New mortgage products being planned together with a substantially simplified property registration system should lead to a new boom on the Egyptian housing market.
As you view the scenery across the Egyptian capital, Cairo, you wonder why the residential buildings look so run down and dilapidated. You may blame it on the fact that Egypt is not a particularly wealthy country (especially against the Western countries) and you may wonder why Egypt’s recent modernisation and successful trade is not being seen in the residential housing. Under the surface, the reason is complicated.
In order for you to buy a house or a residential property in Egypt you have to get the registration documents for the property. Until recently, to get the registration document for the property, you had to pay about 17% of the market value of the property and you had to fill out about 100 forms through four different government departments. As you can imagine, that process cost a lot of money and took several years, and as a result, very few of the properties in Cairo have registration documents!
Without registration documents, no bank will lend you money to mortgage your property, so many potential house-owners find themselves in a catch-22 situation: no money to buy a house outright and no registration to get a bank mortgage. In many occasions, knowing that their children cannot buy a house themselves, families often allow them to build on top of their current house or flat, a process that is much cheaper, but does not make for attractive housing!
The Egyptian government has been promising to modernise the registration rules, and has cut the cost of registration to a much more reasonable, fixed fee. In addition, many of the local and international banks in Egypt realise that there are much business opportunities in offering mortgage deals to Egyptians and some of them have already devised a mortgage structure that works in the current environment. Unfortunately for the masses, the current offers are only for those who are wealthy enough already, so the long wait for house ownership continues for most.
The current cabinet has been pushing through reforms and given that household debt is only 8% of GDP, compared to 18% in the US, the demand for mortgages will go through the roof when they are available to all and there will be a marked improvement in the quality of the housing!
