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Cairo

Selective growth in Cairo residential and retail markets in Q1 Says JLL MENA

JLL MENA, the world's leading real estate investment and advisory firm has released


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​​​​​JLL MENA, the world's leading real estate investment and advisory firm has released its first quarter (Q1) 2013 Cairo Real Estate Overview report. In summary, the report concludes that despite on-going political and economic challenges facing the Cairo real estate market, selective growth can be seen in some residential and retails sectors in the city.

Commenting on the report, Ayman Sami, Head of Egypt Office at JLL MENA said:
“Although we are continuing to experience ongoing  challenges facing the Cairo and wider Egyptian real estate market we are seeing selective demand and new developments in both the residential and retail sectors within this market. The office sector has also seen a number of leasing transactions in the first quarter and the residential and retail sectors have witnessed a number of new project launches and the  start of several new projects including the ‘Mall of Egypt’ which will be the  largest mall in the country. Tourist numbers have also increased and while occupancy levels are improving they are being offset by further falls in the average daily rates that is tempering any improvement in RevPAR.”
 
Summary highlights, Cairo Market Overview, Q1-2013:
  • A series of on–going political disputes, court decisions against the government and street protests have negatively impacted the Egyptian economy during Q1.

  • Egypt’s GDP grew by 2.2 % in 2012. While the political situation has now partially stabilised, the economy is expected to only recover slowly, with IHS Global Insights predicting real GDP growth of 2.7% in 2013 and 4.2% in 2014.

  • Despite the negative economic news, the stock market has performed surprisingly well, with Egypt’s benchmark EGX30 index gaining slightly since the start of the year, to stand at 5,501 points at the end of February.

  • Prime Minister Hisham Kandil is due to meet with the IMF to continue negotiations on the USD 4.8 billion loan in late March with some discussion that he could request an immediate bridging loan of USD 750 million ahead of agreement on the full amount. The government has also announced alternative plans to reduce the budget deficit from 11.0% to 10.4% for 2013, should the negotiations with the IMF be protracted or unsuccessful.

  • Qatar, which has been Egypt’s main donor over the last two years (with over USD 5 billion in aid), has signaled that it is not ready to offer more funds. This could encourage Egypt to request bilateral aid from Saudi Arabia and other regional nations.

  • The New Urban Communities Authority has announced that the residential and commercial land plots that were scheduled for release at the end of 2012, will now be released by the end of March 2013.

  • The Ministry of Finance has announced adjustments to the  capital market law to allow for the introduction of Sukuk’s (Islamic bonds that allow creditors to buy shares in a project and generate profits).

  • To boost the economy and provide further development opportunities, Egypt’s Industrial Development Authority has announced the release of 1,692 industrial land plots. These plots (with a total area of 5.3 million sq m) are located across several industrial zones in Greater Cairo and other governorates. 

  • SODIC (one of Egypt's leading real estate companies) has announced strong revenue of EGP 122 million in 2012 from the handover of units in its Allegria residential project in  6th of October. It has also announced gross presales of EGP 347 million from this project, relative to cancellations of EGP 84 million.

  • There has been media reports that Orascom Construction Industries (one of Egypt's largest listed companies with a market cap of around USD 8 billion) is considering delisting from the Cairo bourse, ahead of a planned listing in Amsterdam. This action relates to an ongoing tax dispute with the government. The unstable investment environment and what some say is politically motivated government action against local companies is deterring further investment in the country.

Craig Plumb, Head of Research at JLL MENA in MENA commented on the Q1 2013 report:
 
“Egypt’s strong  long term fundamentals and the relative lack of modern real estate remain major attractions for both occupiers and real estate investors. Despite the current state of state of flux, many investors and occupiers are taking a long term view and remain committed due to the enormous potential and future possibilities offered by  the Cairo market. Although there was some improvement in market sentiment and confidence last year, the current situation has brought about a ‘back to square one’ aspect in the first quarter. This has negatively impacted the Governments attempts to kick start the economy and attract further foreign investment.  Negotiations about the IMF loan are on-going. A speedy resolution of these negotiations and the subsequent release of IMF funds remains a key milestone that will impact the pace of economic recovery and that of the real estate sector.”
 
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