Property developers suspend property sales as construction material costs soar in Egypt
Many real estate marketers have received messages from development companies to suspend the sale of their residential units until further notice. There is serious confusion in the Egyptian real estate market as the prices of building materials soar due to the Russian-Ukrainian war and the devaluation of the Egyptian currency.
The Central Bank of Egypt (CBE) clarified in a statement that the Russian-Ukrainian conflict has led to an increase in domestic inflationary pressures, therefore the Monetary Policy Committee has decided to increase the key rates by 100 basis points .
Tarek Shoukry, chairman of the Real Estate Development Chamber of the Federation of Egyptian Industries, attributed the rise in real estate prices over the past period to the rising cost of construction materials, pointing out that “the prices of steel rose about 40% and cement about 50%.”
He added that all finishing materials have increased in proportion to the convergence of steel and cement. The cost of construction has also increased, and it has become imperative for any developer who will engage in the construction process to put these new charges in their financial accounts.
Shoukry further noted that the increase in base interest rates also affects real estate prices, due to the impact of the dollar price on many imported products, such as aluminum and others. materials, which affect the cost increase.
He clarified: “There is no room for price adjustment and new pricing according to the new situation. Some developers have stopped selling until the situation stabilizes, and others have revised their prices according to their vision.
In addition, the Chamber of Real Estate Development and the Division of Real Estate Investment submitted to the Cabinet a unified memorandum containing five requests aimed at countering the effects of the Russian-Ukrainian war on the prices of building materials on the basis of cooperation ongoing between government and real estate development entities in Egypt is working to support the market.
He added that the Chamber and the Division have submitted a memorandum to Prime Minister Mostafa Madbouly, which includes 5 key initial demands for real estate companies to deal with the supply crisis and high global prices and its effects on the market. sector locally in cooperation with the government which is making every effort to maintain the strength of the real estate market.
The demands include the granting of a 3-month deadline for all real estate projects in order to give real estate companies the opportunity to assess the situation and its effects on them, and to organize the continuation of this important step. In addition to demanding coordination with the Minister of Industry and Trade to remove dumping duties on iron so that there is no hint of monopoly and a price increase greater than external data and increases world.
The chamber and the division called on the CBE to activate mortgage financing initiatives by simplifying procedures, reducing delays and creating the will of bank officials to activate this initiative to bridge the gap between purchasing power customers and selling prices, in order to maintain sales.
In addition, the chamber called for the creation of a monitoring mechanism by the government to estimate the real price of building materials and the necessary increases without interference in supply and demand, and without exploitation or monopoly.
Beyond that, the list of requests also provided for the holding of meetings with the ministries and authorities concerned by these requests, namely the CBE, the Ministry of Housing, Public Services and Urban Communities and the Ministry of Industry and Trade.
Ahmed El-Shennawy, a member of the Construction Committee of the Egyptian Businessmen’s Association, expected property prices to rise by 15-20% after the CBE’s measures to increase housing prices. interest rates due to the repercussions of the war between Russia and Ukraine, which caused a wave of global economic turbulence which had an effect on prices on a global scale, and therefore on the prices of building materials construction.
El-Shennawy pointed out that the decision of the CBE and the consequent spikes in the dollar exchange rate and the issuance of certificates with an 18% yield represent a major challenge for the real estate development industry.
He explained that real estate development companies are facing a liquidity crisis after raising the interest rate, and that the real estate market is expected to experience price increases of between 15 and 20 percent in the current period due to rising prices of building materials and the exchange rate of the dollar.
“Real estate companies will have to give up part of their profit margin in order to keep the real estate market active and national companies should cooperate with the state to support the national economy and maintain the real estate development industry due to its large economic importance, as it contributes about 25% of the GDP and socially serves about 100 artisans,” he noted.
He called on the state to tighten control over the markets and fight against the monopoly of raw materials and price speculation, which leads to an increase in prices in a way that is not commensurate with the logical increase.
In addition, he underlined the need to boldly facilitate mortgage financing procedures to reduce burdens on real estate development companies, as well as provide facilities to real estate developers by facilitating bank financing procedures for all serious businesses of different sizes. He also suggested increasing payment terms for land from 7 to 10 years.
El-Shennawy suggested the need to move towards vertical expansion in new qualified cities in terms of infrastructure and permission from all relevant authorities, in order to cope with high construction costs and reduce burdens and costs for businesses, and so reduce the price of units on customers as one of the solutions to deal with high prices.
© 2022 Daily News Egypt. Provided by SyndiGate Media Inc. (Syndigate.info).