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Thursday, 28 July 2016

Egypt’s real housing sector: Market-based informality

With a population of over 90 mn people and an annual growth rate of c. 2%, Egypt’s demographics are the key driver of real estate demand. Every year, over 800,000 marriages take place, so it’s safe to assume that roughly the same number of homes is in demand annually. While demand may be strong, the real question is whether or not supply is keeping up.

The formal answer is, “No.” If we take Cairo as an example, the new, formally developed settlements and satellite cities on its outskirts are geared toward a certain type of consumer — a more affluent one that can afford to spend north of EGP 500,000 on what is now considered a reasonably-priced home. After all, government land auctioned in plots of 500 sqm, at a minimum, can only support a certain level of growth, not to mention luxury compounds and gated communities that are simply beyond the reach of your average Egyptian.

A widely quoted figure to validate the claim of undersupply is that the market currently suffers from a housing gap of some 3 mn units.

This is a staggering figure that, if true, should translate into a considerable population of street dwellers. Yet this is not the case. Take a drive along Cairo’s Ring Road and it becomes clear that the housing shortage in Egypt is not all that short. Thousands upon thousands of red-brick developments built on what was previously farmland provide for a much-needed pressure valve for demand pent-up by the shortfall of the formal real estate market. [ Tap here to read the rest of part two in the series. ]

** This is part two of a five-part series by SODIC, a leading real estate developer and proud sponsor of Enterprise. Here, SODIC shares its view on how business and government can work together to save Cairo — doing good for more than 20 mn people and making a reasonable profit at the same time. Subsequent instalments will appear each Thursday morning, exclusively in Enterprise.

** Did you miss part one in the series? Read it here: Why is your day in Cairo so hard — and what can we do about it?

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