Last year was a challenge for real estate developers, to say the least, and that’s certainly true for SODIC. In fact, after the revolution, top management discussed the possibility that there would be no new sales during 2011, which put a real damper on the company’s revenue targets. The government’s unwillingness to grant permits or make key decisions regarding ongoing land disputes crippling the sector only made things worse.

But as 2011 came to a close, SODIC got some much needed good news to help them buck the trend: It had finally received permits for the sale of its latest project Westown Residences along the Cairo–Alexandria Desert Road. In December, SODIC put 148 units, priced between LE 1.8 million and LE 2.4 million, up for sale and sold them all within days. Still riding high on this success, Ahmed Badrawi, SODIC’s business development officer, says Egypt’s real estate sector could see the turnaround it has been waiting for, if authorities make the sector a priority and encourage growth.

Q: What were some of the biggest news stories in the real estate sector in 2011?
Badrawi: Clearly, the disputes surrounding the land deals, such as those facing Talaat Moustafa Group and Palm Hills Developments, and the threats of [land] withdrawal dented confidence in the sector. Companies had to spend significant resources defending themselves from the loss of confidence in the sector among the general public.

Q: How did your company fare in 2011? How did the industry as a whole fare?
Badrawi: 2011 was a difficult year for the sector, but I believe SODIC emerged stronger — both in terms of its reputation and market share. We delivered 350 units in our Allegria project and achieved LE 650 million in new sales of old inventory.

But the extent of the economic challenge is underestimated. Our industry is responsible for 14% of GDP and is a huge contributor to employment, including young and unskilled workers. We use few imports and our supply chain (steel, cement, plastics, woods and metals) supports many industries, from manufacturing and construction to design, transportation and finance. We’re willing to spend LE 10 billion in the next five years.

Q: How has the banks’ refusal to lend as much cash and support projects affected the sector?
Badrawi: It’s had a major impact. Liken it to oxygen in the ecosystem and the impact is on both the supply and demand sides because banks are failing to lend developers or their clients. So developers can’t get funding to finance new projects and customers can’t borrow to finance the purchase of a new home, despite the fact that we hear that there are LE 1 trillion in the banking system, which has a 50% loan-to-deposit ratio.

Our cycle of adding to the economy is very short. Take Westown Residences as an example: the sales will result in immediate construction expenditures and the creation of jobs. It’s an easy sector to stimulate. We had 10,000 workers on our sites during 2011 and it could have been much more.

Q: Did you expect Westown Residences to sell so well?
Badrawi: We had reasonably high expectations. The inventory that SODIC had been selling for the year was pre-revolution inventory and wasn’t necessarily suitable to the new market conditions. We were pretty confident that Westown was more relevant inventory and would be received quite well and that’s how it panned out. We got the permit a couple of weeks before the launch and we didn’t waste any time launching, and, as you saw, it sold out in a couple of days. We were pleased to see our hopes were a big success. We also extended financing to six years from four.

Q: Analysts have said Egypt’s demand for housing is still strong. Do you agree?
Badrawi: At the beginning of the year when we sat with our board, they told us to revise our expectations down massively. They said: expect zero sales in 2011. So when we presented to them recently that we achieved LE 650 million in new sales before the launch of any new products, they were surprised. But I think many of us in the sector know that the demand is deep and real. It’s not speculative and it’s a need, it’s not something you can switch off.

Westown Residences was the first product designed post-revolution. We think customers recognized SODIC’s commitment to quality and delivery and decided they want to be part of this community. I am sure they consider this a good investment in light of inflationary and exchange rate pressures. There are still many challenges in the new year, but none are insurmountable. Demand is still there and has not gone anywhere.

Q: After getting the permits for Westown, do you think the government is finally stepping in and doing their part to revitalize the sector?
Badrawi: We certainly hope so. The permits and approval process had been shut down for the best part of the year and that has been extremely damaging. Not getting permits could even kill proposed investments, because your investors and shareholders become jittery and they tell you to spend less. So I would very much hope there is a track or positive goodwill to facilitate developers to work more freely. bt