Egypt’s Mansour Sees Growth for Palm Hills in Challenging MarketBy
Chairman targets 10%-20% growth in sales, deliveries in 2017
Falling local pound and rising inflation are pushing up costs
Egypt’s Palm Hills Developments SAE expects a jump in sales this year, even as a currency flotation and rising inflation put the nation’s property market under strain.
The luxury real estate developer is aiming for about 8.5 billion Egyptian pounds ($450 million) of contracted sales and plans to deliver some 2,000 units in 2017, Chairman Yasseen Mansour said in an interview at his office in Cairo. The figures are about 10 to 20 percent higher than last year’s targets. He said the company will sell its units in the capital and on the Mediterranean coast in smaller chunks to compensate for rising construction costs and falling disposable income caused by a weaker exchange rate.
The pressure being heaped on Egypt’s property industry is a consequence of the reforms the government carried out to secure a $12 billion International Monetary Fund loan in November. The money was needed to help the country’s recovery from the 2011 Arab Spring. To get it, Egypt had to float its overvalued pound on the global exchange market -- pushing up costs, including of building materials.
“2017 comes with a lot of challenges for the real estate market,” said Mansour, who is Egypt’s sixth-richest man, according to Forbes’s rich list.
Mansour warned that many of the small developers that entered the industry since the uprising six years ago will be forced out, and that the challenging economy gives bigger companies a “good chance” to regain market share. Egyptian real estate will take two to three quarters to stabilize and “those who didn’t plan carefully for this will be burnt,” he said.
Palm Hills expects to finalize an agreement to build a 25 million square-meter (269 million square-foot) residential and commercial project with the government this quarter, and plans to start selling the units at the site west of Cairo by the first quarter of 2018, according to Mansour. The project is almost 100 times the rentable area of the Empire State Building in New York.
The company also plans to acquire a land plot in Alexandria -- Egypt’s gateway to the Mediterranean -- for a residential project this quarter. Palm Hills’s financials will surpass last year’s “on every single metric,” Co-Chief Executive Officer Tarek Abdel-Rahman said in the interview.
The developer, which sells mostly to domestic clients, posted a 235 million Egyptian-pound profit in the third quarter of 2016, 59 percent up from a year earlier.