The Housing and Development Bank (HDB) will launch the first real estate investment fund in the Egyptian market next month with a capital of EGP 500m.
Hany Tawfik, chairperson of Beltone Acumen which is handling the management of the fund, said that the fund’s management contract is being revised in preparation for its signing very soon. Moreover, an offering publication is also being prepared for the fund, expected to be launched next month.
Tawfik told Daily News Egypt that the fund will launch early March in an attempt to address institutions to carry out offerings in the fund’s capital, as it targets this segment of investors.
He explained that the fund will invest in Real Estate Investment Trusts (REITs). Its strategy will focus on development processes through establishing managerial, commercial, or residential projects, or through developing and preparing lands for leasing.
Tawfik ruled out the trend towards purchasing ready units to be re-leased, noting that the return from the development processes is a lot higher than that from purchasing and re-leasing, as with the current high prices, purchasing units will cost the fund a lot.
Tawfik noted that the development process will take up to two weeks until the fund starts distributing profits on policyholders during its third year, so the fund targets middle- and long-term investors, as most investors look for quick profits.
While there are disadvantages of real estate funds regarding the long period policyholders have to bear until profit distribution, and the funds’ exemption from tax exemptions used in most foreign markets, real estate funds have the advantage of continuous regular revenues that are related to the rental value, in addition to an increase of the value of most of the assets owned by the fund over time, which increases the profitability of investment.
Real estate funds are also considered a good opportunity for investors that seek to invest in the real estate market but hindered by the cost of units and his limited investment, where the documents of these funds are considered a sufficient and suitable alternative that provides investors with a share in real estate through small amounts.
The Egyptian Financial Supervisory Authority (EFSA) has recently developed controls for the work of real estate funds. The executive regulations of the capital market stipulate that the percentage of what the fund owns in a real estate projects should not exceed 30% of its assets, and the limit of what it invests in the bonds of a real estate financing company would be 10% of its net assets and no more than 15% of the bonds. The same percentages are true for securitisation bonds for each portfolio.
The regulations also stipulated that the total shares owned by the fund which are registered in the Egyptian Exchange should not exceed 20% of the fund’s assets, as the majority of the shares must be for companies with real estate origin or working in fields related to real estate development.
This is HDB’s third fund, as it owns Ta’meer fund to invest in stocks, and another cash fund named Mawared.
This real estate fund is considered the first fund Beltone Acumen manages.