Gulf developer looks to Egypt to face slowdown

Sherine El Madany
5 Min Read

CAIRO: While the seaside emirate of Dubai has shifted into crisis mode since late 2008 after a stall in the building boom, a number of Dubai-based construction firms are stepping up plans to expand into Middle Eastern markets not as affected by a property downturn.

Several Dubai firms have, for a number of years, had their sights set on Egypt, where a fast population growth rate and promises of sustained economic growth could help them ride out the downturn at home.

Dubai-based Al Futtaim is one of these building companies pouring in billions of pounds in its second flagship project, Cairo Festival City (CFC).

“In 2009 alone, we are going to invest more than LE 1 billion in [the city’s] infrastructure development and mall, said Mohamed El Mikawi, CFC’s general manager, on Tuesday.

“We are bullish on the Egyptian real estate market. At the end of 2007, the country’s housing market contributed 3.6 percent to GDP, which is low when compared to other [developing] countries such as 5.7 percent in Morocco, 5 percent in Mexico, and 10.2 percent in Algeria, he pointed out.

“This means there is room for growth and that demand will continue to mount.

Mikawi said that Egypt’s Ministry of Housing puts demand at between 2.5 million and 3 million units over the next 10 year, spread across various income segments.

“Every year, Egypt counts 600,000 marriages which in turn creates housing demand regardless of the socio-economic class, he explained.

While several developers – both domestic and regional – echo similar enthusiasm on Egypt’s green real estate market, Dubai’s market has gone pear-shaped.

According to international reports, Dubai’s real estate sector is facing a sharp price correction and hundreds of billions of dollars of construction projects have been cancelled in the United Arab Emirates as a result of the economic slowdown.

Companies have slashed thousands of jobs and $583 billion worth of building projects in the UAE federation, which includes Dubai and Abu Dhabi, have been put on hold, according to market research firm Proleads.

As bleaker news continues to emerge from the Emirates, Egypt’s relatively young real estate market could be a safe-haven for Gulf developers.

“There is also great demand on office space and retail which make for a big part of the market in Egypt, Mikawi said.

CFC is the second flagship project of Al Futtaim Group Real Estate (AFGRE), following their largest project to date, Dubai Festival City.

Spread over 3 million square meters in the heart of New Cairo City, CFC is a mixed use urban community that will feature a residential gated community comprising of 480 villas and 2,000 apartments. The project will also host a retail resort with over 300 shops, 100 restaurants and cafes, a 16-screen multiplex cinema, office space, two hotels, green parks, and a school.

“Infrastructure development and construction on the mall began last May.

We expect the mall to be completed towards the fourth quarter of 2011 and fully operational in 2012, said Ahmed Touni, CFC’s general manager for design management.

A joint venture of the Emirtai-British Al-Futtaim Carillion and Egypt’s Orascom Construction Industries is currently handling construction of the mall.

“The entire city is to be completed in 2017, he added.

Both project managers declined to disclose total investment poured into the CFC, however, they said the project is mostly self-leveraged “Our project is not based on an off-sale plan because our main source of liquidity is the group itself. And construction on the residential area will begin regardless of sales, Mikawi pointed out.

While fortunes have shifted drastically since the financial crisis worsened in the second half of 2008, CFC’s developers seem to receive the crisis with both jeers and cheers.

“The crisis is not over. Repercussions are developing and will last for a number of years. . But at times like these, there are also opportunities. For example, land prices are going down, this is an opportunity, but the challenge is how to raise funding to acquire land, build and invest, Mikawi pointed out.

As for Egypt’s real estate market, he said: “The will always be demand for real estate in Egypt. The population is growing; and demand on residential, retail and office space is also booming.

“The financial crisis could [spell] a slowdown in residential housing demand. But it is only temporary and sales will rise again in the coming years.

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