The head of Egypt's Real Estate Developers Association, Mohamed El-Bastani, has stated that it is unfair to hold small companies responsible for project delays and cancellations in the country's real estate sector. El-Bastani noted that the growth of small and medium-sized enterprises in the industry was a response to the massive urban development witnessed in Egypt over the past decade. He emphasized that some small and medium-sized companies have successfully completed projects and delivered units on time.
El-Bastani highlighted that the problem lies not with the size of the company but with incorrect practices that may result from a lack of experience and weak financial and technical capabilities in dealing with market risks. He pointed out that some companies entered the market seeking quick profits, acquiring large areas of land without sufficient consideration for technical efficiency and financial capabilities. This, he believes, is a mistake on the part of the authorities, leading to the stumbling of some companies with the first market shock.
The association head mentioned that the absence of clear regulations for new companies entering the market allowed investors from other sectors to establish development companies with limited capital, which was only enough to pay for land installments. These companies then rushed to launch projects before obtaining all necessary approvals, with the aim of collecting customer deposits and installments. Some companies spent excessively on marketing and commissions at the expense of project execution.
El-Bastani also noted that some companies used customer installments to buy new land and launch new projects before completing existing ones, amid weak governance and financial management. He predicted that the market would witness a "reorganization" rather than a mass exit of small companies. El-Bastani stressed that the presence of large, medium, and small companies is natural and that serious companies with real projects and liquidity problems can be supported.
El-Bastani suggested several ways to support struggling companies, including rescheduling land dues, facilitating financing with project cash flows as guarantees, introducing partners and investors, encouraging mergers, and establishing a quick mechanism to transfer projects to stronger developers when necessary. On the other hand, companies lacking solvency or executive capacity may stop and exit the market, emphasizing the need for an organized process that protects customer funds and ensures project completion.
The head of the Real Estate Developers Association pointed out that the main challenges facing small companies include high land prices, construction material costs, difficulty obtaining bank financing, weak financial management, and the inability to price professionally. He also noted competition from large companies with larger land portfolios, more liquidity, and greater ability to absorb shocks.
El-Bastani concluded that the market does not need to reduce the number of companies through administrative decisions but rather organize the entry of developers and their expansion according to clear controls. This is what the draft law on the union of real estate developers aims to achieve, by linking project size to the developer's solvency, experience, and previous work, with classification of developers, disclosure of execution rates, and project money monitoring.
Key points
- Criticizing the blame on small companies for market issues
- Need for organized entry and expansion of developers
- Draft law to regulate real estate developers
