| 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. |
