Invest-Gate discusses investing in Second Home Property in coastal areas

Invest-Gate held its second roundtable of the year, which commenced on Wednesday, May 29th, 2024 at the Nile Ritz-Carlton, under the title “The Luxe Retreat: Exploring Second Home Property Investments As True Wealth Builders.” This exciting occasion dove deep into exploring the investment potential of second homes, especially in Egypt’s coastal regions in the Mediterranean and Red Sea.

Organized in collaboration with the Egyptian Businessmen’s Association (EBA) and the Egyptian Lebanese Businessmen Association (ELBA), this event brought some of the market’s most outspoken industry leaders, seasoned professionals, and innovative minds to the table to discuss topics including the interest of both local and international investors in residential property developments on Egypt’s scenic coasts, the top legal and policy reforms that are driving investments in these regions, the potential ROI of second homes, branded residences, investment vehicles, the role of brokers, making an income from renting a second home, and a variety of other updates related to the market.

This roundtable was moderated by Mr. Amr Elkady, Founder & Managing Director of AKD Advisory and Board Member of Egypt’s Real Estate Export Council, and witnessed the participation of speakers, including Dr. Mostafa Mounir, CEO of the Tourism Development Authority; Eng. Hisham Shoukry, Chairman of Real Estate Egyptian Council and Founder & CEO of Rooya Holding for Real Estate; Mr. Ayman Abbas, Chairman of Intro Investments Holding; Eng. Mohamed Abdalla, Chairman of Coldwell Banker Middle East; Mr. Ibrahim El Missiri, CEO of Somabay; Mr. Haitham Mohamed, CEO of ORA Developers Egypt; Eng. Waleed Mokhtar, CEO of Iwan Developments; Mr. Akef El-Maghrabi, CEO and Managing Director of Suez Canal Bank; Eng. Bassel El Serafy, CEO of Adeer International; Mr. Nader Khozam, Chairman & CEO of Il Cazar Developments; Dr. Raymond Ahdy, CEO of Wadi Degla Developments; Mr. Omar El Tayebi, CEO of TLD- The Land Developers; Eng. Yasser Al Beltagy, Founder and Chairman of YBA; and Mr. Mohamed Galal, Founder of TSM.

This roundtable served as a platform to offer a unique perspective on market trends, new ideas, the latest developments, and government initiatives that are fueling the growth of this booming area within Egypt’s property sector. Moreover, discussions that were held at this enlightening occasion served an educational purpose to provide both new and experienced investors with the insights that they need to make the most informed investment decisions.

The roundtable’s esteemed moderator Mr. Amr Elkady, Founder & Managing Director of AKD Advisory and Board Member of Egypt’s Real Estate Export Council, started the discussion by thanking Invest-Gate for inviting him to this productive engagement to exchange views and explore solutions to boost investments in the real estate sector. Elkady stressed the importance of second homes for the revitalization of the real estate sector and development in general.

Dr. Raymond Ahdy, CEO of Wadi Degla Developments, emphasized that the coastal homes market is an expanding worldwide trend and one of the notable factors driving this segment’s growth globally in the real estate industry is the coastal homes rental market. He mentioned that last year the coastal homes rental market reached $80 billion and it is forecasted that by 2030 it will be worth $118 billion at an annual growth of 5%.

Within Egypt, there are several factors that drive the local second homes market. One of the promising signs of its growth, he highlighted, is the improving standards of living because that motivates families to think about investing or possibly purchasing a second home. He pointed out there are a variety of motivating factors for local buyers/investors who would be interested in acquiring a second home, which includes maintaining the value of their money. He added that some local buyers/investors are also just generally following a global trend of buying second homes to rent.

With regards to the global second homes rental industry, he highlighted that this segment’s growth is driven by a portion of the world market that is between the ages 25 and 35, which make up 35% of those who rent second homes.

Ahdy noted that among the key selling points of second homes in Egypt are the atmosphere and location on the Mediterranean Sea and the Red Sea, which offer more accessibility. He also highlighted the government’s efforts to develop infrastructure to attract investors.

Dr. Mostafa Mounir, CEO of the Tourism Development Authority (TDA), emphasized the importance of TDA’s role as the state’s arm for developing tourism projects and outlined the vast amounts of land that can be used for tourism development, representing a massive opportunity.

He revealed that the North Coast and the regions of Ain Sokhna and Ras Sedr are the most attractive destinations for holiday homes in Egypt, stressing that the TDA will work to increase facilities for companies and developers in addition to incentives in light of the directives of Prime Minister Mostafa Madbouly to remove obstacles facing investors, provided that periodic sessions are held with investors to learn about their visions.

Mounir added that the number of hotel rooms in projects affiliated with the TDA has reached 104,000 units, and there are 103,000 residential units of holiday homes (second homes) as well. He pointed out that there are promising tourism investment opportunities offered by the TDA periodically to achieve the state’s goal of continuously adding hotel units throughout Egypt.

He continued: “We need a different perspective for projects based on the specificity of each region and its features, and there is an increase in demand in attractive areas such as Marsa Alam, Dabaa and Ras El Hekma.”

Mounir revealed that there are plans to launch a website in coordination with the Ministry of Communications to display promising opportunities related to real estate, which will include all the basic details in addition to the procedures for reserving and purchasing various spaces.

Also, Mr. Nader Khozam, Chairman and CEO of Il Cazar Developments, discussed the requirements of the Tourism Development Authority for hotel rooms, calling for the release of their terms to support the real estate sector in Egypt. He stated that the North Coast has become a region for semi-permanent residences for many, not just vacation homes, amid significant infrastructural development within the area, including the high-speed train. Khozam added that he expects a surge in property prices on the North Coast in the next three to four years.

Eng. Hisham Shoukry, Chairman of the Real Estate Export Council and Founder & CEO of Rooya Holding for Real Estate, stated that hotel apartments are increasing worldwide and represent a huge opportunity. He indicated that the annual growth rate in hotel rooms is about 3% globally while the growth of hotel apartments is 25%. Shoukry recommended that hotel apartments be included as part of the hotel segment to improve the profitability of this initiative and boost investments.

In addition, Mr. Akef El-Maghraby, CEO and Managing Director of the Suez Canal Bank, discussed the BRICS currency as well as its impact on the dollar and real estate prices. He highlighted that the new BRICS currency specifically targets investors from the member states of BRICS. He pointed out that there must be a suitable real estate product in Egypt to attract investments from BRICS countries. El-Maghraby pointed out that though second homes in Egypt are attractive to investors/prospective buyers from Russia, most Egyptian real estate exports currently target GCC countries.

Mr. Haitham Mohamed, CEO of Ora Developers Egypt, pointed out that the value of the US dollar has increased by approximately 50% against the Egyptian pound during the last period. In addition, Mohamed noted, the price of land on the North Coast rose from EGP 1,000 per square meter to EGP 10,000, creating a heavier financial burden for developers by increasing project costs. Noting the significant price hikes in land and building materials, he emphasized that the cost of labor also rose, driving up construction costs and causing developers financial loss. Mohamed highlighted that he expects that the prices of hotel apartments in the North Coast will continue to rise in the coming period, as a result of the current economic conditions.

Moreover, Eng. Bassel El Serafy, CEO of Adeer International, stated that real estate funds could resolve many of the challenges facing the real estate sector in Egypt. He highlighted the need for hotel rooms in the country to apply models that have been proven successful in other countries to make rapid progress. He emphasized the significant market potential for Egypt’s coastal areas overlooking the Red Sea and the Mediterranean, advocating for more facilities to be offered to investors.

Mr. Mohamed Galal, Founder of TSM, stated that TSM has made significant progress by investing in asset management. Galal noted that the North Coast experienced a boom not only for social reasons but also due to the development of commercial and entertainment facilities driven by potential demand from tourists.

For his part, Mr. Omar El-Tayebi, CEO of TLD-The Land Developers, stated that investing in the entertainment sector in coastal areas is crucial, as it supports the increase in demand by both investors and customers. El-Tayebi explained that his company has been operating in Hurghada since the 1980s. He noted that about 70% of hotel rooms that are under the supervision of the Ministry of Tourism in Egypt are located in Sharm El-Sheikh and Hurghada. El-Tayebi suggested that tourism investment requires support from the banking sector to help the industry expand.

Eng. Waleed Mokhtar, CEO of Iwan Developments, commended the recent boom in vacation homes in Egypt. Mokhtar added that developers bear a significant burden due to changes in exchange rates. He said measures should be taken to help companies facing the challenge of property price fluctuations as a result of the extreme surge in the US dollar value. He further noted that while the government offers flexible facilities, devaluation has caused many challenges that need to be addressed.

Additionally, Mr. Ibrahim El Missiri, CEO of Somabay, called for attracting committed investors through incentives. El Missiri also discussed difficulties investing in tourism as well as regulatory obstacles in several areas, including controls on entertainment, and called for the easing of these restrictions. El Missiri also discussed the importance of building the necessary infrastructure and facilities, such as airports and schools, to make certain remote regions habitable for growing residential communities. He further highlighted issues related to trademark regulations, particularly in the Red Sea region as well as challenges related to property registration.

Discussing second homes from an architectural, Eng. Yasser Al Beltagy, Founder and Chairman of YBA, outlined that second homes for a designer need a comprehensive and holistic approach, considering factors such as construction and topography as well as aesthetic and visual or emotional elements that will appeal to the prospective buyer.

Availing the required facilities and services is also an essential factor in determining a project’s success, according to Al Beltagy. These are the qualities that made Marina such a big success.

He explained that the hotel segment is an important area for real estate investments, adding that there is a need, both now and in the future, for setting certain standards for hotel projects. He called for passing legislation that would help extend the residence period in hotel units from only two weeks to two months.

Focusing on real estate marketing, Eng. Mohamed Abdalla, Chairman of Coldwell Banker Middle East, commended and welcomed the introduction of new marketing tools to promote attractive property offerings.

He emphasized that though technology has been a key enabler for real estate marketing, the human contribution to the marketing process is always important and cannot be ignored. He pointed out that platforms, such as Airbnb, show the Egyptian real estate market has a rich variety.

He expressed his agreement regarding the important role of the brokers, highlighting that any players that enter the market serve to enhance and promote competition. Focusing on the real estate sector, he indicated that every player has a key role within the market’s ecosystem, since Airbnb is a platform for marketing yet property management companies are also important for other essential functions within properties.

Abdalla also expressed interest in marketing properties through the metaverse, which can give prospective buyers/investors a close and personal experience of the featured properties.

He also pointed out that the West Alexandria region is undergoing major expansion. Abdalla expects the Ras El Hekma project to attract people from various governorates, not just from Alexandria.

Finally, Mr. Ayman Abbas, Chairman of Intro Investments Holding, stated that investing in second homes is a very important issue. Abbas compared the Egyptian real estate market to Dubai’s, highlighting that Egypt has enough resources and capabilities to achieve similar success but action needs to be taken. This can be achieved by creating a thorough strategy with specific targets to achieve that goal. Abbas reiterated that Ras El-Hekma is the first free zone designated for service, commercial, and tourism purposes.

Sponsors for this roundtable included Somabay (Platinum Sponsor), YBA (Gold Sponsor), and Il Cazar (Delegates’ Bags Sponsor). Silver Sponsors included TLD-The Land Developers, Wadi Degla Developments, and TSM.