Buyer Beware of Building Standards if Buying Property in Egypt

One of the key differences between emerging property markets, such as those in Morocco, North Cyprus and Egypt for example and established real estate markets such as those in France, the Republic of Cyprus and Spain, can be tangibly observed in the form of building standards – or rather a lack of them!

And when it comes to Egypt it really is a case of buyer beware of building standards if buying property in Egypt because boy do they vary dramatically between constructors. The bottom line is that if you’re contemplating buying any unit in a high rise you need a structural engineer to check out construction techniques and even if you’re buying a low rise property you need to look at what’s being built around you…

The fact of the matter is this - Egypt has a number of fault lines and has suffered direct earthquakes, earth tremors and the after shocks of quakes in the region - it’s not a question of if Egypt will have another earthquake it’s a question of when. And while international cities in established property markets (e.g., Tokyo) regularly survive an earthquake unscathed, a city like Cairo could be catastrophically damaged by an earthquake of a relatively low magnitude.

Why? Because of the standards of construction that developers get away with in a nation like Egypt.

Not only are building standards lower than that which many of us are used to in our home countries, but they are also far less stringently observed in Egypt.

Now, to a degree we accept that a property that is being sold for under GBP 100,000 in this day and age in a nation as stunning and enticing as Egypt is going to be of a lower construction standard than Northern European or American standards for example…but while this doesn’t matter when it comes to fixtures and fittings, it does matter when it comes to foundations, the concrete mix, the thickness of steel, the use of cross bracing and base isolation and other earthquake proof construction methods for example.

Okay – so, as a buyer you now know you need to beware of building standards if buying investment property in Egypt – but how can you tell whether a building is well constructed or just well finished with paint and plaster covering the cracks? Often times you can’t – not without the services of a structural engineer who can provide you with as comprehensive a structural survey as you’re willing to pay for.

And if you think hiring their services is too costly an additional fee to pay if you’re investing with tight margins…buy low rise away from any other high rise building but be aware that any future buyer you hope to flip forward to may well commission their own structural survey and if they find faults they’ll protect themselves but it will be too late to protect your investment.

So, ‘buyer beware’ as always – and in the case of emerging markets such as Egypt, beware of construction techniques.

As a foreign investor you have the right to own real estate and land in Egypt, but unfortunately the property registry in Egypt is out of date, incomplete and many believe only 10% of properties in Egypt are actually registered - naturally this creates a problem for the property investor.

However, the majority of real estate investment interest is focused on the main cities and resort areas in Egypt and these are far more geared up to the international property market.

Furthermore the Egyptian government is committed to attracting foreign investment into many sectors including the real estate sector therefore the path is being eased for investors all the time. This is our guide to the property buying process in Egypt for real estate investors.

Hernando de Soto, the president of the Institute of Liberty and Democracy, recently issued a report that explains why so few properties are officially registered in Egypt; according to his research the legal process to acquire permission to build property and then officially acquire the title deed to the land on which the property has been built requires no less than 77 bureaucratic procedures at 31 different agencies and it can take anywhere between 6 and 11 years. This has ensured that only 10% of properties in Egypt are officially registered.

If you then add to this the fact that the property registration fee until very recently was 12% of the property’s net value (it’s now 3%) you can see just how expensive and time consuming following the correct legal channels can be in Egypt and you can realize why so few properties have been registered and have title deeds.

As stated the government of Egypt under Prime Minister Nazif is working hard to promote investment incentives and make things like the freehold ownership of real estate in Egypt easier to acquire for foreign investors.

As the procedures improve so the appeal of the country increases and so property prices increase in direct relation.

An investor who buys into this emerging property market now may well be buying into a prolonged period of growth which is the exact appeal of Egypt from an investor’s perspective.

A real estate investor 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 assist with 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 in his name and acquire the deeds to the real estate.

An investor requiring a mortgage to purchase property in Egypt may like to secure this outside of the country - alternatively mortgage law in Egypt has recently improved and investors and foreign buyers do have access to mortgage products in Egypt now.

However, the real estate they are seeking to purchase has to be registered at the property registry for the mortgage company to consider it. To be eligible for home finance an investor will need to fund no more than 85% of the property purchase price and be able to repay within either 20 or 30 years.