Egypt seeks Saudi investments in its new cities

Attracting investment in Egyptian real estate development from Saudi Arabia runs the risk of colliding with the Saudi NEOM megaproject.
Saturday 29/06/2019
An employee counts Saudi riyals at a money exchange office in Cairo, March 20. (Reuters)
An employee counts Saudi riyals at a money exchange office in Cairo, March 20. (Reuters)

Egyptian officials have taken a large Saudi delegation on a tour highlighting real estate investment opportunities to accelerate the pace of construction in new cities, especially the administrative capital and Alamein.

The dominant features of the administrative capital are government buildings and infrastructure while Alamein, on Egypt’s northern coast, is designed for vacationing and entertainment. Its housing units are designed with wealthy foreign buyers in mind with prices starting at $1,800 per square metre.

The Saudi delegation included representatives of nearly 50 construction and real estate development companies. The Egyptian government did not skimp on offering advantages to prospective investors to encourage them to invest.

During his meeting with the delegation, Egyptian Minister of Housing and New Urban Communities Asim al-Gazzar introduced a mechanism to provide land to developers in accordance with their wishes. Land would be provided on an ongoing basis to keep real estate speculation fever low.

Developers must pay 10% of the total value of the land purchased in advance as a guarantee for a deal. To increase the government dollar reserves and in the case of competing offers, preference would be given to companies that pay in US dollars through foreign sources.

Hamad bin Ali al-Showair, chairman of the National Real Estate Commission at the Council of Saudi Chambers of Commerce, said Saudi Arabia was interested in real estate investment projects in the administrative capital and Alamein.

“The architectural and building style in the new cities is consistent with the interests of Saudi companies, in addition to the facilities and promises to grant land at preferential prices to Saudi investors, all of which will further boost investment during the coming period,” Showair said.

Investing in real estate in the new cities requires developers with substantial financial capabilities. The Egyptian government requires that the winning companies complete the project and pay for the land in full within four years. The company then would have to sell the residential units built in instalments of up to eight years.

The government’s conditions earlier led several local companies to withdraw from bidding on projects at the new administrative capital, so the Egyptian government sought developers in Saudi Arabia.

The Central Agency for Public Mobilisation and Statistics said net Saudi investments in Egypt during the second quarter of the current fiscal year rose 44.1%, compared to last year.

The Ministry of Investment and International Cooperation pointed out that real estate development was second in Saudi investments in Egypt after the industrial sector. The construction sector was third.

Ahmed Zaki Abdeen, president of the new administrative capital, stressed that Cairo was prepared to grant land to Saudi investors at preferential prices.

He said 80% of the infrastructure and utility works had been completed at the first construction site which covers 16,800 hectares. The total area of the administrative capital, 45km north-east of Cairo, is 71.5 hectares.

Abdeen pointed out that all ministries and the headquarters of the presidency would be transferred to the new capital next June. About 50,000 employees from all the ministries will be relocated to the new administrative capital.

Studies indicated that Egypt needs to build 600,000 housing units per year while 250,000 units are currently being built. With the population growing at 2.5% per year, there is expected to be increased demand for residential units on an ongoing basis.

The real estate sector accounts for about 22% of Egypt’s GDP. To revitalise the sector, the government introduced amendments to laws granting citizenship to foreigners who want to buy luxury properties in Egypt.

Fathallah Fawzi, chairman of the real estate committee at the Egyptian-Saudi Business Council, said negotiations with Saudi companies wishing to invest in the administrative capital and Alamein projects were under way.

He said that surveys conducted during the past two years revealed that 70% of real estate purchases in Egypt are concentrated in various projects at the administrative capital, increasing opportunities for the expansion of real estate investment there.

Despite the positive atmosphere of the Saudi delegation’s visit, attracting investment in real estate development from Saudi Arabia runs the risk of colliding with the Saudi NEOM megaproject, which is expected to cover an area of 26,500 with investments amounting to about $500 billion

Larger Saudi companies may turn their attention and investments to NEOM, reducing chances of investments outside the kingdom.