**Real estate developers promise to establish a federation to regulate the sector,
but it runs the risk of dampening competition**


Egypt’s real estate developers are calling for the establishment of a federation to organize the industry and keep Egyptian consumers better informed when purchasing real estate.

According to proponents, bringing together real estate developers in one body would provide a united front for the sector before policy makers and would benefit consumers and the market by introducing greater transparency and helping the sector run more efficiently.

Critics however worry that at best the proposed federation would be irrelevant to the sector and at worst it would result in less competition.

The Egyptian Junior Businessmen Association (EJB) first proposed the idea during Al-Ahram’s Exhibition for Real Estate Investment, held in Cairo July 15–19.

Established in 1999, the EJB is a small community of junior business people that represents the real estate sector in front of policy makers, provides training opportunities for its members and gives direct aid to underprivileged sectors of society.

The idea of a federation has drawn enthusiastic support from real estate developers. “I fully support it, I think it’s a great idea,” says Omar El Hetamy, managing director of Orascom Housing Communities, a real estate developing group that focuses solely on low-income housing projects.

According to El Hetamy, the federation will be based off the Egyptian Contractor’s Federation model — an independent group of contractors that helps regulate the industry.

At the heart of the new federation is a categorization system that groups developers according to what they construct; for example a company that builds a compound versus one that builds a single building. The system will also rank developers according to the amount of capital they have, previous experience and the quality of their work.

Some question whether this system will allow larger players to promote themselves at the expense of smaller businesses, effectively monopolizing the industry, but Khaled Khalil, a real estate analyst at Beltone, believes that “it would provide greater market transparency for the customers and their companies.”

El Hetamy agrees. “The different rankings and categorizations are extremely crucial as they will help the client make a better informed decision,” he says, explaining that with the federation’s new categories, the client will have access to crucial information regarding whichever company he chooses to deal with.

El Hetamy believes that this increased transparency will directly benefit Orascom Housing.

“It will help the big companies,” says El Hetamy. “It’s a positive thing for Orascom since the federation will better establish our name in the industry and highlight [Orascom’s] high ranking.”

According to El Hetamy, the federation will not only help his company attract more clients, but it will also contribute to negotiations with the authorities in charge of privatizing and selling land for development.

“If a company is ranked at grade A, then authorities will give the land away easier and with more confidence,” adds El Hetamy.

This is the main purpose of any industry association, bringing together industry players to better represent their interests to policy makers.

“Real estate developers have to have a federation to protect their interests,” says Tamer Erfan, head of the investment and funding department at Al Ahly Real Estate Development Company and member of the EJB. “The federation will help developers benefit from each given opportunity, and will make it easier for them, as it is a lot more difficult working by yourself in the sector.”

Erfan says having a federation will allow representatives to negotiate new tax laws such as the real estate tax and other laws currently being taken up by civil groups including the EJB.

Erfan also believes that keeping track of violations committed by developers will benefit consumers. He says that the federation would standardize written contracts between consumers and real estate developers — under the current system each company writes its own contracts — and play a role in deciding when developers can offer discounted prices or seasonal promotions, ensuring, says Erfan, the best quality of service for the buyer.

The federation is not without its critics though. Consumers point to the fact that while increased transparency is beneficial, what is currently healthy competition in the market risks going the way of other industries in Egypt if the federation encourages price collusion between developers.

The government is also skeptical. Engineer Zaher Hamed, head of the real estate department at the Ministry of Housing, does not see the purpose of such a federation.

Hamed is responsible for contracting with real estate companies in order to sell them pieces of land, but he sees no difference between whether a company is ranked by a federation or whether he has to review the company himself.

Each contract has a financial bond in case the developer misses the deadline or the standards of the development are not met, he says, therefore a federation for real estate developers would not serve much purpose in monitoring the sector.

“My job in the ministry will not be affected by the federation,” says Hamed, who had not yet heard of the proposed federation and believes it to be irrelevant.

Real estate developers, however, remain insistent that the federation is bound to have a positive impact on the sector.

El Hetamy believes that the federation can also help influence the quality of life for Egyptian households, as it may highlight the need to establish homeowners’ associations to better organize the services of each building such as repair or cleanliness, or to establish an entire administration for the compounds in Egypt, which could potentially be monitored by the new federation.

However, with the vast numbers and types of households in Egypt, it seems almost impossible for one institution to regulate the structure of Egyptian homes.

Members of the proposed federation have not yet been selected, but will be chosen from the different real estate companies in Egypt. Developers have not spoken with the government about the federation, which they envision would operate independently, but would likely require government approval.

But there is growing support for the initiative. “It is a really important sector,” says Erfan, “they’re really late in establishing a federation for it. We take a long time to make things happen in Egypt.”



By Passant Rabie
BusinessToday
Dieser Artikel wurde am 01.11.2009 um 17:12 Uhr geändert.