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Following 2011’s political crisis, our forecasts see trend growth in Egypt settling over the coming five

years, as the political transition from authoritarian rule to competitive democracy raises political risks,

slows reform momentum and weakens investment inflows. We forecast real GDP to expand by an

average 4.2% between 2011 and 2015. We are not yet able to fully measure the impact of the political

unrest on the rental real estate market; however, our in-country sources reported towards the end of H111

that rents had not been affected by the troubles and grew, for the most part, in each city and in each subsector.

Further rent increases are less likely in the second half of 2011 and into 2012, although we may

see some – if at a more measured rate – for industrial space. A rise in rents relative to capital values

means that yields for retail space have risen since the end of 2010. However, taking the longer-term view,

we expect yields will remain stable, or fall slightly, as perceptions of the Egyptian business environment

improve.

Key opportunities in the real estate market:

Delayed projects open up even more opportunity for developers to meet the needs of a growing

population in a healthy economy.

We are seeing projects underway and tourism picking up again. Egyptian Resorts Company

(ERC), which develops mega communities in the country, reported 40-50% capacity by July

2011, up from just 1-5% following the January revolution.

Significant investment and growth opportunities will emerge once there is more clarity on the

political situation. Broadly speaking BMI retains an optimistic view towards the economy’s

long-term potential. The key underlying factors predicating this long-term view are robust

economic growth allied to strong population fundamentals and an urbanisation rate of 2% a year.

Key risks to the real estate market:

The legal contestation of land contracts runs the risk of delaying projects, criminal charges

against the owners of construction firms and the continued tarnishing of the industry’s

reputation. Egyptian courts have finally removed a presidential decree that allowed state bodies

to sell land and pocket the proceeds, according to Trade Arabia in June 2011.

A resumption of large-scale protests on the same scale as witnessed in late January would do

further harm to the country’s all important tourism sector and hold back the economy’s growth

potential. There are many reservations about the short-term outlook of the country.

The most notable challenges in the near term include the private sector’s lack of access to credit,

in addition to an absence of confidence that the current government is capable of steering the

economy through ongoing domestic and external headwinds.

Any long-term impact of the stalled construction pipeline