Guest Post by Amira Salah-Ahmed, Cairo-based business reporter and co-founder of Egypt Monocle. She was a business editor at Daily News Egypt
At the height of the real estate sector boom in Egypt around 2008-9, low-income housing was all the rage. Suddenly big players in real estate seemed to be turning their attention to the big gap in cheap housing.Panel discussions on low-income housing became a staple at five-star business conferences.
There was hope that real estate companies would stop obsessing over their upscale, exclusive developments geared to a fraction of the population and rich Arabs and foreign investors, and start focusing on what the market really needs.
Egypt’s real estate sector came through the global economic downturn relatively unscathed, mostly due to its cash economy that was insulated from international credit markets.
But the country’s tiny mortgage market and a lack of low-income housing expertise among many of Egypt’s biggest developers has made it difficult to meet pent-up demand for cheap housing among the country’s many poor.
Egypt’s housing shortfall stands at a whopping 1.5 million units versus Oman’s measly 15,000, according to property consultancy Jones Lang LaSalle. It puts the most populous Arab nation at the extreme end of the scale.
The government under former president Hosni Mubarak had attempted to implement various low-income housing projects to plug the deficit, but the reality is that talk of low-income housing is deceiving.
It’s what the wealthy brag about to prove they haven’t forgotten about the little guy.
The fact of the matter is, the shortage is getting bigger and there are few steps being made to fix the problem.
When Orascom Housing Communities (OHC) announced its flagship ‘affordable’ housing project, Haram City, in 2007, there was a tiny ray of hope.
It was billed as a pioneering endeavour in the sector and the assumption was that once Egypt’s biggest company, Orascom, led the way, others would follow.
The key word was ‘affordable’, not low-income and OHC promised 70,000 housing units on completion.
However, the project had fundamental flaws, chief among which was its location in Sixth of October, 20 kilometres west of Cairo, where amenities were scarce and infrastructure under-developed.
Not long before that the area was little more than vast expanses of desert.
Now, it’s the opposite. It’s so developed to the point of congestion that it has merged with Cairo’s suffocating urban sprawl.
Haram City also lacks the proximity to Cairo’s main employment districts that are easily accessible by public transport.
Residents would ideally purchase their own mode of transport, another costly addition which doesn’t quite fit in with the tag of “affordable housing”.
Prices of properties are also not on the low scale. The three payment schemes available — installment, mortgage or cash — all start with an advance of around LE 10,000. Depending on the unit you are buying, prices range from LE 70,000 to more than LE 100,000.
Of course, everything is relative. And compared to unit prices at upscale gated communities, which comfortably climb into the millions, Haram City is quite low.
But surely for a nation where at least 40% live under the poverty line, the baseline for comparative prices should be set at the bottom.
Then the cost of lavish housing would be called what it truly is: astronomical, exorbitant and over-valued in a market desperate for cheap housing.
So who, then, was this project targeting? I’ve always wondered but never found the answer, not even after speaking to company employees, who are no more convinced by this affordable housing rhetoric than us sceptical journalists.
At least OHC tried to target a different segment of society, which is more than can be said for other real estate developers who remain infatuated with Cairo’s elite.
These companies fail to appreciate that there is money to be made in catering to the neediest and supplying to a larger market with smaller apartments that are centrally located, with simpler designs and basic finishes.
There isn’t a real push towards low-income housing in Egypt; there never was.
Instead there are many challenges that stand in the way, as Jones Lang LaSalle points out:
• Attracting interest from private developers, with few targeting sociable housing (except Orascom)
• Poor quality of affordable projects due to limited management/maintenance
• Lack of access to housing finance for low income segment – with underdeveloped mortgage market and lack of bank financing for developers
• Requires government to offer subsidised land, but this is under fire because of land corruption scandals
It’s now not uncommon to find rows of empty floors along Cairo’s skyscrapers. These are ambitious housing plans that failed to attract residents, or so-called safe haven investments whose owners either missed or are waiting for the next housing bubble.
The hope is that the government recognition of social consequences of not providing suitable affordable housing, coupled with lower returns from the now saturated luxury market will push Egypt’s housing situation forward.
But what of the little-income masses that need housing at almost symbolic prices?
They are left to fend for themselves in the slums and shantytowns, mostly located in clear view of Cairo’s priciest districts.