British Egyptian Business Association (BEBA) has organised on Wednesday a breakfast briefing themed “In Search of Dollars: Exporting Real Estate to Support Egypt’s Hard Currency Reserves & Annual Remittance Inflows.”

Five high-profile speakers have participated in the panel, namely Eng. Hesham Shoukri, Chairman of the Real Estate Export Council and Founder & CEO of Roya Developments; Eng. Ibrahim El Missiri, CEO of Soma Bay Development Company; Mr. Mohamed Kaoud, Associate Director for Hotels & Tourism MENA Region at Colliers International; Ms. Zeinab Adel, Partner, Head of Egypt at Knight Frank MENA; and Mr. Tamer Yousri Ragheb, Head of Corporate Banking at Emirates NBD.

Mr. Karim Helal, President of Concord International Investment, was the moderator of the panel.

In her opening remarks, Ms. Nadia Lamloum, BEBA CEO, has welcomed the esteemed guests and announced the participation of some of Oasis School’s finest students in the Q&A. Motivated to actively take part in the panel, the students are preparing a concept paper on real estate export and how to find the hard currency through such industry.

Mr. Karim Helal then started the talk by welcoming all the distinguished guests, including members of the Embassy of Singapore in Cairo, and Ambassador of South Korea to Egypt, H.E. Kim Yong-Hyun.

He said the panel aims to explore some unconventional approaches to solve hard currency.

When tackling the challenges to make Egypt a global destination for second homes as the case with Greece, Cypress, Turkey, and most recently Dubai, the panelists had had a heated debate, arguing whom to blame for obstructing the path to develop the exportation of the Egyptian real estate industry.

Nevertheless, the panelists were optimistic that things would become better in Egypt given the country’s unique location, easy language, the kinder warmer weather, the affordable cost of living compared to other countries such as the GCC, and the sincere will of all the stakeholders in the industry.

The panelists eventually agreed that collective work among the real estate sector’s stakeholders: the public and private sector, developers, and lenders could lead the way. This shall be under a new, powerful regulator in charge of overriding the red-tape, outdated measures, ensuring that incentivising regulations are implemented, and exploring more to create a more attractive ecosystem. In addition, they have also agreed on the importance of having a platform that shares real-time data, statistics on the Egyptian real estate market to win credibility among investors, potential buyers.

Below are some of the views and visions the panelists shared during the breakfast briefing.

The idea of exporting Egyptian real estate is not a novel proposal, as Eng. Hesham Shoukri was the first over a decade ago to propose the exporting idea as a method to secure hard currency for the country, just like the Suez Canal. He credited Sharm El Sheikh and Gouna as pioneers in the area of exporting properties to foreigners. He noted that countries like Turkey, Greece, and Cyprus are more organised with government support, strategic planning, and branding. He pointed out that these countries now generate billions of dollars annually from foreign real estate purchases.

These three countries generate between $15 billion and $16 billion from foreigners buying second homes per year, Eng. Shoukri stated.

He even suggested that if Egypt had had a better planning and more active implementation of the real estate export earlier, it might not have faced the current foreign currency shortage.

Under a better planning and wise implementation of real estate export, Eng. Shoukri estimated that Egypt could start to generate between $10 billion and $15 billion, higher revenues than the country gets from the Suez Canal.

Fluctuating Exchange Rates

Eng. Shoukri believes the large difference between the official and black markets’ rates is a major issue, saying the developers face constraints when selling directly to expats in dollars. Developers often resort to using black market rates or adjusting prices based on the cost of building materials, which is affected by the dollar, rather than the official dollar exchange rate.

He even said that Egyptian expatriates are buying properties in Egypt, generating between $3 billion and $4 billion, according to unofficial estimates. Yet, the country does not benefit from Egyptian expatriates’ hard currency as they still use the black-market rates. Some of “these dollars are coming without a system, through the black market,”

According to the Central Bank of Egypt’s (CBE) data, these numbers are much lower, standing between $400 million and $500 million only.

Potentials and Pitfalls

For his part, Eng. Ibrahim El Missiri said Egypt’s unique advantage is its winter sun, making it a very attractive destination for Europeans. Despite this, he referred to the red-tape measures that are over-complicating the process of attracting foreign buyers. He pointed out that Egypt is affordable compared to other markets, but there is a necessity of providing more flights, saying Egypt is merely “an Island” and the easiest, fastest way to come is using airplanes. “The lack of flights is a significant barrier to entering the country.”

Another challenge is the fluctuating exchange rates, he added. Eng. El Missiri said why cities like El Gouna and Sharm El Sheikh are a favourable second home destination for foreigners is that the Red Sea area lies under the jurisdiction of the Tourism Development Authority, where residents can sell properties in dollars, avoiding the issue of double exchange rates. However, he acknowledged that the current situation is a “wait-and-see” game due to payment uncertainties.

He also mentioned that foreigners are facing difficulty in setting up bank accounts as another challenging point. This is in addition to the lack of implementation of schemes and regulations for foreigners buying in Egypt. He also highlighted the challenges faced by Egyptian expats due to difficult connectivity and logistics. Eng. El Missiri noted that medical insurance is a significant concern for Europeans, and efforts to align insurance policies with local health services have been challenging.

The Light at the End of the Tunnel

"It's a challenging time, but it's temporary. Despite the hurdles in the Egyptian real estate market, there's light at the end of the tunnel,” Ms. Zeinab Adel said.

Ms. Adel stated that Knight Frank’s entering the Egyptian real estate market earlier would have made a bigger impact. Despite this, she thinks it’s never too late to enter the market due to constant, growing demand and supply. She sees potential for investments from Europe, but acknowledges that the government’s late action has limited its ability to help. She suggests developers can lead the way with marketing, branding, and positioning to attract foreign investments. However, regional issues and competition from Dubai and Saudi Arabia in attracting seniors to live there make it challenging. She notes that Europeans are price and politically sensitive.

Furthermore, Ms. Adel said Egypt has a strong chance of attracting investment from the GCC. Research shows that a majority of high-net-worth individuals from the GCC already own properties in Egypt and are willing to buy more. However, they are unfamiliar with off-plan sales and installments, preferring to pay in cash or foreign currency. Most of them buy properties for personal use, not as an investment. She notes that Egypt’s culture, language, and weather appeal to them. Despite being considered expensive by Egyptians and Europeans, branded residences in Egypt are cheaper than in the GCC. She suggests making Egypt more user-friendly and considers the potential of marketing senior living to Europeans who are often pensioners looking for a milder winter.The rest of the panelists agreed that attracting investment does not require big-name facilities; just a clean, well-staffed hospital can be enough to attract people.

Whether to invest first or sell first in the context of attracting senior living investors from Europe, Ms. Adel said the GCC is ahead because they invest in facilities first, then attract investors.

Enforcement of Laws

Eng. Shoukri emphasised on the importance of attracting tourists to Egypt, as potential buyers of real estates. He noted that Egypt’s unique advantage is its winter sun, which is not available in Turkey, Spain, Greece, Cyprus, or other Mediterranean countries. He mentioned that a law was passed less than a year ago to grant residency to foreigners buying properties in Egypt, but its implementation has been slow due to security concerns. He also highlighted the issue of property registration in Egypt, stating that it is the only country where people cannot register their units when they buy them. He suggests that this system needs to be improved to attract more foreign buyers.

"Attract foreigners with legalisation, focus on implementing rather than getting caught up in unnecessary paperwork like real estate publicity department.’’

Monetising Quality of Life

For his part, Mr. Mohamed Kaoud acknowledged the impact of various factors on Egypt’s real estate market. Over the past year, Colliers has managed transactions amounting to billions of dollars of foreign direct investment (FDI) into Egypt. Their main clients are family offices, ultra-high-net-worth individuals, sovereign funds, and investment institutions. They see Egypt as an attractive opportunity due to its location and ongoing developments.

Colliers has been mandated to explore real estate opportunities, particularly in hotel and tourism, and have secured transactions for over 20 hotels mainly in Sharm El-Sheikh and Cairo, with a few more coming up in the North Coast. Mr. Kaoud emphasised that exporting real estate is about monetising the quality of life and urges developers to consider what they are offering to their clients.

"Exporting real estate demands legislative amendments and a commitment to enhancing the quality of life; developers, in pursuit of clients, must focus on delivering a joyous and fulfilling living experience. Monetizing quality of life in mixed use and multiple use is a key source of FDI, business expansion with effect on GDP and new communities and societies.”

International Standards to Attract Buyers

For his part, Mr. Tamer Ragheb explained that banks usually step in once the market is well-established. He emphasised the need for a supportive regulatory framework, especially when dealing with foreign currency transactions. He suggested that developers need to meet international standards to attract buyers. Banks can facilitate lending to buyers, either through personal loans or mortgage loans, provided that the necessary regulatory infrastructure is in place. However, he noted that mortgage-backed personal loans can be challenging due to the complexities of lending offshore and securing a charge over real estate in Egypt.

Mr. Ragheb stated that a secondary market needs to be established for continued growth. He emphasised the need to create a marketplace for Egyptian expats as Egyptian banks could support foreigners wanting to buy assets in foreign currency in the future. He added that a secondary loan market for foreigners could be established in Egypt, provided there are units available and the costs are known.

Moreover, he encouraged developers to start marketing initiatives abroad and work with banks for co-branding. He acknowledges the challenges of providing loans in dollars due to the current market conditions. He added that big developers could arrange with banks to have reserve accounts or dollar deposits to secure loans at the beginning as he believes that this would develop gradually and liquidity could grow.

"Create success by following global standards, building strong infrastructure, ensuring steady regulations, making loans easy for foreigners, and providing benefits for both buyers and developers. It's a win-win for everyone,” Mr. Ragheb said.

The debate heated as Eng. El Missiri expressed frustration that developers in Egypt are required to fulfill roles typically handled by banks, such as providing financing. He pointed out that the current mortgage system is not operational and land is not registered, making it impossible for banks to lend. As a result, developers bear the risk and financial burden, including interest and currency rates, he added.

He argues that developers should focus on building products and getting paid, while clients deal with banks for financing. He also noted that developers are expected to provide services like hospitals, schools, and marketing, which he believes are beyond their primary roles.

Wanted: A Regulator to Consolidate Efforts!

Among the esteemed guests was Eng. Mr. Sherif Seif El Nasr, Marketing and Sales Consultant of Tatweer Misr, who said he believes Egypt lacks a regulator to coordinate and consolidate efforts among developers, the government, and the banking community. For his part, Eng. Shoukri highlights the need for real marketing to promote Egypt, rather than certain property projects.  

An Oasis student expressed their concern about the lack of initiative in taking the first step towards development, asking who should be responsible for taking the first step to break the cycle and enable development.

Eng. El Missiri answered that many developers are willing to break the cycle of stagnation in Egypt’s real estate market. He pointed out that successful destinations like Gouna, Sahel Hasheesh, Soma, and Marasi were established by developers who took risks and drove development. However, he noted that there are too many regulations and not enough enforcement of the power of law. He cited the Roads and Transport Authority (RTA) in the UAE as a successful model, as it was given the authority to override regulations and rules, leading to significant development. He suggested that Egypt needs a similar entity that can make decisive decisions and cut through the red tape. He also mentioned the challenges of hosting concerts in Egypt due to restrictive rules and suggests that a leading body is needed to facilitate such events as an example of how things work in the country.

He further said that transparency, facilitated by a regulator, would benefit everyone in the industry. He cites the hospitality industry’s STR platform as an example, where hotels share data on daily occupancy and average daily rates. Over time, as credibility is built into the system, it becomes beneficial for understanding the market. He suggested that the Red Sea market should operate as one, sharing information for greater success.