MAKING MOVES IN REAL ESTATE

February, 2021

    /BLOG/Discover Real Estate

Articulate, astute, energetic and alert. Words that could sum up CEO and Regional Director of RE/MAX Egypt & UAE, Khaled Nasser. A chat with the man himself revealed a lot both about what drives him, and the industry itself.


Why real estate?

I actually started out as an engineer in the construction and renewable energies business prior to starting RE/MAX in Egypt. I made the career shift as it seemed like a good field for a country like Egypt, with so many variables. When it comes to business there are risks in a lot of sectors, but I felt that services held good potential, with the real estate field in particular showing the highest potential for investment in the country. Brokerage was the ideal business I could pursue in that formula.

RE/MAX was part of the equation of that shift. While there are plenty of small ‘mom and pop’ real estate companies operating with a team of four or five people, RE/MAX is the world’s biggest real estate brokerage brand. And its operating model was very appealing to me. I was looking beyond just opening up a small brokerage business, and RE/MAX offered a very significant opportunity to build a scalable business that could offer a win-win situation for anyone who joined the business. When we started eight years ago I was the only person in the company. Today, we are around 800 people in the organization.


MAKING MOVES IN REAL ESTATE

What are the market developments that we should be keeping our eye on?

Looking at the next five years, the biggest market is going to be the New Administrative Capital. It is going to offer a lot of new investment opportunities with potentially a very high return. While that would be the first pick, New Cairo will also continue to do well during the coming three years, until the New Administrative Capital starts to capture the interest of most investors. 6th October and Sheikh Zayed still play a good role, along with New Alamein City, which will see more investment over the next couple of years once the infrastructure is in place and we see it coming to life. It is going to attract a lot of people.


Which factors are influencing the real estate market in Egypt in 2021?

There are so many factors in play in a country like Egypt. To me, the real estate market can be seen as a reflection of the economy. When the economy is doing well, we have a more stable security situation, a more stable dollar, and factories and tourism are more productive. This immediately projects onto real estate as more people have purchasing power. Real estate is viewed as a safe option, whether to improve their lifestyle, or as an investment.

Another key factor is the interest rate in the banks. A higher interest rate has a negative impact on the real estate industry. When the Central Bank drops interest rates, more money comes out of the banks and feeds into the real estate market.

We must also consider the issue of title deeds. The easier the government makes it for people to obtain title deeds for properties, the more people feel encouraged to buy in these areas. Many markets in Egypt are not sufficiently regulated and the legal status of the properties is loose, allowing for complications in registration. Until now, you cannot register a house or apartment you have bought in newer urban developments around the Greater Cairo area. However, in the older parts of the city like Heliopolis and Mohandessin it is possible to go and register your property. But still, the cycle of registration can take six months, or even up to a year. This situation requires a lot of development from the government. When this improves, the banks will be encouraged to make mortgage loans for this type of purchase.

Buyers are increasingly selective about the name of the development company. If a developer is well recognized, strong in the market and with a good reputation you can be reasonably sure that the company builds good products and does not have financial issues and is likely to deliver the project on, or very close to, the due date.


MAKING MOVES IN REAL ESTATE

What trends have you seen in terms of demand for different types of property? Are people upgrading or downsizing at present, or moving to less congested areas?

I think the trend is more towards downsizing rather than upsizing. Not so much downsizing, more of a demand for small units. The price of real estate has surged compared to people’s actual buying power. Since devaluation, people’s incomes may have risen slightly, but not to the extent that they can digest the inflation we have seen in the country overall. People are no longer able to afford the type of property they could purchase five or ten years ago. Most people have been going out and buying smaller units, whether for personal use where they feel able to keep up installment payments, or as a rental investment, just to keep the momentum of their savings.


Where are the best areas to invest in?

I am biased towards the New Administrative Capital at the moment. Admittedly, around a year ago I couldn’t get a feel for it or understand it. But when I visited it a few months ago and saw the amount of construction, along with projects that are very close to being delivered, I came to realize that we are going to have to move fast. There is a significant opportunity there. Looking at how New Cairo was developed and occupied over the past 20 years, I anticipate that the New Administrative Capital is going to surpass that by far. I don’t think Egypt has witnessed anything in the past compared to what we will see in the next 10 to 20 years in terms of property values. It is going to set a whole new bench mark in terms of a standard of living, so this is really the best time to make a purchase and benefit from it. Anyone looking to invest anywhere should visit the New Administrative Capital before thinking of any other investment at the moment.

MAKING MOVES IN REAL ESTATE


What would you advise for long term investment?

For long term investment I would always recommend commercial real estate. Commercial property gives a better yield on the investment every year, typically between 8-12%, before calculating capital gain as the property increases in value annually. Compared to this, residential properties typically return somewhere between 3-5%, with some exceptional areas like Zamalek giving a higher return. Again, it depends on the type and quality of the project the investor is putting money into.


Are market prices holding steady or volatile at present?

Although it may appear to be quite steady, the market is actually rather volatile. Developers, and even individual sellers, do not like to be seen to drop the market price. Instead, they increase the payment terms period and absorb the cost themselves, so in effect they are dropping the price indirectly to give customers an incentive to buy.

What are your tips for first time buyers?

You absolutely need the help of a professional broker. There are low grade developers out there promoting very bad investment projects and we see a lot of uninformed people chasing these projects just because the price point is low. It may seem like a saving in the short term, but if it is not going to bring rent or make a capital gain, it will not be of value in the long term. People need to be informed about the track record of the developer. That goes for commercial property in malls as well as residential. It may seem like a good idea to purchase a shop rather than rent or lease, but the catch lies in the management and maintenance of the mall once the project is sold and handed over to an ‘owners association’. From that point there is generally no way to uphold standards and things become a mess. When we look at the big successful malls like CFC, City Centre and the like, we see that all of the properties are leasehold, with the owning company retaining all management responsibilities. When purchasing residential properties, for personal use or as a rental investment there are important points to consider:

- You have to ask a lot of questions
- You need to look into the legal paperwork, whether it is a unit, a purchase from an individual or a project from a developer.
- You must hire someone to do a proper valuation of the property, especially if it is a resale. Sellers tend to overestimate the value of the property and inflate numbers to stay in a safe range. The prospective buyer should always be aware of the proper price range.
- You should neutralize any emotional reaction as much as possible during the search and negotiation process to avoid making an impulse buy that you would regret later on. It helps to make a check list of everything you are looking for in a property, particularly if you plan to live there. You should also view a lot of options before making a move on a property purchase.
- If you are contemplating purchasing in a compound you should ask about the developer, go and see other projects he has done, to see if they are operational with people living in them. Even if you are buying a project off-plan, it is important to go and visit the plot to get a feel for the area. Some projects may seem attractive, but the surrounding area could be lowend, with a poor infrastructure and poor maintenance


What are the most attractive features being implemented in new developments?

There are many amenities that are now generic in most compounds, from wellness and fitness facilities, gyms, children’s playground and the like. The things to look out for include good landscaping, sufficient parking to be in ratio to the lifestyle standards of the residents, and of course, good security and facility management. Some developers come up with a tailored approach, such as the one in the New Administrative Capital that strongly focuses on the needs of a family. One element they have included is a central kitchen that provides ready cooked meals at cost price. This enables women to free up time to spend with their family, rather than spend hours in the kitchen. Taking the community spirit even further, the same project creates a communication hub where residents can contact other residents who have skills and professions that are needed by the residents. By going back to the fundamentals of what makes for a strong, happy and thriving community, the quality of life is elevated and forms a foundation for generations to come.


MAKING MOVES IN REAL ESTATE
Khaled Nasser
CEO and Regional Director of RE/MAX Egypt & UAE