Real Estate

The real estate sector of Egypt is arguably the most stable. During 2011 when the country was undergoing a change in regime, the market remained wholly unchanged as locals continued to take advantage of the competitive payment options offered by the country’s most reputable property companies.

Similarly, the floating of the Egyptian pound caused an influx in the purchase of high-end properties, since Egyptians living abroad suddenly had twice as much income when converted to Egyptian pounds. Knowing that investing in Egyptian property is essentially risk free, much of the middle class turned to the real estate market for investments, causing an 11.5% increase in the sectors index.

Looking into the future, this sector is expected to increase Egypt’s external competitiveness, and thus attract more foreign investment into the country. Aside from residential properties, there is a growing demand for commercial and retail spaces, and a large number of shopping centers and office parks are currently under construction in an effort to meet the demand from a more structured market driven by the growing middle class.

It is also important to note that 29% of the population is under 40 years old, as this suggests a continuation in the demand for various forms of real estate within the country. This sector already contributes significantly to the Egyptian economy by impacting around 90 industries relating to construction, and 8% of the overall labour force.

Retail Establishments

Because such a large percentage of the population consists of youth, it is no surprise that there is a growing retail market in Egypt. The younger generation in Egypt is well educated, experimental and tech-savvy, often looking to adopt western trends in fashion and technology. Coupled with the emergence of a more affluent middle class, there is a strong movement toward accepting modern retailing concepts that match Egyptian lifestyles, which is also driving shopping behavior in the region.

Egypt is ranked 13th in terms of the most attractive retail markets worldwide, making it one of the most promising and fastest expanding markets in its region, lucrative for foreign investment. Currently, retail outlets account for 59% of total business establishments in Egypt. Within the sector, 99.7% of all establishments are micro enterprises, employing between one and four workers. The food, beverage and tobacco retail market is the largest component of the sector, but remains largely fragmented, with mass retailers accounting for only 8.6% of the total market, while traditional convenience grocery stores dominate the retail scene.

In total, there are just over 1 million private enterprises active in retail. Food and beverage retailers account for 50.9% of total establishments and 43.5% of employment in micro enterprises. This is followed by textiles, garments and footwear enterprises, which make up 8.6% of total establishments and 9.6% of employment in the sub-sector.

Commercial Property

Commercial property is also considered immune to inflation and the devaluation of the Egyptian pound as it continues to bring in high returns on investment for locals and foreigners. Additionally, the boom in the entrepreneurial spirit of Egyptians has also caused the commercial property market to strengthen, especially grade A offices in East and West Cairo, which have witnessed increasing demand during the past year. Likewise, demand for small office space has also increased as more startups are launched in the country. Those with established businesses are also choosing to spend money relocating to quality office space with better geographical locations.

To match this growing demand, developers have begun establishing more commercial projects and this is set to increase with the opening of the New Administrative Capital.

Advantages

Whether you are looking to purchase property for your own personal use or as an investment, Egypt offers many incentives:

– Low property prices starting at around only £40k.
– Steady year-on-year capital appreciation of between 20-30%.
– Well established tourist hotspots suitable for varied interests.
– Steady annual growth in tourist figures.
– Less property taxes than the UK.
– No capital gains tax.
– British residents avoid inheritance tax on any property in Egypt.

– Foreign investors are regarded by the government as a big investment opportunity and laws have recently streamlined procedures, making the purchase procedure easy.

– Strong economic growth and increased investment in infrastructure are boosting the property investment market as a whole.

– Warm climate with temperatures ranging from 14°C in winter to 30°C in summer create a year-round tourist season.

– Increasing inward investment creates a rich investment climate.

– Well renowned developers are creating luxury resorts to cater to Egypt’s new influx of international tourists.

– Easy air access from many European destinations makes Egypt an ever popular medium haul holiday location.

– Low cost of living and maintenance costs.
– English is widely spoken.

Purchase Procedure

There are a number of structures which may be taken advantage of to purchase property within the country:

Off Plan Purchases

– The buyer reserves a new (off plan or under construction) property with a reservation deposit (usually between GBP£1500-£5000) providing the ‘option to purchase’ and fixing the sale price from the date of reservation.

– The vendor (seller) releases a private purchase contract (in English & Arabic) and supplies paperwork relating to the title, boundaries, planning permission, building license, furniture pack and rental guarantee option.

– Part of the contract will also lay down the conditions relating to the payment of the balance of the purchase price. Often the installments are payable at certain building milestones.

– The purchaser will transfer the correct sum of money at each installment time as per the agreed sales contract. A few developers are beginning to offer an ‘escrow’ type account where the money can be held until the developer has reached the ‘milestone’ so the money can be released to the developer only when it has achieved the promised stage of development. This helps to safeguard the client’s exposure in case the developer faces any construction problems.

– The keys are given to the owner once the payments are completed as per the contract.

– The property can now be registered / signature of validity applied for in the land registry in the name of the new owner.

Older Property Purchases

– A real estate investor wishing to avoid new property developments and contemplating the purchase of undeveloped land or older, well established resale properties will need to employ a lawyer specializing in real estate law in Egypt to advise on any such purchase to ensure the transaction is conducted legally, and that at the end of the property buying process the investor is the legitimate owner of the real estate and can seek to have it registered by the authorities in his name and acquire the deeds to the real estate.

– A foreign property investor purchasing in an “off plan” development now has two options of registration, one of which must be adhered to:

1 | Registration of Property

– Property in South Sinai can only be purchased through a 50 year lease using the signature validity process. In other areas of Egypt where the land is freehold, either process can be adopted. However, even in the areas of Egypt where foreigners can purchase freehold, signature of validity can be used instead of registration.

– Foreigners can buy property in Egypt, under Law No 230 of 1996. Foreigners cannot buy more than two pieces of real estate, which cannot exceed 4,000 square meters (sq. m.) in total.

– If registered, the property cannot be sold or rented for five years. The purchase sum must be brought into Egypt in foreign exchange, through one of the public commercial banks.

2 | Signature Validity

This procedure was first introduced because property in Sinai follows a different regime, as a result of an administrative decree issued in 2005. Under the decree, foreign purchasers in Sinai cannot acquire freehold

rights, but only 50 year leases. In 2006, this decree was updated to include Egyptians only being able to obtain usufruct contracts (i.e. a 50 year lease contract) in Sinai and not freeholds. Therefore, all purchasers must follow a procedure called ‘signature validity’, and various other steps. The ‘signature validity’ method has actually become the most popular route for foreigners even outside Sinai, because it allows foreigners to buy as many properties as they like, rent them, and sell them. The following steps must be taken:

– A ‘negative’ certificate for the property should be obtained from the government, stating that there are no mortgages, pledges, or any other sort of rights on the property registered to any other party.

– The tax authorities must issue a certificate stating which taxes are due on the property.

– A sale / usufruct contract is then drawn up. The validity of the sale depends on the terms of the contract, so it is essential for the purchaser to have a detailed contract, defining the property boundaries, the purchase price, the method of the acquisition of the rights of the previous owner, and the method of payment. The contract must be in Arabic, since Arabic is the only language recognized by the courts.

– Purchasers must issue a power of attorney to their lawyer so that he can act on their behalf, a procedure which first requires the purchaser to obtain a multi-entry visa.

– The lawyer then files a legal suit to obtain a court verdict certifying that the signature on the sale / usufruct contract truly belongs to the seller (This is the ‘signature validity court verdict’). This suit will take between 6-8 months.

Property Taxation

Property Rental

Egyptian tax laws work on a self-declaration taxation system where rental income derived from furnished property is classed in the same bracket as general income tax. 70% of the gross rent is accountable as tax on income, the other 30% being allowable deductions as income-generating expenses. Property with an annual rental values less than EGP 24,000 will be exempted from paying taxes, along with commercial units with annual rental values less than EGP 1,200.

Those owning EGP 2m in a single residential unit will also be exempted from tax, as well those owning EGP 10000 in commercial and industrial units. Property valued above that figure will be taxed based on an assessment of its annual rental value, and under new legislation there is a stipulated levy of 10% of a property’s annual rental value after deducting 30% to 32% as maintenance costs.

The balance is taxable at a standard rate of up to 20% of personal and corporate income.

Stamp Duty / Capital Gains Tax / Inheritance Tax

In Egypt there is no stamp duty or capital gains tax payable on real estate and, if you are a British resident, you will also avoid inheritance tax on any Egyptian properties that you decide to pass on.

Sale of Property

In terms of property in Egypt, the sale of land and/or buildings is taxed in the same way, at a rate of 2.5% of amounts earned from a sale. This must be filed as tax owed by April 1st.

The only exceptions to this are income from the sale of inherited land or other real estate which are not subject to tax. The same exemption applies on any income earned from the sale of land or other real estate owned through a shared capital company, provided your shares are kept in the company for at least five years after the sale.

Ongoing Projects

1 | New Administrative Capital

The new city is to be located 45 kilometers (28 miles) east of Cairo and just outside the Second Greater Cairo Ring Road. The new capital will be home to a multitude of government departments, ministries, and foreign embassies, making it Egypt’s financial and administrative hub. Opportunities for real estate investment are unrivaled, since the city will offer a number of residential districts, artificial lakes, educational institutions, hospitals and clinics, mosques, 40,000 hotel rooms, a major theme park, 91 square kilometers of solar energy farms, an electric railway link with Cairo, and a new international airport.

Egyptian public and private construction companies have begun working on infrastructure projects and building the residential neighborhood of the new capital, which foreigners and locals may already purchase in.

2 | The New Ismailia City

The New Ismailia city will be established on the eastern coast of the Suez Canal and will primarily be operated using alternative energy sources. The area is already residential, however this project will establish an additional 5754 residential units, 620 semi-detached villas and 373 detached villas, provided with health and social service facilities in addition to a sports club. The city will also include 7 districts that will be established in 7 phases. Each district will include 700 flat buildings and a number of fully serviced villas near schools, markets and hospitals.

3 | Beit El Watan Project

This project has been launched in seven new cities: New Cairo, 6th of October, Badr, New Damietta, New Aswan, New Qena and New Assiut, providing 4500 feddans of land for Egyptian expatriates, with total revenues estimated at $2.5 billion.

One of the key focuses of this project is to streamline services to citizens using technology, and as such, an e-portal service is provided to communicate with Egyptian expatriates on the development of the project. Through this portal, Egyptian expatriates can reserve and select pieces of land suitable for them and follow up on any information pertaining to their purchase. Beit El Watan is set to complete in 2020.

4 | Heliopolis Sustainable Compound

Set to launch in two years time is the first of its kind ‘futuristic compound’ in the residential area of Heliopolis. The compound will house 8 humongous smart buildings connected with pedestrian bridges and 9 “mega-trees” covering the premises. The project will run almost entirely on wind and solar energy, making it the only sustainable residential compound in Cairo. Aside from residential properties, the complex will also include office and commercial areas, meaning that investments can be made in a variety of real estate types.

Although the project will be completed in 2019, Emaar Misr, will be accepting down payments well in advance, and it is expected that competition will be high for places within this unique complex.