International brands are eyeing Egypt to tap the Arab country's nascent branded residences segment even as local property investors warm up to its promises of a higher return on investments, price appreciation and high rental guarantee.

City Edge Developments CEO Amgad Hassanein told Zawya Projects that many international brands are planning to expand in the Egyptian luxury homes market. Already Four Seasons, Safir, Hilton and InterContinental have branded residences in Egypt.

IWAN Developments CEO Walid Mokhtar pointed out that branded residence is a new product in the Egyptian market compared to Dubai, London and the US. He said local real estate market needs such products because it will help developers to increase sales by catering to customers who need luxury homes.

He added that the new cities and business districts in Egypt need this kind of housing to serve the foreign employees and youngsters who prefer luxury homes.

"Demand for this kind of houses will grow in Egypt in the medium term, and local firms will create their brands. The branded homes command a premium up to 50 per cent over unbranded residences," he said.

"IWAN Developments is negotiating with international brands to launch projects in the North Coast and a new project near the Grand Egyptian Museum," he said without specifying the brands.

Mokhtar said the Egyptian government is encouraging hotel apartment projects near the Pyramids and the Grand Egyptian Museum.

"The government has asked the developers to build approximately 40,000 hotel apartments near the Grand Egyptian Museum," he said.

Maged Sherif, Managing Director, SODIC, had said during a conference in Cairo organised by Savills in January that Egypt's branded residence segment would expand soon. Hence, developers need to choose prime locations to build such projects.

Hisham Shokry, Chairman of Rooya Group, said that adding branded residences to a mixed-use project increases its value. Investors buying branded hotel apartments, he noted, comprise who seek to rent the units to tourists or high-income foreigners working in Egypt or rent them to foreign and Egyptian clients who need luxury homes and serviced apartments.

High premium

In his presentation at the January event, Paul Tosteven, Director, World Research, Savills, had pointed out that the average premium for branded residence over non-branded product stands at 35 percent and can exceed 70 percent in emerging markets, and at 50 percent in the Egyptian market.

The research, which predates COVID-19, noted that the sector registered 198 percent growth in the past decade with hotel-branded residences accounting for 85 percent of completed schemes. The presentation also stated that there are more than 420 branded residence schemes globally, with a combined total of 65,000 units.

Savills analysis showed the top three brands in the MENA region, based on completed and in pipeline schemes, were The Address, Vida and Fairmont Residence. Top three parents, by region, are Emaar Hospitality Group, Accor and Marriott International.

It said a record number of schemes opened in 2019, delivering more than 9,000 additional branded units across 21 countries. In 2020, according to the study, nearly 70 projects are due to complete.

The analysis noted that wealthy individuals are attracted by quality design, security and the level of service that branded residence offer. At the same time, for hotel operators, a residential component helps improve income streams with royalty fees from sales in the early stages and a more diversified hospitality inventory.

Developers have also realised that a branded residential development helps to differentiate in an ever more challenging market place, the analysis noted.

(Reporting by Eman Hamed; Editing by Bhaskar Raj & Anoop Menon)

(anoop.menon@refinitiv.com)

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