Amid rising fuel prices and increasing construction costs, real estate developers are optimistic about the future of the market after the Central Bank of Egypt cut interest rates for the first time in more than four years, a move they say addresses a long-standing financing gap and supports the restoration of investment activity.
In the second Monetary Policy Committee meeting of 2024, the Central Bank of Egypt (CBE) cut its key interest rates by 225 basis points, bringing the deposit rate to 25%, the lending rate to 26% and the main operation rate to 25.5%. The decision came at a sensitive time of inflationary pressures and rising energy prices, which directly impacted the cost of construction materials and transportation.
Billionaire Yassin Mansour, head of Palm Hills Development, said that the real estate sector is the biggest beneficiary of the interest rate cut, as it relies on long-term payment systems, adding that the decision is a good step in supporting the market, according to Bloomberg and Al Sharq.
Mansour expected real estate prices to rise between 10 and 12%, as a result of increased construction costs and labor wages, especially with the increasing migration of qualified Egyptian labor to the Gulf. He also suggested that the interest rate could fall to 20% by the end of the year, which could prompt his company to return to the securitization option that was previously postponed.
Ahmed Shalaby, CEO of Tatweer Misr, sees the interest rate cut as a positive signal for the real estate market, especially in light of the financing gaps suffered by companies. He explained that the decline in the return on savings certificates is pushing investors to look for alternatives that preserve the value of their money, most notably real estate.“
Aiman Amer, CEO of SODIC, said that the decision will have a positive impact but is still not enough to fully stimulate the market, stressing that investors and developers are looking forward to further interest rate cuts to ease financing pressures.
Amr Soliman, president of Mountain View, believes that interest rate cuts support the ability of companies to implement new projects and accelerate existing ones, and stimulate investment in vital sectors such as the administrative capital and New Alamein, which enhances Egypt's investment status.
Amr Soliman, president of Mountain View, believes that the decision will have a positive impact but is still insufficient to fully stimulate the market.
He pointed out that the decision supports middle-income housing and rebalances the real estate market after a period of relative slowdown.
Amine Siraj, managing director of Hyde Park, said that low interest rates make it easier to obtain real estate financing and increase the purchasing power of customers, which supports sales and boosts market growth.
Tarek Shoukry, head of the Chamber of Real Estate Development, also considered that the decision mitigates the impact of the increase in diesel prices on the cost of construction, stressing that the market needs a deeper reduction in interest rates between 5% and 6% to stimulate real estate investment and reduce financing burdens.
Tarek Shoukry, head of the Chamber of Real Estate Development.
Tamer Nasser, CEO of City Edge, said that the interest rate cut reflects positively on developers and customers, but it is not enough alone to curb price increases, predicting a 10-15% rise in real estate prices in 2024, amid continued pressure on construction costs.
Tamer Nasser, CEO of City Edge, said that the interest rate cut reflects positively on developers and customers, but it is not enough alone to curb price increases.
Aiman Bin Khalifa, CEO of Arab Developers, expected the real estate market to witness a gradual recovery, especially with the maturity of savings certificates, which will lead to the return of liquidity towards real estate as a safe investment option.
Aiman Bin Khalifa, CEO of Arab Developers, predicted that the real estate market will gradually recover.
Mohamed El Menshawy, head of Heliopolis Housing and Development, said that the decision will support companies that market their projects with long repayment periods of up to 12 years, expecting repayment periods to extend to 15 years in new phases of projects. He also stressed that real estate funds to be launched will benefit from the low interest environment.
Jasser Bahgat, CEO of Melli, said that companies will not tend to cut prices despite low interest rates, due to geopolitical pressures and currency fluctuations, which prompts developers to hedge pricing to maintain financial sustainability.
Gasser Bahgat, CEO of Melli, said that real estate funds to be launched will benefit from the low-interest environment.
The results of the seven largest real estate companies listed on the Egyptian Stock Exchange revealed that their net profits in 2024 grew by 127%, although revenues did not improve at the same pace. Analysts expect sales to slow in 2025 as inflation slows, which could redirect liquidity to other investment and savings instruments.
Analysts expect sales to slow in 2025 as inflation declines, which could redirect liquidity to other investment and savings instruments.
