Housing Finance in Egypt

Overview

This profile is also available in French here. To download a PDF version of the full 2021 Egypt country profile, click here.

Approximately 22 million Egyptians out of 102 million live in slums. Of these, 850 000 people are living in unsafe settlements at risk of landslides and floods. Huge urban construction projects such as the New Administrative Capital and six new cities are being implemented to provide adequate housing, eradicate slums and achieve the country’s sustainable development strategy. The construction of the six new cities encompasses developing 61 urban areas, including regenerating 24 existing cities and constructing 37 new ones. As part of this, the government of Egypt has removed many unplanned neighbourhoods and relocated thousands of households into new government housing projects. Despite these efforts the demand for housing grows incrementally each year with an annual population increase of 2.5 million people, and 95% of properties remain unregistered.

The government has been working on a widespread economic reform programme since 2016 to achieve economic and fiscal stability. This programme has helped maintain the confidence of all international institutions and credit rating agencies in the Egyptian economy and its ability to face the challenges presented by the pandemic. The major ratings agencies have maintained a Stable Outlook for the Egyptian economy, with Fitch Ratings affirming Egypt’s rating at ‘B+’, and Standard and Poor with that of B / B in the long-term and short-term.

Find out more information on the housing finance sector of Egypt, including key stakeholders, important policies and housing affordability:

Overview
Access to Finance
Affordability
Housing Supply
Property Markets
Policy and Legislation
Opportunities
Availability of data on housing finance
Urban Informality
Websites

Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2021 edition, which has up-to-date profiles for 55 African countries.

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Egypt

Overview

GDP grew by 2% during the first half of 2020/2021 and this has created morejobs and cut the unemployment rate to 7.3% in Q2 2021 from 9.6%8 at the same time last year. The Annual Urban Inflation rate edged up to 4.8% in May 2021 from 4.7% in May 2020.

The economic reform plan supported the revival of the housing sector this year. As a result, Egypt’s real estate index increased by 28.3% in quarter one of 2021 compared to a sharp fall of 30.8% in the first quarter of last year. This was attributed to removing blocks on foreign ownership of land as well as driving public-private partnership projects on government-owned land.

[1] JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company. See https://www.google.com/search?q=JPMorgan+Chase+%26+Co&oq=JPMorgan+Chase+%26+Co&aqs=chrome..69i57.91287914j0j0&sourceid=chrome&ie=UTF-8 (Accessed 18 August 2020).

[2] Egyptian Ministry of Finance – Arab Republic of Egypt. (2020). Financial Monthly Bulletin July 2020. http://www.mof.gov.eg/MOFGallerySource/English/Reports/monthly/2020/July2020/Fullpercent20version.pdf (Accessed 7 August 2020).

^[3] Egypt and Djibouti are the two countries in MENA with expected growth rates of two percent.

[4] International Monetary Fund (IMF). Arab Republic of Egypt. Country Report No. 19/311 https://www.imf.org/en/Countries/EGY#countrydata (Accessed on 12 September 2020). Pg.5.

[5] https://www.capmas.gov.eg/Pages/Publications.aspx?page_id=5107&Year=23518 (Accessed on 7 August 2020). Pg. 30.

[6] Ventures. (2020). World Bank continues to solve housing poverty in Egypt. 24 March 2020. http://venturesafrica.com/blog/2020/03/24/world-bank-continues-to-solve-housing-poverty-in-egypt/ (Accessed 20 August 2020).

[7] World Bank (2020). Egypt: Providing Low Income Citizens with Affordable Housing. 20 March 2020.

https://www.worldbank.org/en/news/press-release/2020/03/20/egypt-providing-low-income-citizens-with-affordable-housing (Accessed 5 August 2020).

[8] Alborsa News. (2020. The government is discussing new mechanisms to finance the construction of 250,000 social housing units. 11 May 2020. https://alborsaanews.com/2020/05/11/1340899 (Accessed 7 August 2020).

[9] Central Bank of Egypt (2020). Measures to offset the impact of COVID-19. https://www.cbe.org.eg/en/Pages/HighlightsPages/Central-Bank-of-Egypt-Measures-to-offset-the-impact-of-COVID-19.aspx (Accessed 5 August 2020). Pg. 1.

Access to Finance

During the global pandemic, the Egyptian economy has proved resilient due to the quick responses to constrain the effect of COVID-19 on the economy. These measures included lowering the policy interest rate and postponing repayments of existing credit facilities. According to the Economic Reform forum, access to finance has been a minor or moderate rather than a major obstacle for firms across Egypt before or after COVID-19.

In July 2021, the Central Bank of Egypt (CBE) launched the E£100 billion (US$6.4 billion) Mortgage Initiative for Low- and Middle-Income Citizens. The initiative aims to finance low- and middle-income households to buy residential units at a decreasing interest rate of 3% for up to 30 years. It applies to low-income citizens whose eligibility is determined by the Social Housing and Mortgage Finance Support Fund based on income and unit price. The unit value is priced at E£310 000 (US$19.7 thousand), for which a 10% down payment must be made. Eligibility is based on a maximum net monthly income for a single person of E£4 500 (US$286.7) and is E£6 000 (US$382.2) for a family. For the middle-income group eligibility is based on a maximum net monthly income for singles of E£10 000 (US$637) and is E£14 000 (US$892) for a family. For units with a value up to E£1.1 million (US$70.1 thousand), a 15% down payment should be made. For units with values between E£1.1 million (US$70.1 thousand) and E£1.4 million (US$89.2 thousand), the down payment is 20%.

The number of mortgage finance institutions in Egypt reached 31 in 2020, of which 23 are banks and 14 are companies. During May 2021, the Mortgage Finance Fund signed 1 867 mortgage finance contracts with a total value of E£ 37 million (US$2.4 million) compared to 513 contracts with a total value of E£7.9 million (US$0.53 million) during May 2020. During January-May 2021, the mortgage finance companies provided funds worth E£2.335 billion (US$ 148.7 million) and signed 2 058 contracts compared to E£884.1 million (US$56.3 million) in funding and 923 contracts over the same period last year. During the same period the mortgage refinance value has dramatically increased to E£902 million (US$57.5 million) compared to E£84 million (USD5.4 million) last year.

In August 2021, the first license for microfinance leasing activity in Egypt was approved. This allows for the financing of low capital asset companies to start new projects or expand on existing activities.16 The number of companies and associations providing microfinance in Egypt reached 950 in May 2021 through 2 818 outlets. In May 2021 the number of customers benefiting from microfinance reached 3.3 million, of whom 2 million (62%) were women, while the share of young people (male and female) was approximately 63%. The financing portfolio reached a value of E£21.724 billion (US$1.383 billion compared to E£17.401 billion (US$1.108 billion) in 2020. The government injected E£2.8 million (US$178 thousand) into 87 700 small and micro projects in the first half of 2021 through the Micro, Small, and Medium Enterprise Development Agency. This created approximately 146 500 job opportunities with those aged between 30 and 40 years old receiving up to 36% of that funding

[1] Amwal Al Ghad (2020). Mortgage finance, 19 Bank and 8 companies offers mortgage services in Egypt 14 July 2020. https://amwalalghad.com (Accessed 12 August 2020).

[2] World Bank (2020). COVID-19 Outbreak: Housing Finance Implications and Response. 1 April 2020. http://pubdocs.worldbank.org/en/368571586473125247/COVID-19-Outbreak-Housing-Finance.pdf (Accessed 12 August 2020). Pg. 11.

[3] Daily News Egypt (2020). Egypt mortgage finance drops 84.2percent in April. 3 August 2020. https://dailynewsegypt.com/2020/08/03/egypt-mortgage-finance-drops-84-2-in-april/ (Accessed 5 August 2020).

^[4] Essam, M. (2020). Financial Regulatory: Real estate finance companies grant 750 million pounds in financing within 4 months. 30 July 2020. https://amwalalghad.com (Accessed 5 August 2020).

[5] Nano-financing targets small farmers, self-employed. homemade projects, fresh graduates, mothers who are the breadwinners for their families and street vendors and was approved by the FRA in November 2019.

[6] Mounir, H. (2020). Egypt’s microfinance market records EGP 17.866bn in Q1 of 2020. 15 July 2020. https://dailynewsegypt.com/2020/07/15/egypts-microfinance-market-records-egp-17-866bn-in-q1-of-2020/ (Accessed 14 August 2020).

Affordability

The Central Agency for Public Mobilization and Statistics (CAPMAS) reports that the average annual income for a family in 2017/2018 was E£60.4 thousand (US$3.8 thousand) compared to E£69.1 thousand (US$4.4 thousand) in 2019/2020 and that the average annual total household expenditure was E£53.7 thousand (US$3.4 thousand) compared to E£61.9 thousand (US$3.9 thousand) in 2019/2020. UN-Habitat (2010) defines affordable housing as housing expenditure representing no more than 30% of the household income. Hence, affordable housing in Egypt means that a family should not spend more than E£1 727 (US$110) per month on housing. Based on the expenditure and income survey for 2019/20 this means that around 30 million people in Egypt face difficulty in achieving their basic human needs, including housing.

The price of low income (social housing) apartments start from E£164 thousand (US$10.4 thousand) for apartments of 75m2, and 90m2 apartments reach E£184 thousand (US$11.7 thousand), E£197 thousand (US$12.5 thousand) and E£310 thousand (US$19.7 thousand). There is, however, a discrepancy in prices due to the location of the units in the city. The highest price is for investment housing apartments in the cities of Hurghada and Port Fouad.

The monthly instalments for social housing apartments start from E£400 (US$25.5) for apartments of 75m2, whose price reached E£164 thousand (US$10.4 thousand), and E£700 (US$45) for apartments whose price reached E£184 thousand (US$11.7 thousand), while for the units priced at E£197 thousand (US$12.5 thousand) monthly instalments reached E£750 (US$47.8). For the low-income group to qualify, the net monthly salary for a single person should not exceed E£4 500 (US$287) and E£6 000 (US$382) for a family. For the middle-income group, the income should not exceed E£10 000 (US$637) for a single person and E£14 000 (US$892) for a family. Therefore, the instalments are affordable based on the average household expenditure calculated above specifically for housing payment (namely E£1 500 (US$95.6) per month).

To increase housing affordability for low-income citizens, Egypt’s first non-bank online mortgage provider Bedaya Company announced its launch of the first non-bank mortgage finance mobile application and online platform. The company funds up to 90% of the residential unit value up to E£25 million (US$1.6 million). According to the Aqarmap index, the demand for real estate increased in July 2021 by 8.4% compared to July 2020. Part of the market revival is due to the announcement of the government’s initiative to provide real estate financing for low income and middle-income citizens at a rate of 3% over a loan period of 30 years.

Arab African International Securities reported that COVID-19 led to a decrease in real estate sales in 2020 compared to the previous year. In 2020 real estate aggregate sales value for the six largest companies decreased by 5.8% to E£65.2 billion (US$4.2 billion) compared to the previous year. Land sales represented 10% of the total sales with a value of E£6.8 billion (US$433 million), compared to 0.3% of the sales last year with a value of E£210.7 million (US$13.4 million). Mortgage finance initiatives at low rates in addition to an interest rate cut would motivate the real estate demand.

E£3.9 billion (US$248 million) was allocated to support social housing projects during 2019/2020. The current budget includes E£321 billion (US$20.5 billion) for social protection, of which E£7.8 billion (US$496.8 million) is allocated to cash support and public facilities in social housing projects. These programmes are targeted at reducing poverty rates and providing a decent life for citizens. “Takaful and Karama” – a cash assistance programme – and the Social Security Pension adopted by the government, targets all low-income citizens: 86% of the beneficiaries of the Takaful and Karama programme during 2019/2020 were among the poorest 40% of the population. This programme and the social security pension contributed to reducing poverty rates by 5.2% during 2019/2020.

[1] Social Housing and Mortgage Finance Fund (2020) Fund activity performance report, April 2020.

[2] Al Eqtisadiah (2020). The real estate market begins its activity after the Eid Al-Adha holiday, with a weekly decrease of 43.7%. 16 August 2020. https://www.aleqt.com/2020/08/15/article_1898321.html (Accessed 20 August 2020).

[3] Al-aees, SH. 2020. FEI, Banque Misr cooperate to revitalise CBE mortgage finance initiative. https://dailynewsegypt.com/2020/06/22/fei-banque-misr-cooperate-to-revitalise-cbe-mortgage-finance-initiative/ (Accessed 10 August 2020).

Housing Supply

Most housing developers in Egypt are interested in building in the centre of Cairo and housing investment in lower income areas is weak. CAPMAS has set the national poverty line at E£857 (US$54.6) per month in 2019/2020 compared to E£736 (US$46.8) in 2017/18. According to the expenditure and income survey for 2019/20, 29.7% of Egyptians live below the poverty line compared to 32.5% in 2017/18. The figure for extreme poverty is E£6604 (US$420.6) per year and the extreme poverty rate is 4.5%. Most low- and middle-income citizens therefore cannot afford to buy housing units.

Since 2014, the government has spent E£61 billion (US$3.9 billion) on a huge number of fully furnished residential units. Through the mortgage finance initiative, 376 196 households have already received their housing units as of August 2021. All units are fully finished, and are up to 90 m2, with 3 rooms. CAPMAS indicates that a total of 194 240 residential units at a total cost of E£79 billion (US$5 billion) were constructed in 2019/2020 compared to 281 300 units last year at a cost of E£94.6 billion (US$6 billion).

The Social Housing and Mortgage Finance Fund (SHMFF) is responsible of financing, managing, constructing, selling, renting and building (75-90 m2) units for low income and (100-120 m2) units for middle income households. By 2024, the goal of the SHMFF is to construct one million units with a total investment cost of E£204 billion (US$ 13 billion). In 2020/2021 the SHMFF succeeded in negotiating an additional financing loan from the World Bank, amounting to E£7.8 billion (US$500 million), to expand the provision of cash subsidies for housing to low and middle-income households. A total of 55 386 beneficiaries have been able to transfer to their new houses with a total cash subsidy value of E£926.4 million (US$59 million) and a mortgage finance value of E£6 526 million (US$415.6 million). A total of 59 473 units have been allocated to beneficiaries. In 2021, 28% of the beneficiaries of the programme were female headed households.

[1] Nextmove. Egypt is booming. https://www.nextmoveegypt.com/en/Visit/Egypt-is-booming.html (Accessed 20 August 2020)

[2] Modern Diplomacy. (2020). Egypt: Providing Low Income Citizens with Affordable Housing. 22 March 2020. https://moderndiplomacy.eu/2020/03/22/egypt-providing-low-income-citizens-with-affordable-housing/ (Accessed 20 August 2020).

[3] Alborsa News (2020). The government is discussing new mechanisms to finance the construction of 250,000 social housing units. 11 May 2020. https://alborsaanews.com/2020/05/11/1340899 (Accessed 7 August 2020).

[4] (2020). Housing in Egypt Report 2020. https://www.capmas.gov.eg/Pages/Publications.aspx?page_id=5104&YearID=23415 (Accessed 20 August 2020).

Property Markets

After more than a year of COVID-19, the real estate sector has proved to be strong and solid, thanks to the government incentives and construction of the new cities. The New Administrative Capital is expected to cost approximately E£380 billion (US$24.2 billion) by the completion of its seven-year plan. Decreased interest rates have also attracted investment, particularly from Egyptian expatriates as well as foreign investors.

Fitch Solutions believes rental rates will recover over the medium to long-term. Fitch notes household spending was flat during 2020 and their expenditure went mostly on essential items and healthcare. In addition, rental rates will not be affected by the limited new supply in the market because demand is increasing.

[1] Abdo, M. (2020). Egyptian real estate sales decline 50 percent” 10 July 2020. Independent Arabia. https://www.independentarabia.com/ (Accessed 20 August 2020).

[2] Global Property Guide (2020).” Egypt’s housing market remains depressed. 25 June 2020. https://www.globalpropertyguide.com/news-egypts-housing-market-remains-depressed-4061 (Accessed 10 August 2020).

[3] JIL. (2020). The Cairo Real Estate Market Q2 2020. https://www.jll-mena.com/content/dam/jll-com/documents/pdf/research/emea/mena/ar/jll-ae-the-cairo-real-estate-market-q2-2020.pdf (Accessed 20 August 2020).

[4] Almasry ALyoum (2020). Expert: 75 percent of Egypt’s real estate is unregistered, and violations threaten “real estate wealth” 2 June 2020. https://www.almasryalyoum.com/news/details/1983847 (Accessed 23 August 2020).

[5] World Bank (2020). Doing Business 2020. https://www.doingbusiness.org/en/data/exploreeconomies/egypt#DB_rp (Accessed 23 August 2020).

Policy and Legislation

In March 2021, President Abdel Fattah El-Sisi ordered postponing the enforcement of the Real Estate Registration Law no. 186 2020, that imposes new property registration fees at the Real Estate authority until 30 June 2023. This will allow parliament to suggest some new proposals like detaching real estate tax payments from registration procedures and providing facilities for property registration. These measures will hopefully increase the number of registered properties in the country, as currently 95% of Egyptian property is unregistered.

In August 2021, the Financial Regulatory Authority (FRA) approved Egypt’s first microfinance leasing licence in the market. The licence allows offering the first microfinance product in the national economy. In October 2020 a new legislative amendment was issued according to law No. 201 of 2020 on the regulation of medium, small and micro enterprise financing. The amendments include increasing the maximum amount granted to each microfinance project to E£200 000 (US$12 740). This will increase financial inclusion rates for productive and craft activities.

[1] “Global Property Guide. (2020). Egypt housing market remains depressed. 25 June 2020. https://www.globalpropertyguide.com/news-egypts-housing-market-remains-depressed-4061. (Accessed 23 August 2020).

^[2] PwC (2020). Egypt: New set of laws to regulate recent COVID-19 tax measures and amend the income tax, real estate tax and the social insurance laws. 20 May 2020.

https://www.pwc.com/m1/en/services/tax/me-tax-legal-news/2020/egypt-new-set-laws-regulate-recent-COVID-19-tax-measures-amend-income-real-estate-social-insurance.html (Accessed 23 August 2020).

[3] Invest Gate (2020). Gov’t Imposes 6-Month Ban on Building Permits. 1 June 2020. https://invest-gate.me/news/govt-imposes-6-month-ban-on-building-permits/ (Accessed 23 August 2020).

[4] Ahramonline (2020). Egypt demolishes thousands of illegal buildings in 3 months. 9 July 2020. http://english.ahram.org.eg/NewsContent/1/64/374066/Egypt/Politics-/Egypt-demolishes-tens-of-thousands-of-illegal-buil.aspx (Accessed 18 August 2020).

[5] The Arab Weekly (2020). Egypt launches microfinance incentives to contain informal economy.12 January 2020. https://thearabweekly.com/egypt-launches-microfinance-incentives-contain-informal-economy (Accessed 23 August 2020)

[6] Global Property Guide (2020). Tax on property income in Egypt. 8 May 2020. https://www.globalpropertyguide.com/Middle-East/Egypt/Taxes-and-Costs (Accessed 23 August 2020).

Opportunities

Egypt’s real estate and construction sectors have a strong foundation for growth in place, despite the world crisis related to the pandemic. The government plan to build new cities across the country is driving demand in all segments. In addition, lower interest rates make financing easier for both buyers and builders. Furthermore, the CBE’s latest initiative to support low- and middle-income households with access to affordable housing is expected to boost the market even further.

The government’s development strategy intends to increase Egypt’s urban area to 14% of the country to cope with the rapid growth rate of population. As a result, the real estate sector, now contributing approximately 16% of GDP, is expected to grow by more than 10 percent in 2021. In addition, macroeconomic stability is expected to lead to an increase in international investment, mainly in the nonresidential sector.

[1] Daily News Egypt. (2020). Housing Ministry to facilitate quicker real estate project development. https://dailynewsegypt.com/2020/05/14/housing-ministry-to-facilitate-quicker-real-estate-project-development/ (Accessed 22 August 2020).

[2] Darwish, M. (2020). Plan to attract more Arab, foreign investments in Egypt real estate sector. 28 January 2020. https://dailynewsegypt.com/2020/01/28/plan-to-attract-more-arab-foreign-investments-in-egypt-real-estate-sector/. (Accessed 15 September 2020).

[3] Propertyfinder (2020). Breaking Down Egypt’s Real Estate Market in 2020. 27 April 2020. https://www.propertyfinder.eg/blog/en/breakegypts-real-estate-market-in-2020/ (Accessed 24 August 2020).

[4] Invest-Gate (2020). Real Estate Development Chamber Reviews 2020 Plans. 26 January 2020. https://invest-gate.me/news/real-estate-development-chamber-reviews-2020-plans/ (Accessed 18 August 2020).

Availability of data on housing finance

In Egypt, the main source for macroeconomic data is the Central Bank of Egypt, which provides data on GDP, balance of payments, investments, and the monetary sector. The Ministry of Finance is responsible for budget sector data, and it releases a monthly bulletin.

Some statistical data can be found on the Central Agency for Public Mobilization and Statistics (CAPMAS) website related to the census report, monthly informative bulletin, and the Housing Report that is published yearly. The Housing Report includes data on the number of housing units built annually and the kind of housing, whether from social housing or private investments. CAPMAS also publishes a monthly bulletin with information on building material prices. Data related to mortgage and microfinance can be found on the Financial Regulatory Authority website. There is a shortage of data related to loans for construction and building purposes. No data is published on housing resale or building cost.

Urban Informality

In December 2018, the Ministry of Housing declared Egypt would be “slum-free” by the end of 2019, a goal later revised to be achieved by 2030. According to the Ministry of Urban Renewal and Informal Settlements around 50% of the population is considered to be lower income and informal settlements constitute around 37% of urban space in Egypt.

E£39 billion (USD2.5 billion) has been allocated to redeveloping informal settlements, with E£32 billion (USD2 billion) of that amount having already been spent. E£16 billion (US$1 billion) of the budget is dedicated to renewing Cairo’s urban spaces, while the rest is spent on informal settlements across Egypt. Also, “in 2020 the government began allowing owners of informal property to apply and pay to formalise, or ‘reconcile,’ their residences or risk its demolition”

The population growth rate in Egypt is 2% with a yearly increase of approximately 2 million. In 2020, 42.78% of Egypt’s total population lived in urban areas and cities. In 2020 the percentage of people using at least basic drinking water services as a percentage of the population reached 99.4%, according to the World Bank.

The current coverage of safely managed drinking water sources in Egypt is approximately 98.7%, 100% for urban areas and 97.4% for rural areas. Furthermore, the current safely managed sanitation is approximately 65%, 96% for urban areas, and 37.5% for rural areas.