Despite the low value of finance offered to the real estate sector in the last two years by local banks in Egypt and the claims of real estate developers that banks are retreating from financing the sector, heads of banks and credit sectors affirm that banks did not decline to finance the projects of the sector as long as all credit factors are met including a well feasibility study, good cash flows, repayment guarantees, low risks and good profitability.
Banks are financing the real estate sector in accordance with the Central Bank of Egypt’s regulations concerning allocating 5% of their portfolios to the sector which has good growth rates because of the high demand and low supply. Banks have offered large volume of finances to the sector in the last period including the EGP 1.3 billion loan offered to Hyde Park, EGP 2 billion loan to Al Futtaim Group, EGP 650 million loan to Saudi Egyptian Construction Company. The recession that has hit the real estate market is the reason behind the retreat in the volume of finance offered to the sector.
Mohamed Abbas Fayed, vice chairman of Banque Misr, affirmed that banks do not decline to finance any sector, but they rather consider a number of standards when offering credit to any project, the most important of which is the project’s economic feasibility which is reflected in the chances of the project success that are based on supply and demand factors. Fayed noted that the sector has many opportunities to grow amid the country’s growing population.
Sherif Elwy, vice chairman of the National Bank of Egypt (NBE), stated that market recession, retreat of demand and increasing prices of building materials have hindered expansions of real estate projects which thereby decreased the volume of finances offered to the sector.
El-Sayed El-Kosayer, chairman of Industrial Development and Workers Bank of Egypt, said the incapability of real estate development companies in marketing as well as low demand from individuals on products are the most prominent challenges facing banks in financing these companies. Banks do not finance companies if there is a probability that they will not be able to repay in order to save customers’ deposits as the real estate sector requires large, long-term finances, he added.
Abdel Megid Mohy El-Din, chairman of the Egyptian Arab Land Bank (EALB), said the unstable currency exchange market, political turmoil and security chaos have impeded the expansions in the real estate sector which accordingly decreased the volume of loans and credit facilities offered to the real estate sector.
Saeed Zaki, member of the board of directors of the Egyptian Gulf Bank (EGB), said the political and economic turmoil, which have hit the country since 2011’s revolution, have largely increased the suffering of the real estate sector as the demand fell and thereby companies stopped to finance real estate companies.
Ayman Mokhtar, head of credit sector at Banque Du Caire, said banks did not decline to finance real estate sector, despite the turmoil that followed 2011’s revolution which greatly affected the real estate and tourism sectors.
The values of syndicated loans recently offered or being arranged to the real estate sector are as follows:
|
The project |
Loan arrangers |
Value of the loan |
|
Hyde Park Project |
National Bank of Egypt Egyptian Arab Land Bank Banque Du Caire Al Baraka Bank of Egypt Arab Investment Bank Bank Audi United Bank |
EGP 1.3 billion (used to finance the commercial components of the project) |
|
Saudi Egyptian Construction Company |
National Bank of Egypt Banque Misr |
EGP 650 million (used to finance the part of the investment cost of the project) |
