The Egyptian Mortgage Market
Dalia, Thursday, 7 November 2013
This article is part of a series of 8 articles about buying property in Egypt. The other articles in the series cover the following topics:
The Egyptian mortgage market dates to 2001, when Presidential Decree No. 277 created the Mortgage Finance Authority (MFA). Yet more than a decade later, it has still to see its true potential in a land full of investment opportunities. And right now foreign investment in Egypt seems like a pretty good idea to the Egyptian government, and that is why they are committed to changing mortgage laws applicable to foreigners in an effort to ease the access to mortgages. This is a hopeful attempt to attract foreign investors to the real estate sector.
In order for foreigners to be eligible for real estate mortgage, then they will be required to obtain a residence visa. This type of visa will enable them to purchase property in Egypt, retain a lawyer, and give him/her power-of-attorney. The residency visa is fairly easy to obtain, and can be for a period of either three years or five years. Once the residency visa has been obtained, then this permits the foreigner – who is now an Egyptian resident – to buy a maximum of two properties with a maximum of 4,000 square meters between the two properties. If there is a need to purchase more than two properties, then they would need to set up an Egyptian Company.
Since there have been newly-established leniencies with the mortgage laws, these new laws allow foreigners to have access to real estate mortgage once the property has been registered at an Egyptian court of law. This registration process can take up to four months for foreigners.
Once the registration process is finalized, all the paper-work is in both Arabic and English and in order, then that is the time to apply for mortgage. Foreigners can obtain mortgages for loans of up to 85% LTV (loan to value ratio). LTV simply means how much mortgage you owe in relation to how much your property is worth. This ratio is determined by dividing the balance of the loan to either the current appraisal price of the selling price of the property. It is always expressed as a percentage.
It is important to bear in mind that the mortgage scene is relatively under-developed in Egypt. In Egypt, the maximum allowed number of years to repay mortgage is 30 years, with a maximum age of 65 years old. The monthly installments should not exceed 255 of your monthly income. At the moment, the interest rate stands at around 14% which sends buyers seeking for alternative methods to fund their purchases.
An example of the mortgage process in Egypt is as follows: let’s say you took out a mortgage of 100,000 EGP, then you would have a time period of 30 years to repay that amount at an interest rate of about 14% which comes to a total of 1,184 EGP in capital and interest each month. This would mean that after the 30-year time period is over, you will have paid approximately 426,240 EGP.
There are some Egyptian banks such as HSBC Egypt which can make arrangements to mortgage properties in Egypt owned by foreigners. And some Middle Eastern banks offer mortgages of 60% over a 15-year time frame. However this only applies to freehold property and the owner has finalized all the arrangements through the developer or the seller.
Nowadays, with the hope of a richer and brighter future for Egypt, there are a number of mortgage financing houses and real estate agencies springing up in major cities all over the country. There were 11 mortgage finance companies by mid-2010, and now, there are over two dozen companies that cater to financing and mortgages. These facilities provide mortgages to natives of Egypt as well as foreigners. Most of them promise a quick processing of paper work, others allow for a 15, 20, and even 30-year period to repay the amount, while others ask for a 25% initial down payment requirement; each trying to lure foreign investors as well as local ones.
Nonetheless, due to the complex registration process which may take up to 6 months to file for mortgage, most Egyptians as well as foreigners prefer to buy in cash. In fact about 58% of all property transactions in Egypt are done in cash, according to the Egypt Housing Survey.
There are some of those who choose to arrange for other means of financing their property purchases from their home country. Others opt to re- mortgage in order to free up some equity, also in their home country, or find some other way for an equity release system. In cases like this, the property purchased in Egypt will be theirs as soon as the registration process is finalized. There are investment companies in Egypt that can facilitate this type of equity release in the case of foreigners owning their own property in their home country.
This article is part of a series of 8 articles about buying property in Egypt. The other articles in the series cover the following topics:
The Egyptian mortgage market dates to 2001, when Presidential Decree No. 277 created the Mortgage Finance Authority (MFA). Yet more than a decade later, it has still to see its true potential in a land full of investment opportunities. And right now foreign investment in Egypt seems like a pretty good idea to the Egyptian government, and that is why they are committed to changing mortgage laws applicable to foreigners in an effort to ease the access to mortgages. This is a hopeful attempt to attract foreign investors to the real estate sector.
In order for foreigners to be eligible for real estate mortgage, then they will be required to obtain a residence visa. This type of visa will enable them to purchase property in Egypt, retain a lawyer, and give him/her power-of-attorney. The residency visa is fairly easy to obtain, and can be for a period of either three years or five years. Once the residency visa has been obtained, then this permits the foreigner – who is now an Egyptian resident – to buy a maximum of two properties with a maximum of 4,000 square meters between the two properties. If there is a need to purchase more than two properties, then they would need to set up an Egyptian Company.
Since there have been newly-established leniencies with the mortgage laws, these new laws allow foreigners to have access to real estate mortgage once the property has been registered at an Egyptian court of law. This registration process can take up to four months for foreigners.
Once the registration process is finalized, all the paper-work is in both Arabic and English and in order, then that is the time to apply for mortgage. Foreigners can obtain mortgages for loans of up to 85% LTV (loan to value ratio). LTV simply means how much mortgage you owe in relation to how much your property is worth. This ratio is determined by dividing the balance of the loan to either the current appraisal price of the selling price of the property. It is always expressed as a percentage.
It is important to bear in mind that the mortgage scene is relatively under-developed in Egypt. In Egypt, the maximum allowed number of years to repay mortgage is 30 years, with a maximum age of 65 years old. The monthly installments should not exceed 255 of your monthly income. At the moment, the interest rate stands at around 14% which sends buyers seeking for alternative methods to fund their purchases.
An example of the mortgage process in Egypt is as follows: let’s say you took out a mortgage of 100,000 EGP, then you would have a time period of 30 years to repay that amount at an interest rate of about 14% which comes to a total of 1,184 EGP in capital and interest each month. This would mean that after the 30-year time period is over, you will have paid approximately 426,240 EGP.
There are some Egyptian banks such as HSBC Egypt which can make arrangements to mortgage properties in Egypt owned by foreigners. And some Middle Eastern banks offer mortgages of 60% over a 15-year time frame. However this only applies to freehold property and the owner has finalized all the arrangements through the developer or the seller.
Nowadays, with the hope of a richer and brighter future for Egypt, there are a number of mortgage financing houses and real estate agencies springing up in major cities all over the country. There were 11 mortgage finance companies by mid-2010, and now, there are over two dozen companies that cater to financing and mortgages. These facilities provide mortgages to natives of Egypt as well as foreigners. Most of them promise a quick processing of paper work, others allow for a 15, 20, and even 30-year period to repay the amount, while others ask for a 25% initial down payment requirement; each trying to lure foreign investors as well as local ones.
Nonetheless, due to the complex registration process which may take up to 6 months to file for mortgage, most Egyptians as well as foreigners prefer to buy in cash. In fact about 58% of all property transactions in Egypt are done in cash, according to the Egypt Housing Survey.
There are some of those who choose to arrange for other means of financing their property purchases from their home country. Others opt to re- mortgage in order to free up some equity, also in their home country, or find some other way for an equity release system. In cases like this, the property purchased in Egypt will be theirs as soon as the registration process is finalized. There are investment companies in Egypt that can facilitate this type of equity release in the case of foreigners owning their own property in their home country.
All types of property for sale in Egypt by private sellers and estate agents. Find your perfect villa, condominium or apartment in Hurghada, Sharm el-Sheikh.
Foreigners can buy property in Egypt. The first thing anyone wishing to purchase property in Egypt must do is find a good lawyer who specializes in
Egyptian property laws. Then they must grant the lawyer power of attorney so the lawyer can act on the buyer’s behalf when legalizing and obtaining
official documents from the Egyptian courts. There are payment options to consider, registration processes, and home insurance.