By Fathy Elsayeh
Invest-Gate held its second roundtable in 2023, the 18th one since its establishment, on the importance of real estate funds as an effective investment mechanism to support the Egyptian real estate market, in cooperation with the Egyptian Businessmen’s Association (EBA).
The roundtable kicked off on Sunday, June 11, 2023, at the InterContinental Cairo Semiramis Hotel, under the theme “Real Estate Funds: Unlocking Investment Opportunities.” It discussed how to overcome obstacles hindering the establishment of real estate investment funds in Egypt. In addition, it shed light on how the government, developers, and the banking sector should cooperate to help proliferate real estate investment funds within the Egyptian market.
Widely considered an essential investment tool on a global scale, real estate investment funds aim to collect financing from investors to be invested in various real estate projects, and the resulting profits are distributed to investors at a specific percentage.
Recently, many have called for establishing a culture that is conducive to the growth of real estate investment funds in Egypt. For several years, there has been only one real estate investment fund traded on the Egyptian Exchange, which is the Egyptians Real Estate Fund. In December 2022, Banque Misr, in partnership with Banque du Caire, Misr Insurance Holding, and Allianz Egypt, launched a real estate investment fund, named the Misr Real Estate Investment Fund 1.
The roundtable was divided into two main sessions with the theme “Supporting the Spread of Real Estate Funds.” Both sessions were moderated by Eng. Fathallah Fawzy, Vice Chairman of the Egyptian Businessmen’s Association & Chairman of the Real Estate Development and Contracting Committee. The roundtable witnessed the participation of a prestigious group of prominent real estate experts, namely Mr. Alaa Wally, Advisor to the Chairman, Promotion & Business Development; Ms. Sally George, Head of Mutual Funds Department (FRA); Dr. Ahmed Shalaby, President & CEO of Tatweer Misr & Chairman of Egyptian Real Estate Council; Mr. Ahmed Abdullah, Vice Chairman of REDCON Properties, Eng. Abdallah Sallam, President and CEO of Madinet Masr, Mr. Nader Khozam, Chairman & CEO of Il cazar Developments; Mr. Ahmed Elbatrawy; Founder of Egypt MLS; Dr. Hashem El Sayed, Executive Chairman & Co-founder of ODIN Investments & Executive Chairman of Egyptians Real Estate Fund; Eng. Bassel Al Serafy, Global CEO of Adeer International, Managing Director of Paladin Properties UK; Dr. Nour El-Deen El-Serougy, CEO and Founding Partner of HRE Properties Egypt; Mr. Hassan Nasr, Gates Developments CEO; Ms. Maha Abdel Razek, Misr Real Estate Assets Management CEO; Mr. Mohamed Galal, TSM Chairman; Ms. Olena Shyrokova, President of the Ukrainian Business Council UAE; Ms. Ana Gazzara, Gazzara Global Group CEO; Mr. Haytham Soliman, HRE Properties UK CEO; and Eng. Tarek Bahaa, MENA Real Estate Development Consultancy CEO.
During the roundtable, key industry professionals discussed the main obstacles facing the establishment of real estate funds in Egypt, including the lack of sufficient awareness of the importance of this investment tool for the sector, the high costs of establishment, and the lengthy establishment procedures, in addition to the tax environment that needs some amendments.
Discussions also revolved around the development of more incentives for all parties operating in the sector to support investment in real estate funds and reconsider the foundations of tax treatment for these funds to attract local and foreign investments, as well as attracting foreign real estate funds.
Experts also touched on how the state supports real estate funds, as the Egyptian government adopts some facilitations that would increase their number.
Concerning the banking sector, the participants in the roundtable explored how to exploit the abundance of real estate assets in Egypt to attract banks to support real estate investment funds. The roundtable also discussed how bank financing for these funds will resolve liquidity issues for developers.
“The expansion of urban development that Egypt has witnessed is unprecedented. Thus, real estate investment funds are very important to fully benefit from this trend, which is essential amid the economic challenges that Egypt is currently facing. Real estate investment funds are among the key investment vehicles that will contribute to attracting more local and foreign investments,” said Eng. Fathallah Fawzy, Vice Chairman of the Egyptian Businessmen’s Association & Chairman of the Real Estate Development and Contracting Committee.
For his part, Mr. Alaa Wally, Advisor to the Chairman of Promotion & Business Development, stated that “The Egyptian Stock Exchange (EGX) is fully ready to support real estate investment funds and help investors. These funds are a big opportunity for small investors. One of the main advantages of real estate investment funds is to distribute risks among different instruments and also enable developers to secure liquidity at a lower cost. The main challenges impeding the establishment of real estate investment funds is the evaluation of assets and the high taxes that erode their returns.”
In a similar vein, Ms. Sally George, Head of the Mutual Funds Department (FRA), noted: “Real estate investment funds support financial inclusion. They are attractive to investors and allow the general public to own shares [in real estate projects]. From 2007 until 2020, legislation was drafted for real estate investment funds, and other procedures were facilitated, such as the maximum limit for funds was eased to EGP 5 million, after it was the minimum limit. Also, the regulations permit properties to be registered later, and it is not a condition to be already registered.”
“Foreign customers prefer to buy properties through real estate funds. Thus, they will play a key role in property export and bolster sales amid fluctuations in prices. Egypt needs to amend some legislation to facilitate the establishment of real estate investment funds, which has returns ranging from 5% to 10%. These funds will help non-residential investments, including educational, commercial, and medical projects. Real estate investment funds will also support Egypt’s property exports,” said Dr. Ahmed Shalaby, President & CEO of Tatweer Misr & Chairman of the Egyptian Real Estate Council, calling for the reduction of taxes on real estate investment funds.
“The real estate wealth in Egypt amounts to EGP 10 trillion. The main target of real estate funds is finance and investment,” Mr. Ahmed Abdullah, Vice Chairman of REDCON Properties commented, adding that the Planning and Budget Committee at the Egyptian House of Representatives approved exempting dividends of securities investment funds established under the Capital Market Law on the condition that these funds invest at least 80% in existent properties. He stressed that there should be more attention to funds that specialized in green and sustainable buildings, as well as pension funds, which are very important to investors.
Furthermore, Eng. Abdallah Sallam, President and CEO of Madinet Masr, clarified that real estate investment funds are a very important tool for real estate development, stressing that we should use models that have been implemented abroad concerning different real estate investment funds. He highlighted that there are already investment funds in Egypt, but they aren’t registered and are operating under what is called ‘parallel funds,’ clarifying that facilitating the establishment of real estate investment funds in Egypt will achieve balance in the market.
“Real estate investment funds target people who can’t afford to buy properties amidst the current economic challenges. The private sector in Egypt needs amendment of some real estate laws to accelerate property export. The New Administrative Capital is a model that should drive the real estate sector in Egypt through governance,” Sallam added.
Mr. Nader Khozam, Il cazar Developments Chairman & CEO, highlighted that “Real estate investment funds in Egypt need the information to achieve their expected results. 50 funds were operating in the 1990s that were generating high returns.” He added “Establishment procedures take a long time and that needs to change. Egypt has great potential to attract several real estate investment funds, which will secure huge liquidity for developers.
Khozam stressed that the banking sector is key to supporting the spread of real estate funds in Egypt, calling for issuing a new tax law for these funds.
“Real estate investment funds are crucial to support investment. Technology should be applied in the real estate sector to encourage investors. There should also be different facilities and a single source of information for customers and investors,” Mr. Ahmed Elbatrawy, EGYPT MLS Founder, maintained.
“MLS technology is the main driver of all real estate transactions in American, Canadian, and Mexican markets. Therefore, the launch of a subsidiary to the platform in Egypt will boost property export,” Elbatrawy added, revealing that EGP 1 billion was invested in MLS Egypt to build a platform that will provide information on real estate funds, portfolios, and returns.
“The value of real estate funds in the world amounts to a total of $1.9 trillion. All factors indicate that real estate funds have become a major necessity. There are no obstacles hindering the establishment of real estate funds in Egypt. I call, however, for the offering of tax exemptions [for these funds],” said Hashem El Sayed, Executive Chairman & Cofounder of ODIN Investments & Executive Chairman of Egyptians Real Estate Fund.
Eng. Bassel El Serafy, Global CEO of Adeer International, and Managing Director of Paladin Properties UK, says that real estate funds are essential, as they are one of the solutions to the current problems of real estate developers.
“It is Egypt’s way to export real estate, attract investors, and provide foreign currency,” he added, pointing out that Saudi Arabia is witnessing great activity in establishing real estate funds at present.
Dr. Nour El-Deen El-Serougy, CEO and Founding Partner of HRE Properties Egypt, explained that the governance in real estate investment funds is important because it facilitates the disposal of real estate. El-Serougy stressed that investors have expressed great interest in the Egyptian market, but they still need information, indicating that the real estate market in Dubai recorded sales of AED 9 billion in the recent period.
El-Serougy continued that this is amid great competition for the Egyptian real estate market, which is also being challenged by the European, Gulf, and African markets, explaining that some citizens do not have a culture of ownership through shares, thus, promoting this culture is the role of the government, which must educate the citizens and spread awareness.
Mr. Hassan Nasr, CEO of Gates Development, agrees with El-Serougy, saying that Egypt has excellent real estate wealth, indicating that awareness of the culture of real estate investment funds must be raised in Egypt. He also said that there are challenges facing the establishment of real estate funds in Egypt and it is necessary to consider them. This includes the tax rate, the fund’s information availability, and the return from these funds compared to the return on bonds.
Ms. Maha Abdel Razek, CEO of Misr Real Estate Asset Management Company, explained, “Real estate funds are a powerful investment tool, and Egypt’s delay in establishing them is not a problem. Rather, sometimes it is better to take advantage of the mistakes and problems of others,” stressing that investing in real estate is one of the means of saving in Egypt.
Abdel Razek pointed out that some mechanisms for achieving returns are currently being studied, emphasizing that Misr Real Estate Asset Management has an excellent opportunity to enter real estate funds, as their real estate is attractive, and the occupancy rate is high.
Mr. Mohamed Galal, TSM Chairman, states that since 2009 the company has tried to implement the idea of real estate funds informally, and then moved to the official form in 2013 to become an Egyptian joint stock company.
Galal explained, “There are currently great economic challenges in Egypt, which affect the real estate market,” adding, “Recently, there has been a presence of Gulf investment in Egypt.”
Galal emphasized that this, until now, is not enough, indicating that countries near Egypt have huge investments that the state must try to attract, stressing that the problem of return on investment (ROI) must be solved.
Ms. Olena Shirokova, President of the Ukrainian Business Council UAE, commented that real estate investment funds are important to the Egyptian economy, stressing the need for more legislative reforms and facilitations, in addition to increasing private sector participation.
Ms. Ana Gazzara, Gazzara Global Group CEO, pointed out that real estate investment funds are vital to the global economy, commenting, “I do not want to talk much about the obstacles of establishing real estate funds, but efforts must be unified to find solutions.” She added, “In my opinion, Egypt has a great opportunity to attract investments.”
“In 2018, I saw more developments in Egypt; by investing in new technologies, Egypt can attract more foreign investments in its real estate investment funds,” Gazzara continued.
Mr. Haytham Soliman, CEO of HRE Properties, UK, called on the Egyptian government to address all obstacles that prevent the establishment of real estate investment funds, affirming that the banking sector must participate more and cooperate with the government and developers to overcome all obstacles. Soliman mentioned that data availability in a comprehensive market is important for local and foreign investors.
In the same context, Eng. Tarek Bahaa, MENA Real Estate Development Consultancy CEO, stated that Egypt is witnessing a vast construction boom that has led to substantial investment opportunities that have attracted the attention of foreign investors.
He added that this can help support real estate investment funds in Egypt, adding that the market needs funds for real estate development as they already exist in Saudi Arabia and are a successful means of financing.
It is worth noting that the round table was sponsored by REDCON Properties, Madinet Masr, HRE Properties, Il cazar Developments, EGYPT MLS, Gates Developments, Misr Real Estate Assets Management, Al Baraka Capital, and TSM.
Media partners included Aleqaria, Al-Borsa News, Daily News Egypt, Algedaan Real Estate, Elly Banaa Masr program, Aqarmap, Osoul Misr Magazine, Bloom Gate, Property Plus, and Aqar Gate.