JEDDAH — Several factors have contributed to the current shortage of affordable housing in Cairo, JLL said in its second MENA ‘Middle-Income' Housing report released Monday. According to the report, such factors are high land values which have reduced access to affordable land, high capital costs for associated infrastructure development such as roads, electricity and sewerage, low adoption of prefabricated construction techniques have contributed to higher construction costs, lower financial returns compared to other residential sectors, making such developments less attractive for developers, and limited access to suitable finance for low income families due to generally immature mortgage markets.
The definition of affordable varies across the region in terms of ‘price point'. JLL's report indicates that an ‘affordable' sales price in Egypt is around EGP285, 000 and annual rent around EGP32,000.
The importance of the middle-income sector of the market should not be under estimated, as it accounts for over 60% of all household in Egypt. That equates to 12 million households in Egypt.
JLL defines ‘middle-income' housing as that provided by the market which is affordable to the middle tranche (i.e. 40-60%) of households on the assumption that they spend no more than 30% of their gross household income on housing.
The complexity of these factors means that solutions are not necessarily easy to find, the report added. The report suggests that resolving the shortage of middle-income housing requires a concentrated effort involving government agencies, private developers and other stakeholders, focusing on six key factors:
1. Providing developers with access to affordable land.
2. Reducing the cost of infrastructure and land servicing costs borne by affordable housing projects.
3. Promotion of industrial approaches to construction and more unified, large scale procurement processes to reduce construction costs. 4. Adapting developers' business models to make affordable homes more attractive.
5. Improve access to mortgage financing through regulation and encouragement of financial services industry to allocate certain funds middle income households.
6. Regulate the delivery of affordable homes and ensure ongoing affordability..
Ayman Sami, Head of JLL in Egypt, said “while none of these solutions are easy, we believe that working together, government agencies and developers can address the shortfall that JLL has identified in the Cairo market.”
The Egyptian government has recognized that additional resources should be allocated to the development of middle-income housing, but more needs to be done. We believe there is a need to re-think the existing relationship between government and the real estate development industry to create more affordable housing that middle income families can afford. We also recommend more innovative planning and design initiatives to create more attractive, environmentally sustainable and cohesive communities as well as accessible financing, empowering middle income families to take a stake in their future.”
Sami highlighted “several examples of best practice that offer some hope that changes are already beginning to take root in Cairo with both Arabtec and Orascom seeking to provide more affordable homes.” “However, delays in servicing Orascom's existing project (Haram City) and delays in agreeing contractual terms between Arabtec and the Egyptian government continue to undermine these efforts,” he added. — SG
