PROJECTS: INTERVIEW: 'Despite the rise in material costs, Egyptian developers have left prices untouched' - CEO, Adva Developments

Developers focussing on reviving the real estate sector and the economy than on quick gains, according to Ahmed El Shennawy

  
Image used for illustrative purpose. Construction machines are seen at the site of the futuristic, iconic tower skyscraper, in the business district, which is being built by China State Construction Engineering Corp (CSCEC) in the New Administrative Capital (NAC) east of Cairo, Egypt March 8, 2021.

Image used for illustrative purpose. Construction machines are seen at the site of the futuristic, iconic tower skyscraper, in the business district, which is being built by China State Construction Engineering Corp (CSCEC) in the New Administrative Capital (NAC) east of Cairo, Egypt March 8, 2021.

REUTERS/Mohamed Abd El Ghany

Egypt’s Adva Developments has drawn up ambitious expansion plans, including investing 2 billion Egyptian pounds ($128 million) over the next five years, company CEO Ahmed El Shennawy told Zawya. 

Last week, Zawya had reported that the company is awaiting government approvals to launch a 250-million-pound ($16 million) villa development in the 6th of October City. 

The Adva CEO said the company is planning to work with state-owned firms to develop their landholdings. 

“We have the expertise to develop and build projects that aim at populating Egypt’s desert areas as envisaged by the government,” El Shennawy said in an interview with Zawya Projects. 

Q4 2020 recovery 

El Shennawy, a member of the construction committee of the Egyptian Businessmen Association, said the country’s real sector witnessed an improvement in demand in the last quarter of 2020 despite the COVID-19 pandemic due to strong government support. Supply from ongoing projects in New Administrative Capital also contributed to the higher sales volume, he said.  

“The western part of the greater Cairo area will witness a relative increase in prices and value after the inauguration of the Grand Egyptian Museum and the Sphinx international airport this year [2021] due to the relative shortage in land available for development,” he predicted.  

Ahmed El Shennawy, CEO of Adva Developments

While developers are concerned about the impact of inflation on construction costs, he said their focus has been on reviving sales impacted last year due to customer insecurity over the pandemic. 

“Although material costs would have increased by 10-15 percent, developers have left property prices untouched as they want to revive the real estate sector instead of making quick gains. I see this as a positive message of helping put the sector back on track by stimulating supply and demand. If developers and construction companies had increased their prices, it would have driven returning customers out of the market.” 

Mortgage finance initiative 

The Adva CEO welcomed the 100 billion pounds mortgage finance initiative launched by Egyptian President Abdul Fattah al-Sisi, wherein low-and-medium income buyers would be provided mortgages at a low-interest rate of 3 percent and long-term payment plans up to 30 years.  

“The initiative will drive more sales in the market during the upcoming period,” he said while calling for the financing initiative to be extended to projects under construction.  

He also called for the financing cap to be increased to 1.5-1.75 million pounds ($95,789-$111,754) instead of the current 1 million ($63,859.77) as medium-income individuals form a significant part of the population. 

El Shennawy said the Central Bank of Egypt (CBE) should facilitate a trilateral arrangement between the financing bank, the developer, and the buyer, whereby the bank can claim the unit if the buyer fails to pay. 

“A ministerial decree allocating the land with a transparent execution timeline and registration with the relevant authorities are all the guarantees the banks need to vet the seriousness of the project. The CBE can also mandate that developers have dedicated escrow accounts to ensure that the money paid by the clients are not diverted for other projects or purposes by the developer.” 

(1 US Dollar = 15.66 Egyptian Pounds) 

(Reporting by Marwa Abo Almajd; Editing by Anoop Menon) 

(anoop.menon@refinitiv.com

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