Investors from the Gulf have continued to pull out of Egypt’s major real estate schemes, according to several investment banks in Egypt.

A spokesperson from Pharaoh Investments told MEED: “GCC investors have pulled out of a number of major schemes announced during the EEDC [Egypt Economic Development Conference, which was held in March 2015]. Initial MoUs [memorandums of understanding] weren’t upheld and even our mandate to facilitate investments for a number of projects has expired.”

During the EEDC, Egypt’s Housing Ministry championed the announcement of several major real estate schemes, such as the $20bn October Oasis project and the $3.1bn 6 October Urban Oasis scheme, both of which were presented to investors during the conference in Sharm el-Sheikh.

During the conference, several GCC investors showed interest in large, high-end, mixed-use developments being proposed. A year on from the conference, and several investment banks have told MEED that Gulf developers have decided not to invest in Egypt’s real estate despite the interest shown last year.

First blow

“The first major blow was the breakdown of the deal between the government and the UAE’s Mohamed Alabbar [chairman of Dubai-based Emaar Properties] for the development of the capital city,” says a local analyst. “[Cairo] has failed to offer a favourable environment for major schemes, and Gulf investors are unhappy with the government’s reluctance to allow them to raise fund from local banks.”

The New Capital City scheme faced several challenges, following the conference last year. By the end of 2015, the UAE’s Capital City Partners, championed by Alabbar, had completely dropped out of the scheme. The Egyptians have since signed deals with Chinese investors, and recently announced that work on the first phase of the project will start in April.

Despite this, other projects have struggled to proceed as Egypt shows no signs of improving its business environment. Local analysts also believe GCC investors have become reluctant to invest in the country amid falling oil prices and tighter budgets.

Earlier in March, Capital Group Properties (CGP), owned by the UAE’s Abu Dhabi Capital Group (ADCG) and Al-Ain Properties, said it is planning a $5.1bn mixed-use project in Egypt.

Several major schemes have been announced in the past year, but Egypt’s need for foreign investment to finance these projects continues. Real estate analysts are expecting legislative changes to encourage foreign involvement.

The development of the New Capital City provides a massive opportunity for foreign developers and real estate firms within Egypt. The master project could help relieve some of the pressure on Cairo’s existing urban area.

Egypt has seen a total of 7,560 residential units delivered in its capital throughout 2015, compared with the scheduled delivery of 30,000 units forecast by developers at the beginning of 2015. This represents a materialisation rate of just 25 per cent, according to a report by US-based JLL.

 Project Construction status  Financial status  Value 
Source: MEED
       
New Capital City  Phase 1 to start in April  MoU signed with Chinese for phase 1  $45bn 
Public housing  Several ad hoc projects Deal broke down with UAE’s Arabtec and project has become public policy, with private developers invited as well as direct government funding from Tahya Masr fund $40bn
October Oasis  No progress No progress – UAE investors have pulled out  $20bn
Zayed Central Park No progress No progress – unknown foreign investors have pulled out  $400m
Zayed Crystal Spark  Study  Saudi and UAE developers still negotiating with government  $1.6bn
Sheikh Zayed Residential area  No progress No progress $183m
6 October Urban Oasis  No progress No progress $3.1bn