Cairo, Egypt, is not an international real estate investor’s typical investment destination. To be frank, when I went to Cairo I was pessimistic about the market. After having spent time on the ground, talking to many people, and doing more research, I am now optimistic.
This article is part two of another article which you shoud read first “8 reasons why Egypt is poised for strong growth“. In a nutshell, painful economic reforms, a focus on growth, a new political and economic model, a reformed energy sector and good results all point towards a growing economy.
Additionally, 3 factors are specifically bullish for real estate
- The population of greater Cairo is expected to jump from over 20 million currently to 38 million by 2050.
2. Interest rates are falling fast.
3. A derelict housing stock. This building below is in Zamelek, Cairo’s best neighbourhood. It is objectively better than 95% of buildings in Cairo. It was built in Socialist times and is clearly outdated. People with money will not not want to live in such buildings anymore. If this is what rich people housing looks like in the core center, can you imagine what it is like for middle class and poor people?
I saw something which is rather uncommon in real estate markets I’ve been to. Many buildings do not have windows on entire sides of their facades, and owners randomly choose to add windows. Again, this building is in the heart of Zamelek and is better than 95% of Cairo buildings.
The city of Cairo, excluding the new coumpound-living cities which encircle Cairo, has a housing stock of extremely poor quality. Think Eastern European blocks of the 1960s, in worse quality and much dirtier.
There is virtually limitless potential demand for new, better housing.
In which neighbourhoods should you consider making a real estate investment in Cairo Egypt?
Left of the Nile: Nothing to report there. Mostly lower-end neighbourhoods with horrible construction standards. Also, ignore the new cities being built on this side of the city (more on this below).
Zamelek: The historical “expat” center of Cairo. At one point, over half of the British population of Cairo lived in Zamelek. It is where the vast majority of embassies are currently located. This is also where Cairo’s nightlife is concentrated, with a number of cool bars and restaurants. Finally, being the center of the former British colonizers, stunning historical buildings can be found, albeit in various states of condition.
Zamelek is one of the greenest neighbourhoods in town, but the pollution levels are nevertheless overwhelming. I hate to say this, but objectively Zamelek isn’t that nice. However, seeing how much of a hell-on-earth main Cairo is, whenever I came back to my hotel in this neighbourhood it felt like a little island paradise. This is how most local residents feel as well.
In spite of a few leafy roads, the reality is that it is nevertheless fairly ugly. Just walking around the neighbourhood, one can tell that it went through better days. In colonial times, it must’ve been very nice for those living here, and in the 1970s and 1980s as well. Have a look at these buildings from those years:
Now they just look old in a bad way. Yet, they are worth too much to demolish and build something new.
In other words, Zamelek has a feel of past glory.
With that said, it is nevertheless in the middle of Cairo, has some beautiful historical buildings, and will always remain better than the vast majority of neighbourhoods. As an investment, I don’t see any immediate upside. Rather, it’s a safe Cairo play if you are in it for the long haul. I visited an apartment in the area – more on this below.
Maadi: The other expat area. It’s a bit far from the center but is leafy, a bit more affordable, and more spacious. Along with Zamelek it is the top area in Cairo. However, it also suffers from a slightly ageing housing stock. A positive point is that it is close enough to New Cairo and the New Administrative Capital thanks to a network of highways. It is also a fair, safe, long term play.
A Mess: Old Cairo, slums, working class neighbourhoods. There is everything in this area, from historical buildings near Tahrir Square, to century old houses, to middle class neighbourhoods, markets, and slums. However, they are have three things in common: crowds, dirt, and pollution. This area, along with the West side of the Nile, is illustrative of why people want to move OUT of Cairo.
An example of a real estate investment in Zamelek, Cairo, Egypt
The way the real estate market operates in Cairo is a bit different from most places. Yes, there are real estate agencies and online services. However, a common way for people to hunt for deals is to go around to the specific buildings they like and ask the men who work in these buildings if there are any apartments for sale. Typically, most building have an older man sitting on a chair who takes care of maintenance, and helping people in the building.
They know everything about the building (and their inhabitants) and act as middlemen.
I went to visit apartments and this one is an example of a typical long-term Zamelek play. If I were to invest in Zamelek, I would invest in historical buildings of character, as that is what Zamelek symbolizes. I wouldn’t touch any of the 1970s-1980s buildings with a ten-foot pole.
The apartment is 200m2, boasts 3 bedrooms, 2 bathrooms, a 4m high ceiling, nice views, and is on the 4th floor (not the top floor). Its list price is EGP 6 million ($382,000) or about EGP 30,000 per m2 ($1915 per m2). The average price in Zamelek is about EGP 23,000 per m2 ($1460 per m2), so this apartment comes at a premium, but bear in mind that the Zamelek average includes all these poor quality buildings I mentioned, which represent the majority of housing stock in the area.
The views are pretty, the building has charm, it’s bright, and the apartment is on a good floor. This building is in the ”good” (North) part of Zamelek, as opposed to the ”bad” (South) part.
Clearly, it needs a revamp. I’d estimate the renovation costs at EGP 3000 per m2 ($190 per m2) for quality finishings as the wooden floors and windows look ok.
Say you negotiate the price down 10% (haggling is expected in Egypt), you’d end up with a total price tag of about $385,000 including renovation costs and purchasing costs.
Rent-wise, you could expect $1,450 per month renting it to expats. That would yield you a gross 4.5% – nothing fantastic. But it’s not surprising, as after years of capital controls and inflation, wealthy Egyptians ploughed their savings into prime real estate.
Low yields are a feature of making a real estate investment in Cairo, Egypt. The game here is all about capital gains.
This apartment has extra potential for capital gains seeing that a mere one minute walk away, the city is building a new subway station.
If you require an agent for your investment or even rental needs in Zamelek, reach out to Monica Lamberto email@example.com of www.zamalekrealestate.com. She was very friendly and patient. As you can imagine, I typically have a lot of questions!
As much as I see the allure of Zamelek as a safe Cairo long term play, my speculative side discovered a Cairo play with much more potential upside.
Most people that can, head East of Cairo
Even though I travelled a lot across Africa, including to many of the continent’s massive cities, I must say that nothing was as unpleasant as Cairo due to the pollution, traffic, and overcrowding.
Most people from Cairo would agree with me, and are moving to shiny new cities which encircle the capital. These cities have proper infrastructure such as wide roads, good urban planning, new housing, large malls, new hospitals, schools, universities, and most importantly residential compounds.
Cairo has become all about the compound life
I know I said enough negative things about Cairo by now. Let me change my tone completely and make this statement.
Compounds in Cairo make European city living look backwards
Many of these compounds are absolutely amazing. The housing stock is brand new, the schools, hospitals and universities have state of the art facilities, they are leafy with many parks and pools, they are safe, and there is much less pollution in the air.
Most of them include private clubhouses and restaurants, and all the facilities an urbanite could dream of.
Why would anyone ever want to live in Cairo when there is such a superior lifestyle a few kilometers down the road? Most don’t actually, it’s just a money and availability constraint.
Compounds will become ever more of a magnet as Cairo’s population mushrooms from 20 million to 38 million by mid-century.
My North American, South American and African audiences will understand. My European audience will have a hard time understanding the attractiveness of the compound life. Yet, this insight is key to making a good real estate investment in Cairo, Egypt.
Make a real estate investment in the East of Cairo, Egypt
Some developers will try to sell you apartments in the new cities of “6th of October City” and “Sheik Zayed City” West of Cairo. Don’t invest there.
The reality is that there is nothing wrong with these new, modern, clean cities. The only issue is that they are not where the growth is concentrated. The New Administrative Capital and the International airport are on the complete opposite side of the city. Therefore, the West will see much less growth and demand going forward.
A game-changing project in Africa and the Middle East: Egypt’s New Administrative Capital
Cairo is hell-on-earth and most Egyptians will agree with me. To remedy this, a visionary project was launched by President Sisi: The New Administrative Capital.
Located a mere 35km east of Cairo, it is a gigantic project. The new capital of Egypt aims to house 6.5 million people (the size of Madrid), and will be Africa’s first, real smart city. Think Dubai, but built by Egyptians for Egyptians, with actual demand for everything they will be building.
It will be made up of campuses, compounds, financial centers, a new international airport and will boast world class amenities and infrastructure. All ministries will relocate there and government employees will be made to move as well. A monorail line will link the New Administrative Capital to the rest of Cairo.
The business district will host Africa’s tallest building, and the city will have Africa’s biggest expo center.
It’s hard to imagine the scale of the project until you go there. I really recommend you check out this 7-minute Youtube video to get an idea of the scale of the project: https://www.youtube.com/watch?v=UJY7597PrR8. If you don’t watch it, you won’t understand what I’m writing about.
It is not a pipe dream; It’s happening
My pictures are horrible as the weather was bad, but the city is being built – fast. Schools are already operating as well as several universities such as the Canadian University. Students either drive there or are bussed to campus.
It’s a priority project for the government as it is President Sisi’s pet project. He wants, and needs it, to be a success. People, businesses, and ministries will be forced to move there, whether they like it or not.
This is a key point that will make this project a success. Unlike with the other new cities around Cairo, the authoritarian government will force people to transition to the new capital.
This massive project is being undersold. Very few people from outside the Middle East have heard about it, and even fewer understand the scale of it. It’s a game changer.
I went to see a number of developers to discuss the project with them. One of them had a nice view of my former employer 🙂
For all developers I spoke to, their highest priority projects were in the New Administrative Capital. Why? Because the government is sitting on them. Every few months they have a government delegation show up and follow up on the projects’ Key Performance Indicators (KPIs). Between signing for the land, and handing over the keys of a completed compound, developers have four years. If they are late by even a day, the government charges them brutal penalties.
Nowhere else in the country are developers under such pressure. As a real estate investor, I love it when developers are under pressure to deliver on time, and are held accountable.
It is such a priority that all projects in the New Administrative Capital come with a STATE GUARANTEE
Yes, this is unheard of. Essentially, if a developer goes bust, then the government guarantees to the investors who bought apartments or villas that they will either get their money back, OR that the government will complete the project.
So essentially, you can speculate on real estate in the New Administrative Capital, and have near complete downside protection in EGP thanks to a state guarantee. It’s like buying an Egyptian government bond, but with a hard asset play.
When I heard of this I had a hard time believing it as it’s such an attractive feature. A lawyer confirmed this deal. Here’s the document from the government:
Large 2 bedroom apartments can be had for about $60,000 (!) – less than $500 a m2
Yes, these numbers are absolutely incredible. Of all the developers I visited, I liked this one best as it wasn’t too expensive, nor too cheap as you don’t want to attract the wrong crowd.
This project is priced for the middle class, has pools, offers safety, and even has a clubhouse. It’ll be close to schools, malls, and everything anyone would want.
There are multiple apartment sizes available. I’d recommend 2 or 3 bedroom apartments. The reality is that people have large families so demand is strong for this segment.
Over half the project has been sold. There are a few 115m2 2 bedroom 2 bathroom units left, but most 2 bedroom units are 125m2.
There are various payment plans and the price per m2 changes between apartment sizes, floors, and buildings.
The typical price for payments over 10 years is about EGP 10,000 per m2 ($637 per m2), and if you pay cash now, upfront, you can get discounts of 25%-35% depending on the units. Paying EGP 7,500 per m2 would be fairly typical in such cases, which amounts to less than $480 a m2.
Granted, these numbers are for brownfield construction. This means you need to do the bathrooms, kitchen, paint the walls, add the tiles, etc. The developer can do this for you for EGP 2,500 per m2 ($160 per m2), with a possible payment plan over 4 years.
A parking space is an additional EGP 70,000 ($6,000), which I recommend due to the car culture.
This Excel file has the 10 year payment plans for the 2 bedroom and 3 bedroom units. Do bear in mind prices are in EGP. Prices will rise in January, and gradually over time as the project advances.
Why I find this a very interesting real estate investment in Cairo, Egypt
- Egypt is poised for strong growth due to a number of factors as mentioned in my article on the economy in Egypt.
- If you pay cash, it’s dirt cheap. Prices could hardly be any lower. Construction costs and land prices in the area are bound to rise.
- If you pay over 10 years, you are effectively taking a 10 year fixed loan in Egyptian pounds. If the currency devaluates, which is very possible at some point, you’ll be paying less and less every month. This option is available to non-residents as well.
- Even if the currency devaluates, it is likely the price of real estate will tag along with inflation, especially at such low prices. When prices are that low, it means the developers don’t make thick margins, so you are not paying that much more above land and construction cost.
- As soon as people start living in the New Administrative Capital, and the tallest building in Africa is complete, expect international awareness and locals wanting to move in. You’re likely to see a re-rating of property values.
- Interest rates are falling, which will boost the real estate market even more. It’s only in the past 3-4 months that 10 year payment plans have been made available by developers. In the near future, bank lending is going to play an even bigger role. This is a major catalyst for price growth.
- The government guarantees your investment. Sure, the Egyptian government is not the most solvent of governments, but a state guarantee is an amazing deal, especially as this is a priority project with strong political support.
- In case you cannot afford the installments anymore, according to Egyptian law you can only lose 10% of the price of the apartment. The developer must reimburse you the rest.
- The reservation agreement and paying the deposit and installments can be done entirely remotely – no need to go to Egypt. You’ll just have to come at the key handover to get the apartment registered in the cadastre. Also, why wouldn’t you want to come for this? It’s the fun part 🙂
- The developer can help you flip the apartment through his resale department.
- This New Administrative Capital is being totally undersold abroad. Right now, pretty much the only foreign investors are from the Gulf region, though this developer has sold some units to Spaniards.
If you want to find out more, feel free to get in touch with the CEO directly at firstname.lastname@example.org.
Mohamed did his undergrad in Poland and completed his postgraduate studies in the UK, so he can help you in English. It’s also great to have direct access to the CEO when making such an investment abroad – you’re bound to get better service.
Are Home Owners Association (HOA) fees expensive?
Egypt is quite unique in this regard. When you receive the keys to the apartment, you are expected to pay 8% of the value of the property into a “maintenance fund”. The plan is then for the HOA to use the interest payments on these funds to pay for the maintenance costs. Most developers will essentially tell you that you pay 8% once and then nothing ever again. More honest developers will let you know that you will be expected to pay any gap between the interest received and the actual HOA fees,
At 9% interest per year, it amounts to almost 0.8% of the property value per year for HOA fees, which is fair. I don’t see this system as sustainable long term due to inflation, and potentially lower interest rates. But still, it ensures that there will be good maintenance for quite a long period of time, even if other owners stop paying.
What are the risks of making such a real estate investment in Cairo, Egypt?
I mentioned the macro risks in my article on the Egyptian economy.
As for the project risk I’d say a few:
- You want to make sure what you are signing is a proper contract. As always, even with a developer contract, get a local lawyer to review it for you. You can find one through your embassy, or one of the foreign chambers of commerce in Cairo.
- If the developer were to go bust, even if there is a state guarantee, it would nevertheless not be pleasant, but certainly not a catastrophe. It’s pretty amazing to be able to buy an off-plan apartment from a developer without having to worry much at all.
- Rental yields will probably be low as a lot of supply would come just as people start moving in. This is a capital gains and diversification play. It’s hard to conceptualize how such apartments could cost less than $1,000 per m2 in a few years from now.
- Currency risk. If the economy were to take a turn to the worse, then getting dollars out of the country could be problematic.
It’s not for everyone. I wouldn’t buy my first and only property there. This is more adequate for people who already have assets and are looking to diversify.
Overall though, this is a surprisingly low risk way to play a very interesting developing market growth story. Also, the ticket size is low and it’s not complicated. I find making such a real estate investment in Egypt, Cairo, very compelling.
There’s an element of fun as well. It’s also about buying early into a visionary project.
A few legal aspects related to making a real estate investment in Cairo, Egypt.
I had a chat with Mr. Emad Helmy Said (email@example.com, WhatsApp +201224661050) in Zamelek, who was very helpful. Here are a few points you should know:
- The registration process for second hand properties is quite bureaucratic. It can take anywhere from 6-8 months to complete, which a lawyer can do for you with a power or attorney.
- Many second hand properties in core Cairo are not legalized, so it is important that your lawyer performs proper due diligence.
- There is no capital gains tax on the sale of real estate in Egypt. However there is a 2.5% tax that the seller must pay on the value of the sale .
- There is a yearly, non extravagant property tax.
- No inheritance tax.
As always, check in your country of tax residency for the local tax implications of such an investment.
In any case, make sure to hire a lawyer to help you navigate through the purchasing process, even through the much simpler route of buying directly from a developer. It’s important that your contract be both in Arabic and English for banking purposes back home.
Investing in real estate qualifies for the Citizenship by Investment programme in Egypt
Not that the Egyptian passport is a great travel passport, but why not get it thrown in for free if you invest a large enough amount?
If you make a properly structured real estate investment of $500,000 anywhere in Egypt, not just in Cairo, you qualify for Egyptian citizenship. Egypt allows dual citizenship so you won’t need to give up your (hopefully) better passport.
If you want to find out more about that real estate development in the new capital, feel free to get in touch with Mohamed, the CEO, directly at firstname.lastname@example.org.
Other articles on Egypt:
If you want to read more such articles on other real estate markets in the world, go to the bottom of my International Real Estate Services page.
If you want to discuss your internationalization and diversification plans, book a consulting session* or send me an email.
*a consulting session is a discussion about your portfolio and objectives. It does not constitute legal, financial, tax or investment advice.