Egypt: Mortgage education
Osama Saleh is a busy man. The head of the Mortgage Finance Authority (MFA) is one of the new breed of private sector leaders brought into the government by Prime Minister Ahmed Nazif to liberalise and reinvigorate the economy. Saleh has been in the job for barely a year, yet under his leadership the MFA is already achieving results.
'Access to finance has been a problem for years,' says Saleh. 'And real estate is the major engine for an economy. Our reforms, which are being driven from the top by Finance Minister Mahmoud Mohieldin, are vital both for the Egyptian people and the economy as a whole.'
Since July 2005, the MFA has fronted a new effort to establish a mortgage-based real estate market in Egypt. The authority is beginning to create a much stronger regulatory environment, introducing operational guidelines for companies and a proper degree of protection for stakeholders. For the first time, the MFA will supervise mortgage companies, appraisers, agents and brokers. It is also streamlining regulatory practice across the board: in the case of mortgage foreclosure, for example, reducing the period of eviction from potentially years to 90 days.
But straightforward procedural issues are not the only challenges facing Egypt, a country where the vast majority of people do not have a mortgage. Indeed, many are completely unaware that such a debt instrument exists. 'Our first challenge is to start educating people,' Saleh says. 'People are beginning to hear about it, but need to learn more.' Following the success of the government's widespread publicity campaign for recent tax reforms, among its promotional activities the MFA has already set up free call centres to deal with enquiries in both English and Arabic from people and foreign investors eager to learn more about this new financial development.
The first concrete step towards a mortgage-based housing market, however, is large-scale registration - obviously, one must officially register an owned property before it can be mortgaged - and even this is a national first. Until a new law was passed this year, registration costs were unfeasibly high and navigating the bureaucracy was a mission in itself.
But, under Saleh, the MFA has introduced a price cut. Now registration costs are limited to 3 per cent of the value of the property up to a maximum of £E 2,000 ($350), and the streamlined process can take a few days rather than months. And in a further move to free up the market, mortgages can also be approved on properties that have been ‘pre-registered' ahead of full registration.
However if the market is to meet Saleh's expectations of a 'mortgage take-off in 2007' it needs more than good infrastructure. Aware that the initial step into a debt might intimidate many, the government has also contributed £E 350 million ($61 million) to the Guarantee & Subsidy Fund, also chaired by Saleh, to boost the finance available to low-income families applying for a mortgage.
A first-time mortgage seeker can apply to the fund for a subsidy for 15 per cent of the value of a property up to a maximum of £E 10,000 ($1,740). If he sells the house within five years, the money must be returned, but after this period the subsidy becomes a grant and is permanently transferred to the mortgagee. Low-income families are thereby encouraged to own their own home, while reducing the initial financial burden.
Most encouraging for the MFA and the market, however, and the biggest indicator of the real estate boom to come is the remarkable inflow of private finance. The Guarantee & Subsidy Fund has been joined by 19 mortgage companies and banks now providing finance to the market.
When Saleh came to the MFA in August 2005, after almost three decades in international private banking, there was barely £E 16 million ($2.8 million) of mortgage finance in the market. Within 12 months this has balloone
Osama Saleh is a busy man. The head of the Mortgage Finance Authority (MFA) is one of the new breed of private sector leaders brought into the government by Prime Minister Ahmed Nazif to liberalise and reinvigorate the economy. Saleh has been in the job for barely a year, yet under his leadership the MFA is already achieving results.
'Access to finance has been a problem for years,' says Saleh. 'And real estate is the major engine for an economy. Our reforms, which are being driven from the top by Finance Minister Mahmoud Mohieldin, are vital both for the Egyptian people and the economy as a whole.' Since July 2005, the MFA has fronted a new effort to establish a mortgage-based real estate market in Egypt. The authority is beginning to create a much stronger regulatory environment, introducing operational guidelines for companies and a proper degree of protection for stakeholders. For the first time, the MFA will supervise mortgage companies, appraisers, agents and brokers. It is also streamlining regulatory practice across the board: in the case of mortgage foreclosure, for example, reducing the period of eviction from potentially years to 90 days. But straightforward procedural issues are not the only challenges facing Egypt, a country where the vast majority of people do not have a mortgage. Indeed, many are completely unaware that such a debt instrument exists. 'Our first challenge is to start educating people,' Saleh says. 'People are beginning to hear about it, but need to learn more.' Following the success of the government's widespread publicity campaign for recent tax reforms, among its promotional activities the MFA has already set up free call centres to deal with enquiries in both English and Arabic from people and foreign investors eager to learn more about this new financial development. The first concrete step towards a mortgage-based housing market, however, is large-scale registration - obviously, one must officially register an owned property before it can be mortgaged - and even this is a national first. Until a new law was passed this year, registration costs were unfeasibly high and navigating the bureaucracy was a mission in itself. But, under Saleh, the MFA has introduced a price cut. Now registration costs are limited to 3 per cent of the value of the property up to a maximum of £E 2,000 ($350), and the streamlined process can take a few days rather than months. And in a further move to free up the market, mortgages can also be approved on properties that have been ‘pre-registered' ahead of full registration. However if the market is to meet Saleh's expectations of a 'mortgage take-off in 2007' it needs more than good infrastructure. Aware that the initial step into a debt might intimidate many, the government has also contributed £E 350 million ($61 million) to the Guarantee & Subsidy Fund, also chaired by Saleh, to boost the finance available to low-income families applying for a mortgage. A first-time mortgage seeker can apply to the fund for a subsidy for 15 per cent of the value of a property up to a maximum of £E 10,000 ($1,740). If he sells the house within five years, the money must be returned, but after this period the subsidy becomes a grant and is permanently transferred to the mortgagee. Low-income families are thereby encouraged to own their own home, while reducing the initial financial burden. Most encouraging for the MFA and the market, however, and the biggest indicator of the real estate boom to come is the remarkable inflow of private finance. The Guarantee & Subsidy Fund has been joined by 19 mortgage companies and banks now providing finance to the market. When Saleh came to the MFA in August 2005, after almost three decades in international private banking, there was barely £E 16 million ($2.8 million) of mortgage finance in the market. Within 12 months this has ballooneThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
If you are already a subscriber to the MEED package and have activated your online subscription, sign in
If you are already a subscriber to the MEED package but have not activated your online subscription, please activate here
If you would like to subscribe to the full MEED package and get access to the whole of the website, please subscribe here
If you are a MEED magazine only subscriber and would like full access to MEED.com, please contact Customer Services who will upgrade your subscription.
