Investment Property in Egypt

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Investment Property in Egypt

Property investment in Egypt is being heavily promoted by the Egyptian Government and Tourist Authorities as an interesting proposition for international property investors who are searching for a relatively low-risk environment, not too far from Europe. In 2005 new legislation was passed which made it far easier for foreign investors to buy property in Egypt on a freehold basis. These along with much lower registration taxes, which have been dropped from 12% to 3%, have opened the Egyptian real estate market up for international investors.

Egypt already has an established tourism industry and although it suffered due to Egyptian politics and the threat of terrorism through to 2005, it has rebounded and tourism figures are back on a positive increase. Recent changes in residential tourism laws are also expected to have a dynamic effect on properties in Egypt, with off plan developments and investment at the forefront of the promotion in real estate.

Egypt will not remain an unknown destination for much longer and it is destined to become an investment oasis especially alongside the shores of the Red Sea where there is a huge number of new off plan developments in the form of resort communities.

In the last two years, a growing number of property investors have been buying off plan properties in Egypt, many whom have already seen capital growth of between 20% - 30% especially in Red Sea resorts.
Prices are expected to grow at a median of 15% per annum as demand for off plan resort homes increases. Traditional holiday destinations such as El Gouna will no doubt continue to fair well, but it is new areas on the Sinai Peninsula and other areas on the shores of the Red Sea which are where the interest in investment is currently centered with Sharm El Sheikh and Hurghada being very popular with British and northern European investors.

Off Plan Investment Property in Egypt

All Egyptian property related contracts are written in Arabic which means that you will not only require a lawyer that is bi-lingual but also one that is able to supply written translations, understand British or some form of international property law and ideally be local to the area where you intend to invest.
With demand increasing for off plan developments, paperwork could be rushed by the developers as they try to keep up. A professional lawyer will help you to steer clear of any potential pitfalls. Although the purchase and registration process is straightforward it remains very different to that of your home company. Do NOT try and cut costs by omitting to use a reputable lawyer.

Economic Factors

• Property price returns of up to 30% per annum in some locations.
• Low cost of living and very low property prices.
• Strong economic growth in recent years (GDP 7-8%) and this is expected to continue through 2008
• Government reforms and incentives for foreign investment, making the property investment process far easier
• Strong growth in the tourist industry due to increased air services, modernization of amenities and completed luxury resorts and others under construction

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Fees and Taxes

• Property registration and legal fees for conveyance total around 6%.
• Stamp Duty on property is payable by the buyer at 3%. The buyer will also pay a small inspection and measurement fee (approx. £50).
• Income tax from property revenues is charged at 20 to 22%. Many countries enjoy a double taxation treaty with Egypt.
• Egypt levies no inheritance or capital gains taxes.

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Registration

Approximately 90% of all properties in Egypt are NOT registered. This is because up until recently the cost of registering a property cost in the region of 12% and took, on occasion years to process. Because of this, it can be very difficult to ascertain whether a resale property is actually owned by the vendor.

By investing in off plan properties the registration process should take no longer than four months, partly due to the fact that new off plan developments on the Red Sea and a few other areas are built on land that was previously owned by the government, which ensures that the title deeds were clear and free of liens at the time that they were sold to the developers

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Lawyers

The majority of lawyers that you wil meet will speak English and will be able to provide translations of all Arabic paperwork involved in the sales process. Egypt has a very different and at times complex registration system so it is imperative that your lawyer conducts the necessary property searches and double checks them prior to closing. A good local lawyer will be able to iron out any local idiosyncrasies that may be applicable

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Purchasing Off Plan in Egypt

When buying an off plan property in Egypt, prices are typically set by the developer and unless you are buying a number of off plan properties the price will not be negotiable. Resale properties on the other hand can be open to negotiation, but please bear in mind the problems of legally identifying the actual owner of the property and the registration process both before and after the point of sal.

Investors who are prepared to pay cash will find that some vendors of off plan developments are willing to discount 5-10% of the sales price or more often than not offer credit terms with 0% over 3-4 years.

As of the beginning of 2008, it is now possible to raise a mortgage in the UK when buying a property in Egypt. These tend to be easier to get on new off plan development as the banks are aware that the paperwork is far more likely to be in order and they will have a saleable entity.

In recent years the Government of Egypt has been increasingly aggressive with its marketing programmes for advertising the beauty, history and more recently the benefits of investing in Egypt. Economic policies have also shifted during the last couple of years and the privatisation of state owned companies and industry has generated in the region of some $3 billion dollars, which in turn has assisted GD figures to grow to between 7-8%.

These new alterations in legislation have made it easier for foreign investors to open new businesses and Egypt has garnered praise from the IMF and the World Bank Economic Forum which chose Sharm El Sheikh as its location to hold its Middle East Conference this year - 2008.

All of these new changes to the economy of Egypt have also had a positive effect on the Egyptian banking sector. A loan of half a billion dollars has been awarded by the World Bank to assist in the recapitalisation of the finance industry. Mortgages however remain archaic, with funds being available to finance property purchase being available but only with very high interest rates. Currently we would recommend that investors either buy for cash or raise necessary finance in their own country.

Transport Links and Infrastructure in Egypt is improving since a funding package of 5 billion dollars was granted to make necessary improvements to the national railway and other public transport networks.

During 2005/2006 tourism rose by 5.5% which is a point more than international tourism as a whole and tourism revenues rose by 11%. Hotel capacities have risen by over 5% per year and expected to continue.

Construction and real estate industries now account for around 7% of GDP in Egypt and the continued demand for new resort communities in tourism areas but also the need for new cities for the national market means that the future is bright in many areas of Egypt.

All in all the economy is prospering across Egypt, which is a good sign to international investors that the current real estate boom is not isolated to key areas and therefore prone to become a bubble driven by marketers as against one driven by a genuine need and desire of the Egyptian government.

Principle areas of interest for investors are the Sinai Peninsula on the Read Sea, Sharm El Sheikh, Hurghada. Many of these new off plan resorts have guaranteed rental schemes in place, with genuine infrastructures in place that will ensure that they are adhered to.