The Egyptian government is keen to promote real estate export as a source of foreign exchange and is studying various proposals and procedures to achieve this goal. This was stated by Prime Minister Mostafa Madbouly in a meeting that discussed the mechanisms and procedures to enhance real estate export, including the establishment of a real estate fund and a real estate bourse.
A real estate bourse is a financial market where real estate assets are traded similarly to stocks and bonds on traditional stock exchanges. It aims to provide investors with an easy and transparent way to buy and sell real estate, without the need to purchase actual properties directly. It also offers greater liquidity and diversification, as well as reducing some of the risks associated with investing in real estate.
The real estate bourse will complement the traditional real estate market, and provide opportunities for real-time trading and investment in the real estate sector. It will have a positive economic impact, as it will increase the demand for real estate and stimulate the growth of related sectors.
Ahmed Abdelrahman El-Sheikh, the chairperson of the Egyptian Exchange, said that work is underway to complete the legislative and regulatory framework for the real estate bourse, which will play an effective role in regulating the trading of real estate shares and enhancing the capital market’s contribution to the development of the real estate sector.
Ahmed Abdullah, the deputy chairperson of Redcon Properties, highlighted the importance of supporting the government’s approach to establishing real estate funds and a real estate bourse. He said that it is necessary to provide a new technological product that helps Egyptians and foreigners choose the appropriate property for them. He suggested that real estate developers should offer distinctive products that attract foreign investments, such as hotel apartments with all the services that interest foreign investors.
He also stressed the need to provide an online map of the available units, as well as a property ID number for each unit, to allow investors to view them in virtual reality. He recommended that private companies should operate independently from the government, and provide clear and honest information and data about all the existing units.
He added that real estate funds and a real estate bourse lack technological readiness and trained workers to facilitate real estate trading. He called for addressing these challenges before launching these initiatives.
Real estate experts welcome the idea
The idea of establishing a real estate bourse in Egypt has received positive feedback from some real estate experts, who believe that it will enhance liquidity and transparency in the sector, as well as provide new investment opportunities for investors.
Adel Abdel Jawad, the CEO of Jawad Developments, said that the real estate bourse is a very good idea, although it is still under development and will be activated later. He explained that the bourse will allow investors to buy and sell real estate easily and quickly, and to invest in small shares of properties listed on the bourse, without the need to own an entire property. He added that the bourse will also help investors diversify their portfolios by investing in a variety of properties, which will reduce their exposure to the risks of investing in a single property or a limited market.
Abdel Jawad also said that the real estate bourse will increase transparency and confidence in the real estate market, as it will provide a monitored and regulated system for trading, which will ensure the application of specific rules and standards and the protection of investors’ rights. He said that the bourse will also reduce brokerage costs and commissions, and provide accurate and updated information about listed properties, which will help investors make informed decisions.
He concluded that the real estate bourse will boost the economy and enhance confidence among investors, as it will increase the flow of capital into the real estate sector, which will improve investment and stimulate growth.
Ashraf Diaa, the Chief Operations Officer at A.SQUARED, also welcomed the idea of a real estate bourse and stressed the importance of using technology and online platforms to facilitate trading on this type of bourse. He said that the bourse should be tightly regulated and supervised by regulatory bodies to ensure the integrity of operations and protect investors’ rights.
He pointed out that there is no fundamental difference between the real estate bourse and the financial bourse, in terms of the concept, as they both involve exchanging certain rights through papers and documents that prove these rights. He said that the real estate bourse is a special case of financial bourses, but its success requires clear regulations and procedures, as well as digitising the real estate transaction and ownership transfer process. He said that this would allow the transfer of real estate ownership at any time and outside official working hours through an online application.
How to evaluate properties on the real estate bourse
So, experts agree that the real estate bourse will enhance liquidity and transparency in the sector, as well as provide new investment opportunities for investors. However, how can investors evaluate the properties listed on the bourse and make informed decisions?
John Gamil, a specialist in urban development and real estate development, explained that several factors must be taken into account when evaluating properties on the real estate bourse. These factors include:
- Location: The location of the property is one of the main factors that affect its value. It must be compatible with the investor’s specific purpose and have strong growth potential.
- Expected financial return: The expected financial return from the property includes the expected rents and other income associated with the property. The higher the return, the more attractive the property is for investors.
- Fair value: The fair value of the property is the value that reflects its current market value based on financial and economic criteria. It is determined by using various methods such as discounted cash flow, net asset value, or comparable sales.
- Operational performance: The operational performance of the property includes the vacancy rate, rental growth, and maintenance and management costs. These factors affect the profitability and efficiency of the property.
- Potential risks: The potential risks associated with the property include financial, legal, environmental, and market risks. These risks may affect the performance and value of the property.
- Liquidity level: The liquidity level of the property on the real estate bourse depends on the size and trading of the property in the market and the ability of investors to buy and sell shares easily. This factor affects the demand and supply of the property.
- Financial data and information: Investors must obtain financial data and information about the property and its owner, such as revenues, expenses, debts, assets, liabilities, etc. This information helps investors assess the financial health and stability of the property and its owner.
- Laws and legislation: Investors must be familiar with local laws and legislation related to real estate and real estate bourses, such as taxes, fees, regulations, etc. This helps investors avoid legal problems and disputes.
Gamil added that there are several examples of successful real estate bourses in the world, such as:
- The New York Stock Exchange (NYSE): It was founded in 1965 and provides a platform for trading investment properties in the United States. The stock exchange includes many major real estate companies and real estate traded funds.
- The London Stock Exchange (LSE): It is one of the largest real estate bourses in Europe. It was established in 2006 and owns several registered real estate companies, including companies specializing in commercial and residential real estate.
- The Singapore Real Estate Exchange (SGX): It is a leading platform for real estate trading in Asia. It was established in 2007 and trades investment properties and REITs in Singapore and the surrounding region.
- The Sydney Stock Exchange (SSX): It is a leading platform for trading investment properties and REITs. It provides investors with an opportunity to invest in real estate listed on the stock exchange and benefit from its price fluctuations.
Meanwhile, Saudi Arabia also announced its launch of a real estate exchange last week, which will include many services that will accelerate real estate operations, provide high-quality and efficient data, and achieve transparency and freedom of supply and demand. The Saudi Ministry of Justice launched the Saudi Real Estate Exchange on a trial basis in November 2021.
The volume of real estate assets in Egypt reaches EGP 10trn, and about 43 million properties. Real estate development contributes about 20% of GDP and 12% of the current workforce in Egypt