Egypt’s real estate sector manages to absorb COVID-19 repercussions in 2020

Shaimaa Al-Aees
7 Min Read

Although 2020 was a difficult year for all economic sectors, Egypt’s real estate market has managed to absorb the repercussions of the novel coronavirus (COVID-19) pandemic.

Real estate companies worked hard to stimulate demand on property, despite the uncertainty that affected customers and their willingness to spend. Some of these companies succeeded in gaining and maintaining customer confidence, allowing the former to encourage customers into making a purchase decision.

The following report will highlight the most important features and decisions that distinguished the local market in 2020 and its efforts in combating the fallout of the global health crisis.

Companies compete on best offers

During the COVID-19 crisis, many real estate companies sought to create new and flexible marketing plans to attract the largest base of customers. The move came on the back of the economic slowdown in real estate market sales caused by the pandemic.

Many developers are also now providing customers with long-term payment plans, to make it easier for the latter to pay instalments. Some developers have decreased down payments, whilst others have initiated cash back offers to stimulate buying and dispel the concerns of customers who want to buy units for housing or investment purposes.

Excessive use of cash back

Cash back was a trend that most real estate companies have taken up over the past year. Amid the COVID-19 crisis, some real estate companies resorted to offering cash back to attract and motivate customers to buy units at their projects, and stimulate sales.

Cash back is a form of incentive offered to buyers of certain products, where they receive a cash refund after making their purchase.

Kareem Mamoun, Commercial Director at Edge Holding, said that cash back offers harm Egypt’s real estate development sector. This is a particular risk especially after a number of development companies started following this mechanism with the aim of increasing their sales.

Mamoun says that offering cash back affects the credibility of these companies and transforms the customer into a marketer.

He added that the spread of this phenomenon in some projects reflects a negative image of them, and also impacts on the function of broker companies, which consider commission as their main source of income.

Maamoun said that some real estate companies operating in the New Administrative Capital (NAC) have raised marketing commission to 5% and 6%. This has, in turn, pushed some marketing companies to assign part of that commission to clients, in order to attract the largest segment of customers to the project.

He noted, however, that this is an unprofessional method of competing, as it means that companies do not need to exert effort or professionalism in marketing. It also means that they can sell project phases at the expense of Egypt’s entire real estate market system, without taking into consideration the consequences of this policy on investors and employees.

CPA intervenes in developer-client relationship

The role of Egypt’s Consumer Protection Agency (CPA) is to control the local real estate market between developer and consumer.

In August 2020, the owner and director of the Golf Park Company for Tourist Facilities was taken to court following complaints lodged by a customer regarding breach of contract. The case was heard by the Cairo Economic Court, which handed down a sentence of one year’s imprisonment with hard labour and bail of EGP 20,000. The pair was also obliged to pay criminal expenses.

In July 2019, the CPA received a complaint in which the complainant outlined how they had been affected by their contracting with the company. The complainant purchased a chalet from the company in 2013, and, according to the contract, was supposed to receive the unit within two years from the date of the contract.

Exhibitions go online

The idea of holding real estate exhibitions online was a novel idea for Egyptian customers, who prefer a physical presence inside the company booths. In using face-to-face interactions, customers tend to feel they can get better acquainted with the best offers, and differentiate between the companies’ offers and their real estate products.

Online property exhibitions saw unprecedented interest due to the COVID-19 pandemic, according to Emad Al-msaodi, Founder and CEO of Aqarmap.

Technology makes it easier to connect investors and customers, which has encouraged the company to invest millions of US dollars in developing a sophisticated online platform. This has taken place in cooperation with a Norwegian company, said Dawood Al Shezawi, Owner and Chairperson of Strategic Marketing and Exhibitions.

Government provides facilities for developers

The Egyptian government announced a package of facilities and scheduled adjustments for developers and contracting companies, to help them overcome the repercussions of the COVID-19 pandemic.

The government has also provided indirect support to the real estate sector during the current period, which is set to stir up stagnant waters slightly. This support represented a reduction in interest rates by 300 basis points, due to its positive impact on the volume of facilities provided by real estate companies to clients. These have contributed to increasing demand rates.

The Administrative Capital for Urban Development Company (ACUD) has cut land-reservation down-payments at the NAC to 10%, instead of 20%.

In addition to this, the Central Bank of Egypt (CBE) played a significant role in facilitating companies through a number of different initiatives that targeted the real estate sector.

The CBE’s decision to slash interest rate was aimed at supporting Egypt’s economy, particularly the real estate sector, to resist market fluctuations in the current period due to the impacts of the pandemic.

It has also moved to engage with the contracting sector as part of its EGP 100bn initiative supporting the industry and agriculture sectors, according to CBE Governor Tarek Amer. Part of the facility includes a decreasing interest rate of 8%.



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