The top ten listed companies, representing less than a third of the companies listed on the EGX as being primarily active in real estate, were found to comprise 88% of the real estate sector’s net profits over the last decade (2010-2021), according to new research “Who Owns Cairo?” issued by 10 Tooba for applied research on the built environment.
The one-year project aims to shed some light on one of Egypt’s top industries, as the real estate sector is the fourth largest contributor to the country’s GDP and a key sector for both local and foreign investors.
The research chose to measure long-term profitability rather than take that of one year to balance out fluctuations in earnings. This shows an immense concentration of activity in a relatively small number of companies, all of which are primarily involved in building gated communities targeting upper middle-income buyers and above.
“The most profitable listed real estate company was Emaar Misr for Development, averaging EGP 2.3bn ($100m) in annual net profits since it was listed in 2015. It was followed by Talaat Moustafa Group with an annual average of EGP 1.2bn ($62m) in net profits between 2010 and 2021, and Palm Hills Development earning an average of EGP 500m ($26m) over that same time period,” the report read.
The case study companies are Emaar Misr for Development, Talaat Moustafa Group Holding, Palm Hills Development Company, Madinet Nasr Housing and Development, Housing and Development Bank (only the housing and real estate activity), Six of October Development and Investment Company (SODIC), Pioneers Properties for Urban Development (PREDCO), Heliopolis Company for Housing and Development, Orascom Development Egypt, and Arab Developers Holding (formerly Porto Group Holding).
The case study companies owned or controlled over 140 developments in the Greater Cairo area at the end of 2021 – the study’s time stamp, comprising 41,000 feddan. While this number is relatively small compared to the region’s massive 750,000 feddan, it becomes more significant when compared to the new residential desert land added to the twin valley cities of Cairo and Giza from the late 1970s estimated to be 209,000 feddan. Here, the companies’ holdings represented 18% of that area, reflecting how their primary development has been suburban rather than urban. In some of the new desert towns, such as New Cairo, Hadayek October, and Capital Gardens, their holdings comprise over a quarter of their residential areas.
Talaat Moustafa Group Holding had the largest holdings by far, controlling 16,442 feddan representing 40% of the total land under the possession of the ten case study companies at the end of 2021. It was followed by Palm Hills Development controlling almost 6,400 feddan or 15% of the case study land. The third largest landholder was Heliopolis Housing and Development that controlled over 5,700 feddan in the Greater Cairo region, or 14% of the case study land, according to the study.
The study highlighted that almost 100 individuals, families and states were found to have significant holdings in the 10 case study companies at the end of 2021. According to the ultimate beneficial owner (UBO) methodology we used, just over half (51%) of the case study land was estimated to be owned by Egyptian investors, which reflects how Egypt’s real estate sector has been very well internationalized. Based on wider studies, this is thought to have a negative impact on affordability, and therefore calls to question official efforts to seek further foreign investments in it. The second largest shareholders by land area are unknown investors on the EGX free float – individuals or institutions investing directly – in smallholdings below disclosure thresholds, or funds and private companies whose owners we were not able to identify. The third and fourth largest landholders are Saudi Arabian and Emirati investors, owning 14% and 12% respectively, of the case study land. This was largely expected given Egypt’s preference for regional investors since its economic liberalisation in the 1970s, and the passing of the Investment of Arab and Foreign Funds Law. Norway was the fifth largest landholder, owning 2% of the case study land through its sovereign wealth fund.
“In terms of investor types, so-called high net worth individuals, or families, were the largest investor by land area, owning 35% of the case study land. Equally so were thousands of unidentifiable smallholders on the EGX, and other stock exchange free floats, who also owned – though without any control, a further 35% of the case study land. It was surprising to find state owned enterprises or SOEs, owning 25% of the case study land, a full three decades after the IMF and World Bank structural adjustment programme was implemented in Egypt, pushing for the privatisation of state-owned industry. However, Egyptian SOEs represented only a portion of this as will be explained further below. The remaining 5% of land was owned by private and listed companies and funds that the study could not establish their ownership, or, given some of their smallholdings, was deemed more representative to keep them as institutions such as the world’s largest asset managers the Vanguard Group and BlackRock Inc.” the report read.
At the investor level, the report highlighted that the Government of Egypt was found to be the largest owner of the case study land, holding 16% of it mostly through the Holding Company for Construction and Development, as well as through New Urban Communities Authority – NUCA, which is tasked primarily with building the new desert towns, and some state-owned banks.
The Egyptian Talaat Moustafa family, founder of the eponymous group, was the second largest land holder, and the top non-state holder, directly owning almost 5,600 feddan, or 14% of the case study land. In third place was the Saudi Bin Laden family, owning 2800 feddan, or almost 7% of the case study land. The government of the UAE was the fourth largest landowner in the case study, and the state with the second largest landholdings, comprising 2500 feddan or 6% of the case study land, the study noted.
According to Yahia Shawkat, the study’s lead researcher, by bringing more transparency to the real estate sector, the government can better regulate it, and residents can have a better understanding of who builds their homes.