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Ripplewood deal boosts optimistic expectations for Egyptian real estate market growth

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SODIC is one of the largest real estate development companies listed on the Egyptian Stock Exchange, launching projects targeting strata that earn above-average income.

A pair of deals made last week by the American firm Ripplewood to buy large stakes of Palm Hills and Sixth of October Development and Investment (SODIC), 2.3% and 9.4% respectively, has helped boost optimism regarding near term Egyptian real estate sector growth. (Photo from Palm Hills)

A pair of deals made last week by the American firm Ripplewood to buy large stakes of Palm Hills and Sixth of October Development and Investment (SODIC), 2.3% and 9.4% respectively, has helped boost optimism regarding near term Egyptian real estate sector growth.
(Photo from Palm Hills)

By Abdel Qader Ramadan

A pair of deals made last week by the American firm Ripplewood to buy large stakes of Palm Hills and Sixth of October Development and Investment (SODIC), 2.3% and 9.4% respectively, has helped boost optimism regarding near term Egyptian real estate sector growth.

“American companies do not invest in any particular market or activity unless in-depth studies demonstrate an expectation of solid returns from those investments,” said Mohammed Abdallah, chairman of Coldwell Banker Egypt Real Estate.

“The American company’s investment in two real estate firms is a strong indicator of the sector’s capability for growth in the near future,” Abdallah added. “The current moment is very suitable for investment as Egypt is expected to draw closer to stability after electing a president in the coming days.”

Alongside expectations for an increase in accordable and social housing which will increase real estate sector growth, Abdallah said there is demand for all types of housing in Egypt, and that this demand applies to luxury housing. There is a shortage of available units, he admitted, but said this type of foreign company searches for sectors that make a profit. This will likely not be achieved through housing projects for low-income populations, he noted.

Despite this, Abdallah expects that the two companies will begin targeting these categories by establishing projects for this type of housing across various regions, or by setting up small-sized units in larger plans.

SODIC is one of the largest real estate development companies listed on the Egyptian Stock Exchange, launching projects targeting strata that earn above-average income. Unit prices begin around EGP 600,000. Some of the company’s largest projects include West Town, an integrated neighbourhood in Shekh Zayed City, the Allegria project, Forty West, Polygon, Kattameya Plaza, and Autoville.

Palm Hills is one of Egypt’s largest real estate developers and has one of its biggest land banks, amounting to 17m square metres. The company is implementing 18 projects on 10m square metres of this area, and owns 7m square metres of land on the Desert Road and North Coast.

“The smooth transfer of power following presidential elections and completing implementation of the road map will motivate many foreign companies to invest in Egypt,” Abdallah said.

Abdallah pointed out that he believes the uncertainty that prevailed during 2010 surrounding the transfer of power from former President Mubarak was the reason behind a large number of companies’ hesitation toward entering the Egyptian market.

“The Egyptian Stock Exchange must promote the inclusion of new companies in the market in the near future and provide incentives for companies to participate,” he added.

Stock market analysts said that Ripplewood is hoping to take advantage of low share prices following the economic decline that result from the 2011 revolution, alongside expectations for stability to return and prices to rise after presidential elections take place.

“The presence of American companies demonstrates the sector’s strength as well as confidence in Egyptian companies,” said Ahmed Badrawi, managing director of SODIC.

He said that the company would benefit from Ripplewood technically and financially by supporting the company’s future plans.

Ripplewood played an important role in developing Commercial International Bank (CIB), when it bought 20% of its shares before ceding them completely in 2009.

“There still exists a high demand for luxury housing units, but SODIC considers all available opportunities in the market for all types of housing,” Badrawi said. “The issue lies in providing land for affordably priced housing for less than the company’s current selling price of EGP 600,000…Land prices range from EGP 500-2,000 and these prices do not allow for the construction of units at lower prices.”

Badrawi said that the company is continuing conversations with the Urban Communities Authority in order to obtain the land at lower prices, adding that they “would not hesitate” to carry out projects suitable for B and C categories if they are able to find affordable land.


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