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Property Purchase in Egypt

REAL ESTATE PROPERTY MARKET

Egypt has long been known for its antiquities and exotic tourist sites. In the past, most visitors travelled on package tours and stayed in hotels. As with many other middle eastern and north african countries, Egypt is seeing a developing property market driven by foreign investors. If you want to be ahead of the pack, this is a good time to invest in Egypt. The property market is still at an early stage of development, and lags behind the tourist market - a perfect letting scenario.

Recent changes in Egyptian legislation and taxation rules make it easier for foreigners to buy and own property in Egypt. The emergence of a resale market driven by both local and foreign property investors has provided excellent opportunities for both short and long term property investment. Where other markets such as Florida and Spain are maturing, Egypt is at an early stage in the property development cycle, and provides an opportunity for investors to enter the market early rather than paying mature prices.

The market is strongest in the major commercial centres of Cairo and Alexandria, and the government have provided special relaxed visitor visa regulations for key resorts.

It is evident that interest in the investment property market in Egypt is beginning to awaken as investors in the wider world becomes aware of the incredible opportunities and incentives available for investors in Egypt.

The key market factors attracting overseas investor interest include Egypt’s fast growing tourism sector, the fact that the government is continuing to commit to legislative initiatives designed to enhance the investment climate and the fact that property prices in Egypt remain low and affordable whilst demand for quality property for sale and short term let is increasing.

EGYPT VISA AND ENTRY CONDITIONS

There are no restrictions for EU passport holders. Visa on Entry costs £10. Otherwise visa price starts at £15.

Is a Visa required for Egypt?

Visas are required by all nationals referred to in the chart above except the following:
(a) EU nationals travelling to Hurghada, Sharm El Sheikh or Taba Resorts for up to 14 days. They will receive an entry permission stamp upon arrival;
(b) those continuing their journey to a third country within 24 hours, provided they are holding confirmed tickets;
(c) cruise ship passengers entering Egypt, at any port, for a maximum of three days.

EGYPTIAN CURRENCY

The official currency is the Egyptian Pound

1 Egyptian Pound = 100 Piasters

1 US Dollar = approximately 5.75 Egyptian Pounds (as of October 23, 2006)
1 British Pound = approximately 10.75 Egyptian Pounds (as of October 23, 2006)

EGYPTIAN GEOGRAPHY

Capital
Cairo is the capital city of Egypt. It is the largest city in the Arab World, Africa, and the Middle East. It is also the industrial and commercial centre of Egypt.

Geographical Area
Total: 1,001,450 sq km
Land: 995,450 sq km
Water: 6,000 sq km

Population of Egypt
77,505,756 (July 2005 est.)

Languages spoken
Arabic (official), English and French widely understood

Climate
Egypt has hot, dry summers and moderate winters.

Egypt Property Buying Process

When you buy property in Egypt as a foreign investor you have the right to own real estate and land. Unfortunately the property registry in Egypt is out of date and incomplete. It is believed that only 10% of properties in Egypt are actually registered and this naturally creates problems for the property investor. The good news, however, is that 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. This is especially true of new property being built.

In recent years the Egyptian government has shown a committment to attracting foreign investment into many sectors including the real estate sector therefore the process of property purchase and ownership for foreign nationals as investors is improving all the time.

The Egyptian government is working hard to create and promote investment incentives and make things like the freehold ownership of real estate in Egypt easier to acquire for foreign investors. As the property purchase procedures improv, so the appeal of the country increases and this is having a direct bearing on property prices.

A property investor who buys into the emerging Egyptian property market now may well be buying into a prolonged period of growth. This is good news for the property investor. A real estate investor wishing to avoid new property and 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 advise on 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 by the authorities in his name and acquire the deeds to the real estate.

A property investor requiring a mortgage to purchase property in Egypt may want to consider securing this outside of the country, however mortgage law in Egypt has recently improved and investors and foreign buyers do have access to mortgage products in Egypt now. 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 a home finance mortgage 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.

Main Stages in the Standard Property Purchase Process

• The buyer reserves a new (off plan or under construction) property with a reservation deposit (usually GBP£2000) providing the ‘option to purchase’ and fixing the sale price from date of reservation.
• The vendor (seller) releases a private purchase contract (in english & arabic) and supplys paperwork relating to the title, boundaries, planning permission, building license, furniture pack and rental guarantee option.
• Part of the contract will also lay down the conditions relating to the payment of the balance of the purchase price. At the moment we have selected a 30% on contract, 10% within 6 weeks, 40% in the second stage of construcion, 15% on completion, and 5% on snagging.
• The schedule of stage payments are made to coincide with various stages of the construction process. (‘milestone’ payments)
• The purchaser will transfer the correct sum of money to an ‘escrow’ account where it will be held until the developer has reached the ‘milestone’. The money is released to the developer only when it has achieved the promised stage of development. This helps to safeguard the clients exposure in case of the developer running into problems with the construction.
• The keys are given to the owner once the 15% completion payment is received. The owner then has a limited period to ask the developer to fix any remedial issues before paying his final 5% snagging payment.
• The property can now be registered in the land registery in the name of the new owner.
  the new regulation of registration fees:

STAMP DUTY & TAXATION

• There is no VAT to be charged on buying a property in Egypt
• There is no CGT tax in Egypt
• Registering the property in the land registry is under 1.5% of the property value per m2
• There is no wealth tax based on the value of the property.
• You will be charged 20% tax on income generated through rental
• Inheritence tax, in Egypt, follows the arabic code, which is very fair and uses algebraic equations to determine the fairest amount that each heir inherits. A local lawyer should be consulted.
• If you are a British citizen living in the UK then you’ll also avoid inheritance tax on any Egyptian properties that you decide to pass on to your loved ones.

MORTGAGES IN EGYPT

• A heavy burden on the the Egyptian real estate sector, as well as the economy as a whole remains the absence of a strong mortgage financing sector.
• Home owner loans can be obtained at around 11 – 12% of the property value
• The main barrier to mortgage refinancing is the backlog of property registration, however there is also no credit bureaux effectively operating in Egypt.
• The essential secondary market with which a mortgage lender could transfer and secure their loans with institutional lenders such as insurance and pension funds has not yet developed.
• In July 2006, Egypts central bank, in co-operation with 24 other private and public financial institutions created the Egyptian Company for Mortgage Refinancing (EMCR) with an initial capital of $37.1M or LE 213M which was approved by the World Banks board of executive directors.
• EMCR will bridge the funding gap by providing secured loans over a period of 20 years to the banks and mortgage companies. The banks and mortgage companies will pledge their portfolios to EMCR. Mortgage providers can in turn employ funds from the EMCR to extend additional loans up to 20 years to homeowners.

Conclusion

Egypt has a complete and balanced economy. Its well integrated structure ensures sustained growth in a diversified environment where sectors such as manufacturing, energy, agriculture, tourism and services interact to create economies of scale. This generates a balanced distribution of the nation's income, employment and export revenues and multiplies the opportunities for investment and growth.

Tourism indicators
· 1999 - 4.797000 arrivals
· 2005 – 8.608000 arrivals
· 1999 – 31002 tourist beds sold
· 2005 – 85172 tourist beds sold
(source CAPMAS)