A group of real estate developers have listed their demands to revitalise and develop the sector during the closing session of a summit held recently. These measures included activating mortgage finance for units under construction, as was the case before 2008.
In addition, they called for including the real estate sector in initiative to support industry, agriculture with 11% interest rate loans, and changing the work system in the real estate sector through shifting to construction and then selling to avoid price variables and continuous cost burdens. Besides, granting additional plots of land to developers at nominal prices to compensate for current losses, and considering project completion upon construction of 70%, in addition to suspending the payment of all bonuses and additional fees that increase burdens on developers and finding a mechanism for financing projects by guaranteeing units and not customers’ checks.
Similarly, support for local manufacturing of building materials, and increase the percentage of land exploitation for current projects by no less than 25% of the current percentage.
They called for deferring payment of interest in land instalments for at least two years, with fixing the interest when paying on 10%, and speeding up the issuance of the Developers Federation Law, as well as supporting property export and establishing local real estate funds to attract foreign real estate funds.
They recommended providing lands under the usufruct system and fixing price of dollar against Egyptian pound for lands valued in dollars at the price of the date of assignment, with the need to remove dumping fees for some building materials such as steel to support developers during the current period, even if for a temporary time. Moreover, provide mortgage financing or bank financing with acceptable interest, as well as making a package of tax and economic incentives for real estate developers to ensure the continuity of the sector.
They called on the government to find comprehensive and integrated solutions for developers, and find a mechanism to compensate losses of real estate developers, similar to contractors, to ensure the continuity of the real estate sector and enhance its contribution to GDP.
Developers further demanded activating mortgage financing for units under construction with the support of Central Bank of Egypt (CBE) with subsidised interest rate. They elaborated that a small number of banks finance such projects, which may slow down the expansion of some companies and their ability to deliver on the date contracted with clients, adding that banks or financing agencies should reduce financing guarantees with an increase in project construction rates.
They highlighted the importance of the role that banks can play in supporting and stimulating the real estate industry in Egypt by providing various financing means, and a set of products and services that meet needs of customers, including opening a bank guarantee account (Escrow account) that includes the developer and the customer and the bank. A cash amount is deposited throughout the project development period to secure the construction and payment of contractors’ dues, and preserves client’s rights.
The recommendations also included that real estate development companies undertake the study of the project and abide by the construction dates agreed upon in a tripartite contract, provided that this study is submitted to the mortgage finance company. Buyer pays a down payment of 20% upon contracting, which is transferred to the set aside account (Escrow account) and is disbursed to the developer to start business. Mortgage companies begin paying financing payments when unit completion rate reaches 20%, provided that the project sales percentage reaches 60%. Hence, financing is paid on checks after the approval of a consultant (engineering expert accredited by the Financial Supervisory Authority who is agreed upon between the two parties and appointed by the mortgage financing company).
Additionally, the recommendations included that the mortgage finance company finances housing units and their share in the land and common benefits, and a list of accepted real estate developers is drawn up according to their previous work and their commitment to delivery dates for subscribers, their capital efficiency and financial analysis of their budgets. It is conceivable that the list will not exceed a very limited number of companies.
The recommendations included that the real estate finance company finances housing units and their share in the land and common benefits, and a list of accepted real estate developers is drawn up according to their previous work and their commitment to delivery dates for subscribers, their capital efficiency and financial analysis of their budgets. It is conceivable that the list will not exceed a very limited number of companies.
Real estate developer is also obligated to assign a mortgage finance company a general, irrevocable power of attorney to sell and assign the allocation of land on which the project is built in favor of the mortgage finance company until it pays its full value or any dues to the New Urban Communities Authority. The reservation is made in favour of the mortgage finance company on the units financed by the project and remains this reservation continues until investor completes full payment of financing or registers units and registers real estate guarantee in favour of the mortgage finance company, whichever is earlier.
Then, the agreement with the real estate developer that in case the investor defaults and does not pay more than three instalments, the real estate developer is obligated to recover the unit and pay the amount financed on it to the mortgage finance company or replace it with a new buyer acceptable to the finance company.
Furthermore, they agreed that in the case that real estate developer fails to complete the project (delay in constructions for a period exceeding six months at any development phases), the mortgage finance company will pay the remaining dues to the New Urban Communities Authority or any other party from the set aside account (Escrow Account). The mortgage finance company also manages the project and has the right to assign the project to any real estate developer, and in all cases, the mortgage finance company has the right to refer back to the real estate developer to compensate for damages incurred as a result of this failure.