An Investment Opportunity: Real Estate and Tourism in Egypt

An Investment Opportunity: Real Estate and Tourism in Egypt

Youssry Saleh & Partners   22 Mar 2016   651 Views
Indirect business activity in Egyptian Market

Egypt in its accelerated movement towards economic reform has been emphasizing the importance of real estate development projects and large scale projects in order to restore the market and economy after its decline post Revolution of 2011.

The large scale projects have recently been encouraged and put on the spotlight as opposed to the smaller projects, import and export, stock market etc. investments as they were in the past.

When selecting sector to invest in among various sectors of Egypt, business experts recommend the following two: real estate and tourism. Why? Because the government is targeting those two sectors in its sustainable development strategy of 2030 and has introduced enablers and facilitators via amendments to the Investment Law.

The Real Estate

The real estate sector in Egypt started its tremendous growth back in 2001/2002 and it has been growing very fast ever since recording approximately $1billion. In 2013 it recorded 27.5% growth rate and revenue about 31 million Egyptian Pounds. According to the real estate experts this sector will grow to reach 70% in 2020 and $12 billion in revenue.

The figures indicate that the future of development in Egypt belongs to this important sector which in 2012 absorbed about 12.9% of total labor force of the country and in the sustainable development strategy of the real estate sector takes the share of the loin in the plan.

The two main projects included in the sustainable development strategy are:
A) Building one million units: the main aim of the project is to build one million units in all Egyptian governorates and the main target of this project is to provide units with reasonable price for the low income citizens. In relation, the government issued Social Housing Law No. 33 for 2014. The said project has an estimated total cost EGP 150 billion divided on 5 years and it will create 250,000 jobs.

B) The housing sector: the main goal of the housing sector plan in the development strategy is to work on expanding the housing program menu and removing all the issues and hassles associated with properties’ registration. Efforts are made to activate mortgage loans, real estate finance in general, as well as tremendous work is being conducted in terms of institutional and legal reform initiatives as to eliminate all obstacles facing the sector.

The Tourism Sector

Tourism sector is considered to be one of the main sources of income of Egypt, during the peak of its activity, the sector absorbed almost 12% of the total labor force and its contribution to GDP constituted about 11%. Moreover, it was one of the sources for the foreign currency. During the past 4 years Egypt witnessed the average rate of tourists ranging from 9 to 14 million.

In the sustainable development strategy the tourism sector is considered one of the main sectors that the government is setting many plans for and strategies for development; and mainly in the tourism sector development the government is targeting the development of pyramids area, establishing new resorts and developing the infrastructure in touristic areas.

The role of the Ministry of Tourism is to promote new tourism strategy and to encourage new investors to set new projects in Egypt as well as it is responsible for improving and training the labor force.

The new amendments of Investment Law No. 8 for 1997:

The new amendments of the Investment Law are aimed to facilitate investment in real estate and tourism sectors. Below is a brief overview of relevant articles.

Chapter 5 in the new investment law- ‘Disposition of Lands and Real Estate’: Article 71 stated that the disposition of lands and real estate which are owned as a special property of the state or other public legal persons shall be for the purpose of the investment for the companies and establishments subjected to the provisions of this Law.

Article73: in the situations, where the companies and the institutions subjected to the provisions of this law are requesting to provide lands or real estate from the country’s private property, for investment projects, the purpose and the space and the place where the investor desires to establish the project shall be mentioned in the application. The Authority shall present its available lands and real estate   or available at other administrative authorities that is appropriate for the investment activity of the investor   and shall indicate the nature of the land or the real estate and the conditions related to it, and indicate if it is equipped with facilities and ways of disposition, and in return for that and other requirements and necessary data.

Another incentive undertaken by the government in the new law of investment is related to disposal of the lands and the real estate privately owned by the state free of charge to the investors which match the technical and financial requirements which shall be stated by a Cabinet’s Decision. The new incentive shall be valid for 5 years starting from the 1st of April 2015 according to Article 74.

In all types of the disposal of free of charge land and real estate, the investor shall present cash guarantee or any other guarantee to the disposing Authority, and abide by the standards and facilities prescribed by the Internal Statute. This guarantee shall be reversed after five years upon the start of the effective production of the projects with productive nature, or start of engagement in activity of other nature.

So both real estate and tourism sector were included in the Prime Minister’s Decision No. 180 for 2015 which regulates the Investment Guarantee and Incentives. All tourism projects are supported in the regulation except the 3 stars projects and projects in the new valley governorate and promising areas outside the old valley which will be determined by the Egyptian Cabinet.  So the tourism projects related to establishing hotels and resorts will benefit from the articles in Chapter 5 – ‘Dispositions of Lands and Real Estate’.

Real estate sector with all of its sections is supported in the Executive Regulation where establishing new cities and renting properties are governed and regulated.

For both sectors there are some guarantees required from the investor, which shall be presented in order to be fully supported by the Investment Law such as financial guarantee, project type and size; and also, there are some conditions which must be satisfied in order to ensure seriousness of the investor such as conditions to selling or dividing the land given to the investor.

As Egypt is moving towards the better future, many initiatives are being undertaken, legal landscape modified, and all in order to provide enablers for the country to return back on track in terms of its economy, development and stability.