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MORTGAGES IN EGYPT TO BE SCRUTINISED BY CBE

Tuesday, 23 Sep 2008

Last week, the Central Bank of Egypt stipulated that all mortgage companies and banks must submit more detailed reports pertaining to their financing and business methods quarterly from now on. This is in an effort to increase the level of monitoring being conducted at banks and improve risk management for financing property in Egypt.

From the end of September, banks are required to submit detailed quarterly reports to the CBE, the details of which have not been revealed. The luxury section of the Egypt property market will be under particularly close scrutiny, since sizeable loans from banking institutions often fund these kinds of units.

“It appears the CBE is concerned about the real estate market and is keeping a tight eye on developments, especially with regard to falling prices or slowing demand,” EFG-Hermes said, adding, “We believe these demands by the CBE are in line with a cautious approach to mortgage financing, which is new in Egypt and accounts for only a small portion of real estate transactions.”

Although the US economic crisis has sent the global financial industry into turmoil, last week industry analysts and insiders were optimistic about the mortgage segment of Egypt’s financial markets, and said that the more stringent attitude of Egyptian mortgage financers was to their advantage. As it stands, Egyptian banks will finance 75 to 90% of the value of a property in Egypt, and the interest rate ranges from 13 to 15%, on average, with a maximum time span of 10 to 20 years.

It is predicted that the Egypt property market will increase by 15% per year, since over a million apartments are currently unoccupied, due in part to a lack of lending schemes. Further interest rate increases by CBE, however, will force financers to raise their interest rates too, thereby making it difficult for some buyers to afford accommodation in Egypt.