Egypt's Naeem to set up mortgage firm

Egyptian investment bank Naeem Holding is setting up a $200 million mortgage finance company to tap surging demand for real estate in Egypt, the bank's chief executive said on Monday.

The investment bank is also planning funds worth about $300 million in total to invest in Egyptian and regional property markets to be launched over the coming year, Ahmed Naim Badr told Reuters in an interview.

Changes to property laws are allowing mortgage finance companies for the first time in Egypt, where economic growth and demand from the Gulf Arab region are pushing up property prices.

The company, in which Naeem could have as much as a 10% stake, could begin operations by the end of December, Badr said.

"In three to four months we will apply for a licence and begin operations," Badr said. "There is a big rally in the real estate market and this can't be managed without mortgage companies."

Naeem was in talks with Egyptian banks about taking stakes in the company, Badr said, declining to name the banks.

Legal changes such as reducing fees for registering properties and clarifying foreclosure laws are boosting competition in offering mortgages in the most populous Arab country.

Amlak Finance of the UAE started a mortgage unit in Egypt this year, which it says will become profitable by next year.

"By the end of this year the [mortgage] law should be fully in place," Badr said. "There are many more companies in the pipeline."

Unlocking real estate growth

The mortgage law could double investment in Egypt's real estate market, Badr said.

A surge in liquidity in the Gulf Arab region, economic growth in Egypt, and high inflation were encouraging people to invest in real estate, he said.

Land prices around the capital of Cairo had already roughly doubled over the past year on roughly $3 billion of investment, he said.

"I see the amount increasing again but it is subject to getting the mortgage law properly implemented," he said.

Most of the new real estate developments in Cairo, such as the residential compounds built by UAE firm Emaar Properties, cater only to Egypt's wealthy.

"Once the law is passed developments will be able to serve more people, which will help to develop a middle class," he said.

Changes to Egyptian law allowing funds to buy property, in addition to listed companies, would also boost investment in the sector, Badr said.

Naeem is starting a 700 million Egyptian pound ($124 million) fund to invest in Egypt's Smart Village, an office park in a Cairo suburb, and a fund of up to $200 million to invest in regional real estate.

"There is a lot of liquidity among small investors who are currently seeking real estate investment opportunities," Badr said.