Egyptian property in need of a shake-up

What's Up: Egyptian developers must update their business models if they want to unlock the benefits of government housing initiatives introduced in the post-Mubarak era.

Egyptian property developers must change their business models if they want to unlock the benefits of government housing initiatives introduced in the post-Mubarak era.

Egypt, the Middle East and North Africa region's most populous country, faces the biggest shortfall of affordable housing. The government has pledged to build 1 million extra units, but the global property investment and advisory firm Jones Lang LaSalle puts total demand for affordable homes at 1.5 million.

Until recently, the industry has focused much of its attention on the wealthy elite, pricing out the majority of Egyptians.

"The sector is not fully represented by the current listings on the Egyptian stock exchange, which mainly consist of luxury developers," said Ankur Khetawat, an analyst at AlembicHC Securities in Dubai.

Egypt's property market has been reeling from a string of legal rows over how the government of Hosni Mubarak, the ousted president, sold state land, depressing activity in the sector.

Land disputes have hit major firms such as Talaat Moustafa Group, Palm Hills Developments and Egyptian Resorts, most of which have higher exposure to luxury property. The cases revolve around a 1998 law requiring state land to be sold via competitive bidding, rather than direct sales.

"There is potential, the groundwork needs to be done before reaching the level where sales volumes increase," Mr Khetawat said. "There needs to be a resolution to the cases, there needs to be a strong regulatory environment, mortgages and financing, preferably backed by the country's government."

Madinet Nasr Housing, a formerly state-run firm founded by the government in 1959 and now 30 per cent owned by Beltone Private Equity, plans to launch two building projects early next year.

Work on one of these, known as Teegan, is planned to include mixed-use housing units and commercial buildings.

The company is also seeking to launch a project on its 5.5-million- square-metre plot on the outskirts of Cairo known as Kilometre 45.