By Hamada Ismail
The real estate development company Assets for Development, recently releaed plans to construct three new projects this year, including a medical facility at a cost of EGP 50m, in addition to a residential compound in New Cairo and a series of tourist resorts along the Red Sea. The amount of investment required for these last two projects will be determined after a series of evaluations.
Sayyid al-Ghandur, the company’s development director, stated that 35% of all land in the company’s Sawani project, located on the North coast, has been open to investment since last June, with an estimated total value of EGP 500m.
The Sawani project will be built on 125 acres and will include a total of 1200 summer units, including villas, chalets, apartments and 5 star hotels, in addition to a series of restaurants, swimming pools and other amenities spanning a total of 18,000 square meters. All units are set to be built on stepped terraces overlooking the Red Sea. An area equal to 20% of the project space will be reserved for further construction of housing units, while the rest will be home to a 20,000 square meter man-made lake and a marina designed specifically for yachts.
The company said that it was currently in the process of installing the terracing which represented a vital aspect of the project. Seven of these terraces reach higher than 50 meters, with construction costs estimated at EGP 40m. EGP 30m of the cost will go towards building the structure of the terrace, while the remaining EGP 10m will be spent on designing the retainer walls.
Assets for Development expects to complete the first stage of the project, including 600 housing units, in 2014 and the second stage is expected to be finished by 2016.
Ghandur said that completion of the Tabib 3 of the project would require a total investment of EGP 50m, and will be modeled on the experience of Tabib 1 and 2. The first would include the establishment of a 1,200 square meter medical center in New Cairo, and will consist of 16 medical units of different specialisations, in addition to a number of pharmacies and testing centers, all of which is expected to cost total an estimated cost of EGP 30m.
The Tabib 2 project is set to be built on 1,000 square meters of land, at an estimated cost of EGP 50m.
He added that the events following the revolution in Egypt over two years ago had not had a profoundly negative effect on the company’s output or its rate of construction, saying that they had worked hard to maintain its reputation and preserve the confidence of its clients, doing so by adhering to timetables and succeeding in obtaining the number of permits necessary to engage in construction, even while the country experienced change and instability.
Ghandur added that the country’s current economic crisis was telling in that it helped investors distinguish between those companies that were able to preserve their place in the market despite the country’s difficulties, and those that did not possess the resources and flexibility to do so.
He added that the company had been able to preserve its share of the market despite the sector’s overall shrinking, saying that special steps had been taken to aid clients, such as providing them with special payment plans based on their needs which could be periodically amended according to developments in the market.
The company has taken part in 12 conferences over the last year, including four outside of Egypt, a fact which reflects positively on their marketing efforts.
Ghandur added that the company uses its own resources and finances in order to fund construction of its projects, in addition to cash influxes coming from the sale of property, and premium payments made by clients. This has provided the company with high levels of financial solvency, allowing it to continue funding projects without having to take out bank loans.
Customer demands brought about the innovation of stepped terraces for holiday projects overlooking the Red Sea. As the market along the North coast developed, fierce competition pushed companies to offer more when constructing new units. For this reason the company decided to make available houses and resort units built on stepped terraces. Although similar projects have previously been undertaken throughout the world, very few have so far been established in the North coast region.
He added that recently the company had slightly increased the price of plots of land for its Sawani project, compared to prices when it first launched in June. He said that prices were maintained when the project was first launched in order to better attract businessmen and investors, with prices increasing as the project became more popular and well known.
Ghandur went on to say that price increases have fluctuated between 5 and 10% per year, saying that they may in fact increase further if the market were to experience a jump in the future. He added that the decline of Egypt’s real estate market over the last two years has prevented companies from increasing prices, as a way of providing incentives to buyers, causing them to remain fixed for extended periods of time.
Despite this, Ghandur felt that the sheer number of projects currently being pursued in the North Coast region has helped somewhat to attract both local and foreign investment. It is also hoped that the construction of an airport at Ras Sadr, in addition to an army road constructed parallel to another that runs along the coast, which will also work to help attract more investors and clients.
Ghandur acknowledged that there had been decreases in real estate purchases by clients for the purpose of investment, which have come largely as a result of Egypt’s deteriorating economic situation. This reduction has had a negative effect on the company’s cash influx, which is responsible for covering between 20 to 30% of all project financing. Many clients who canceled their investments had initially purchased the land during its development phase for the purpose of selling it later at higher prices and hoping to reap a large profit margin.
He pointed out however that the country’s current recession has created an appetite for investors to continue purchasing land for the purpose of re-sale, saying that professional clientele would not purchase any land before first confirming that all necessary specifications were already met.
Ghandur added that the company was working to resolve all disputes with its clients and the Egyptian government in order to help restore confidence in the market and the country’s economy as a whole.
He further stated that the number of companies and organizations competing for territory in the North Coast had stunted development in the region. This has led to a decline in a number of company’s financial solvency rates and their ability to finish and implement projects. As a result companies with experience and high financial solvency rates have been the most successful in acquiring land for purchase, sale and development.
He added that after completion many of these development projects will come to resemble small cities because of the on site commercial amenities.
Considering projects along the southern road of the North Coast that do not overlook the sea, Ghandur said they have attempted to compensate by increasing the number of swimming pools and man-made lakes built on the premises.
Assets for Development, initially began to market itself as a company that specialized in medical real estate projects, but has recently attempted to expand its operations into tourism, such as in the city of Sawani, in addition to residential, commercial and service related real estate.
Al-Ghundur added that in recent times medical and service related real estate projects have come to be neglected by companies who prefer to build and construct administrative and retail related projects.
He criticised the Egyptian government for continuing to sell real estate and property via auctions and bids, as this distorts the market’s images and artificially raises prices. In regions such as Egypt’s Fifth settlement, one square meter of land, has fetched as much as EGP 11,000.
Currently he said, businessmen could be expected to see the largest returns on their investments in mid to high level real estate projects, however companies have so far still had trouble selling high end luxury villas, particularly those built on large plots.