A Strong Investment Climate in Egypt

Egypt’s government continues in its mission to encourage inward foreign investment through reforms to its investment policies, which are reducing bureaucracy and keeping the country’s recent economic growth firmly on track.

A recent report by the Institute of International Finance confirms that these procedures have led to an increase in net FDI (foreign direct investment) which has grown from 0.5 percent of GDP in 2004/05 to 8.2 percent in 2006/07.

The report discussed the country's financial policy, noting the major procedures implemented since 2004, especially the tax reforms of 2005, that implemented the law of a unified treasury account, established the large financers' centre and merged sales and income taxes.

Efforts to improve the legal and regulatory framework governing the investment climate were also highlighted by the report. It noted that Egypt had achieved a better rank in International Finance Corporation (IFC) and the World Bank's indicators of the ‘Easiness of Doing Business’ in 2008.  Egypt has also been ranked the top reformer in the world in terms of improvements to the investment environment.

Buying Property in Egypt

One of the main benefits of investing in Egyptian property is the low purchasing cost: approximately 3% of the purchase price. In addition, property taxes remain very low and the absence of VAT, Capital Gains Tax, Stamp Duty and Inheritance Tax makes for a profitable investment arena.

Below is a quick summary of investment benefits:

• 0% Stamp Duty
  
• 0% Capital Gains Tax
  
• 0% Inheritance Tax (for British citizens living in the UK and if property is left to family members)
   
• No taxes for non-resident owners in Egypt. You are not liable for Inheritance, Income, Capital Gains or Corporation taxes in Egypt. As a UK resident, you are liable for all your worldwide assets and incomes. There are no restrictions on when you can resell your home.
  
• Government Real Estate Tax: 50GBP per annum.
  
• Title Deeds, Registration and Lawyers fee: approximately 3% to 4%.
  
• Low cost investment with high potential returns. Egypt is an emerging market and Sahl Hasheesh is in an underdeveloped area of the Red Sea Riviera.
  
• Property in the Hurghada area is sold 100% Freehold.
   
• Low purchase costs. Legal fees in general are not excessive. The Egyptian Government will make a charge on the purchase of your property of approximately 2.5%.
  
• A steadily growing tourism destination set to double its tourism figures in the next 10 years. 
  

Investment opportunities

One area that is feeling the benefits of the country’s new acclaimed accessibility is the mammoth project of Sahl Hasheesh, touted by some experts as the most important construction project in Egypt since the Pyramids!

Indeed, Sahl Hasheesh is a resort community project of unprecedented scale.  Situated in the Hurghada region, it will cover 32 million m2 and when completed it will assume the proportions and functions of seaside resort towns such as Cannes, with La Croisette on the Riviera Sahl Hasheesh is to become one of the most exclusive and architecturally inspired waterside addresses in the world, thanks to ambitious resort projects such as Serrenia, amongst others.

Serrenia delivers a unique living experience: luxury residential accommodation within a world class golf complex, including tennis and basketball courts; an ESPA branded spa; a heliport, a landing strip for private aircraft; and a 330-berth Camper & Nicholson marina and yacht club, catering for the world’s largest private yachts. In addition, this outstanding resort is home to a 7-star hotel and designer shops to rival Paris, Madrid & London. Bespoke properties here will set you back around £25 million, with comfortable apartments starting at £200,000.

The resort of Sahl Hasheesh is entered through a monumental Pharaonic gate, leading down the main avenue to the Red Sea. Lined with over 100,000 fully grown palm trees, its carefully planned walkways lead to the old town and heart of Sahl Hasheesh. This small city provides premium resort facilities where visitors will enjoy cinemas, arcades, piazzas, bars, restaurants, live entertainment, 300 shops and a casino, while benefiting from an essential community infrastructure; schools, sport facilities, hospitals and places of worship.

At the end of a 250m pier below the bay’s crystal waters, lies one of the greatest attractions of the development, The Sunken City.  This is a mystical site consisting of ruins and antiques that will provide any visitor an experience that is truly out of this world.

Another area that cannot be ignored when looking at Egypt’s economic and property investment potential is Cairo. Wikipedia states that Cairo is in every respect the centre of Egypt, as it has been almost since it’s founding in 969 AD and one quarter of all Egyptians live there. The majority of the nation's commerce is generated from or passes through Cairo city. The great majority of publishing houses and media companies, as well as nearly all film studios are located there, as are half of the nation's hospital beds and universities. This activity has fueled rapid construction in the city - one building in five is less than 15 years old.  This astonishing growth until recently surged well ahead of city services. Homes, roads, electricity, telephone and sewer services were all suddenly in short supply and analysts are trying to grasp the magnitude of the change, coining terms like "hyper-urbanization."

In addition to being one of the world's largest urban areas, Cairo offers many sites to see as well as being the administrative capital of Egypt.  Close by is almost every Egyptian Pyramid, including the Great Pyramids of Giza on the very edge of the city. Ancient temples, tombs, Christian churches, magnificent Muslim monuments, and of course, the Egyptian Antiquities Museum are all either within or nearby the city. Cairo provides great culture, including art galleries and music halls such as the Cairo Opera House - as well it should, being one of the largest cities in the world. It also provides some of the grandest accommodation and restaurants in the world.

One company that continues to provide high quality accommodation in Cairo is DAMAC, the largest private real estate developers in the Middle East. In a recent article Egypt’s Business Today magazine, Ziad El-Chaar, the general manager of Damac Properties was quoted as saying that “In Egypt, upper development is an established field, Egypt’s economy is growing and international demand is growing — Egyptian expatriates and foreigners from around the world are demanding a house in Egypt.”

Likewise, “We see a lot of real demand,” says El-Chaar, “we don’t see this as a bubble. The economy is growing, the population is growing, and the international demand is growing. There is definitely a boom in demand in the Gulf from the Egyptian expats who live there.”

Conclusion

Despite the huge increase in Egypt’s property prices, one cannot deny that they are still far lower than their equivalents in other countries across the region.  The fact of the matter is that demand, economic growth, discretionary income and population increases will keep prices rising. Along with the real estate boom, there has been a more than equal growth in the banking industry, with developments in loan and mortgage facilities.

From a strategic point of view, Egypt seems the perfect place to invest. With economic growth of 7% per annum, along with the largest population in the Middle East, the country holds unlimited potential. For real estate investors, relatively cheap property prices, the natural beauty of Egypt’s coastline, continued economic growth and a demand that far exceeds supply, together make Egypt an enticing opportunity.

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