CAIRO - 25 December 2018: As Egypt’s investment market opens up, the real estate and construction industries continue to be critical sectors, whether due to fears of a prospective real estate bubble or the promising growth rate.
Combined the two make up the strongest sector in Egypt, constituting 17 percent of the total GDP; real estate alone contributes 7 percent. Which is why leading companies like Tatweer Misr are expanding their portfolios and investing heavily in the industries.
In an interview with Egypt Today Egypt, CEO Ahmed Shalaby highlighted how the recent growth presents a prime opportunity for developers to look for opportunities to export real estate. Given the overall business environment, it makes good business sense that Egyptian real estate companies are focusing on promoting real estate to potential buyers outside their borders, he says, adding that in line with this strategy, his company has participated in exhibitions in Dubai, Abu Dhabi and England to promote real estate export to Egypt.
Tatweer Misr has been in the market for four years. What has it achieved since?
Since our inception, we have launched three mega projects, beginning with our award-winning project IL Monte Galala followed by Fouka Bay in the North Coast, which recently won the MR&H award for the best underdevelopment resort in the Mediterranean. More recently, in 2018, we launched our first home project “Bloomfields” in Mostkbal City. In addition to these projects, we have just celebrated the launch of GEN@Bloomfields, the first Entrepreneurial hub managed by the Global Entrepreneurship Network in the Middle East and North Africa.
Over the past three years, our projects have witnessed continued innovations, for example, in Fouka Bay we incorporated a crystal lagoon in our masterplan, which is considered the biggest in the North Coast, to allow every home to be waterfront. More recently, we partnered with a new chain of boutique hotels to serve our customers in IL Monte Galala and Fouka Bay.
The name Tatweer Misr has, over the years, become synonymous with new ideas and innovation.
Fouka Bay Project
What are the company’s upcoming investments?
At the moment, we are mulling different investment opportunities. The fact is that, as part of our value proposition, we are careful in selecting areas [we choose to invest in] and need a strong value proposition in place in order to embark on a project. For us, the choice is not necessarily the best location but more importantly, what value can we add to this area or demographic. Moreover, while we intend to grow our portfolio, we spend a lot of time on the planning process to define what value we can add.
Do you have plans to invest in Upper Egypt?
We are currently waiting for the right opportunity before we invest in this area.
What are the company’s plans regarding existence in the European market in the upcoming period? How do you promote your work abroad?
We recently participated in Cityscape Dubai as part of the Egyptian Government initiative to promote real estate export from Egypt. This was not our first exhibition abroad, we have also previously participated in other similar platforms in Dubai, Abu Dhabi and England.
Tatweer Misr has, as a part of its objective to in- crease international outreach and sales, partnered with Liverpool LFC, the number two football club worldwide in terms of fanbase. Now factor in super- star Mohamed Salah, and we find that LFC arguably has the most significant fan base in Egypt and the Middle East at large as they continue to support the Reds.
According to the terms of agreement, Tatweer Misr used this partnership to launch an International Sales Campaign in Europe, starting with the United Kingdom, this last spring. This is critical for us at it represents one of the first steps the company has taken towards exporting its projects to European countries. Our strategy was always built with the intention of exporting our projects; this is reflected in our master plans.
While we have historically relied on the Egyptian market, which we will maintain, we also want to expand our reach into new markets, thereby increasing international brand recognition and in turn boosting international sales.
What are the latest updates of the IL Monte Galala project?
The project’s first phase of delivery is expected by the end of 2019. At that time, there will be a number of amenities in place and others in development. As time progresses, we will integrate new ideas and concepts into our masterplan to remain in tune with the needs of our guests and customers; adjustments must be made to incorporate new ideas and trends as we seek to remain true to our vision, which is to build value.
Construction Update of IL Monte Galala
What about Fouka Bay in the North Coast?
Fouka Bay is currently in the delivery stage. In the summer of 2019, we expect phase one owners and guests to enjoy their summer vacation at their full finished waterfront homes. Our focus for the time being is that they prepare for their unforgettable stay.
Can you tell us more about the company’s agreement with Kerten Hospitality?
Our partnership with Kerten will allow us to provide three different types of hotel services targeting customers’ varying needs.
The number of projects in the pipeline includes seven hotels in total, which will be located in Tatweer Misr’s flagship projects IL Monte Galala in Sokhna and North Coast’s Fouka Bay. The former will host three hotels: Cloud7 Hotel & Serviced Apartments, a Cloud7 Hotel, and The House-branded villas, Serviced Apartments, and Hotel spread across 1,340 keys, as well as a total built-up area of 108,000m2. Fouka Bay will feature four properties: two House Hotels & Serviced Apartments, Cloud7 Hotel, Serviced Ca- banas and Bungalows, and a Cloud7 Hotel, in aggregate offering more than 1,000 keys covering around 100,000m2. The first hotel opening is the House Hotel Fouka, which is scheduled for a soft opening in 2020 in the North Coast development.
Kerten hospitality has found success during the last few years with its approachable, yet individualistic, style of hospitality concepts—which align with Tatweer Misr’s driving concept all of which has been on the foundation of connecting guests and providing quality customer experiences.
Various companies are aiming to be listed on the Egyptian Exchange, is your company planning to be listed too? When will we see Tatweer Misr as a listed Company on EGX?
Legally, real estate developers cannot proceed with an IPO except three years following their first delivery.
Once we fulfill this requirement, we will then study the market to decide on the best time to apply for an IPO.
How do you see the real estate market today?
The Egyptian real estate sector is one of the strongest sectors in Egypt; construction and real estate contributes to 17 percent of the total, annual GDP and real estate alone contributes with 7 percent.
Population growth is a one of the main drivers behind the sector’s strength; Egypt’s population amounts to around 100 million, increasing annually by 2.5 million every year. As per Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS), we have around 950,000 couples marry every year, which increases housing sector demand.
Accordingly, we can affirm that the demand in the market is real, be it for housing or for investment. Real Estate represents 60 percent of the Egyptian house- hold’s savings and Egyptians will always find real estate investment as a safe haven option.
How do you see the country as a real estate developer?
On the one hand, the government has placed the sector at the heart of its economic agenda, ensuring that there will be plenty of contracts available in the foreseeable future. All the mega projects to build cities, roads, and capitalize on infrastructure affirm that the country’s growing potential is particularly recognizable globally. On the other hand, efforts to reform the economy through the removal of fuel subsidies and the flotation of the Egyptian pound have led to soaring costs and short-term pain for contractors and developers. In the short term, as with anything, we are going through an adjustment period, which will balance itself out in the end.
Does the market witness a recession?
The major concern when people discuss bubbles is around a specific segment, the A and B class, and specifically the Greater Cairo area. It is important to understand that the real estate sector is not homogenous sector across the country; in general, the sector continues to grow each year and will go on at this pace in upcoming years. This segment has witnessed a decrease in sales volume although the sales value remains constant, and has in fact increased for some companies. The decrease in sales is a direct result of a decrease in purchasing power.
The fact is that there will be continued demand in this environment, because a negative real interest rate, coupled with the devaluation of the Egyptian pound, has seen domes- tic investors and expatriates push their cash into real estate to hedge inflation as ROI sometimes reaches a level as high as 300 percent. Ultimately, despite the increased tendency towards speculation at the higher end of the market, there is a substantial core of domestic end-users in Egypt; this guarantees strong demand that should ultimately help buoy developers over the long term.
What is the importance of real estate export? How do you see the future of real estate in Egypt?
I believe that these days present a prime opportunity for developers to look to export real estate. Given the overall business environment locally, it makes good business sense that Egyptian real estate companies focus on exporting real estate to potential buyers outside their borders. Potential overseas buyers have vastly different motivations for buying overseas properties or more specifically, in our case properties in Egypt, prime among them being a greater focus on capital appreciation in addition to value of purchase. Within today’s financial climate the cost of prime property in Egypt is seen as a potential opportunity within a limited time frame and hence an incredible opportunity for those companies that wish to market their products abroad.
Globalization of the real estate industry is now a fact of economic life. Cross-border investments are increasingly common, both in physical assets and in portfolio investments; offshoring part of the supply chain is becoming a more likely resort, and variables from the field of international economics, such as openness, international capital flows, exchange rates and so forth have an increasing impact on real estate markets.
Is mortgage effective as an approach in the Egyptian market? What should the government do to get the attention of people and investors to mortgages as an option?
The problem most developers face is that the Egyptian market currently poses restrictions on mortgage finance because banks only commit to already established projects. Therefore, this avails finance for residential projects on developers in the market, who invest in the project from the start before selling their units on installments, which consumes resources, time, and effort that can be directed towards planning more projects.
The market is in need for a more constructive mortgage finance system, which can prove effective throughout the planning phase and help accelerate the construction process.
Why did you decide to participate in the Global Entrepreneur Week? What are the benefits of this event to your company and the community?
Since its inception, Tatweer Misr has been a strong proponent of entrepreneurship and education and has held a major track record of activities supporting their vision to create a base for developing entrepreneurs. Those we support can emerge with the requisite skill base and support that would propel them to a higher level, enabling them to contribute to job creation and poverty eradication, whilst harnessing the values and principles of a true entrepreneur.
In line with this, Tatweer Misr has been the main sponsor of Global Entrepreneurship Week over the years and recently signed an agreement to sponsor the event its activities for the forthcoming 3 years. More- over, Tatweer Misr has worked on the global level; more recently, it ratified an international day for MSME’s at the United Nations under the auspices of the International Council for Small Businesses (ICSB).
Our MoU with the Global Entrepreneurship Net- work (GEN), which we signed a few weeks ago, is set to establish the Hub for Innovation & Entrepreneur- ship in the Middle East and North Africa managed by GEN, a first of its kind. “GEN@Bloomfields” is set to provide first-class education focusing on innovation, entrepreneurial culture and SME development. Through its partnership with Tatweer Misr, GEN will focus on bringing best-in-class programs, communities and support from its network, operating in 170 nations, to Egypt’s next generation of entrepreneurs.
Do you believe the future of the business is in the hands of entrepreneurs?
Yes, absolutely. Entrepreneurs represent the high- est growth potential for a country and the highest number of jobs generated, especially since 61 percent of Egypt’s population is under 30 years old. We have great potential, which could only be reached through improving the education and providing real opportunities for young, innovative minds who could become tomorrow’s leaders if they are given the space and right tools.
Many young people have good ideas, but can’t turn them into real businesses, what is your advice for them to become successful entrepreneurs?
Try, try then try again. Failure should not stop you.
What are the elements of success for businesses and entrepreneurs?
A good idea, a good plan and persistence in implementation. Having said this, over 70 percent of successful entrepreneurs statistically have a strong educational foundation. As a result, the better the education system, the greater the potential for success. This potential can unfold within an environment that is receptive to prompting entrepreneurship and building a strong ecosystem to support it. A case in point would be the efforts of our government over the last four years in creating an environment that enables entrepreneurship.