Egypt proposes mortgage law changes to boost home ownership

[DJKeefy]

Egypt's financial regulator has proposed changes to the mortgage law to allow remortgaging and higher borrowing levels for people on low incomes, in a drive to boost home ownership in the country of 83 million.

However, Ashraf el-Sharkawy, chairman of the Egyptian Financial Services Authority (EFSA), announcing the proposals on Wednesday, said that no changes could go ahead until they were approved by a yet-to-be-elected parliament to replace the one dissolved this year. No election date has been set.

Conservative lending rules and red tape have long been blamed for holding back development of the mortgage sector in Egypt. As well as helping more people to buy their own home, particularly poorer Egyptians, economists say a more active mortgage industry would boost the economy.

Mortgage lending is equivalent to less than half a per cent of gross domestic product (GDP) in Egypt, compared to 13 per cent in Morocco, according to a 2011 report on Africa housing by FinMark Trust, a body mainly funded by British government aid.

Mortgage lending in Britain, by comparison, is equivalent to about 80 per cent of GDP.

"The mortgage finance industry needs a push in Egypt," Sharkawy told a Euromoney conference in Cairo.

"Now it is time to change this law to add new instruments: remortgage, refinance your mortgage, equity finance and other types of finance like murabaha finance," he said, referring to the Islamic financial instrument "murabaha".

He said one change to the law proposed by EFSA involved increasing the amount that those on low incomes could borrow, raising the value of installments they could pay each month to 40 per cent of their salary, up from 25 per cent.

"Because of the (property) price increase this 25 per cent cannot buy a small flat," he said. "So we are suggesting to have it up to 40 per cent."

The shortfall in affordable housing in Egypt is the highest in the Middle East and North Africa region at 1.5 million units, followed by Iraq at 1 million and Morocco at 600,000, according to a 2011 report by property firm Jones Lang LaSalle.

The report also said that 80 per cent of Egyptians fell into the low-income sector.

The government is seeking to revive the economy and improve the lives of poorer sections of society who complained of being left out during economic liberalisation under ousted leader Hosni Mubarak.

But, highlighting a deadlock in policy action that is frustrating investors in Egypt, Sharkawy said the changes to the mortgage law needed approval by a parliament that has yet to be elected. He said the draft changes had been sent to the cabinet four months ago.

The lower house of parliament, elected earlier this year, was dissolved based on a court order that declared the vote violated the constitution. But new elections will not be held until a new constitution, still being drafted, is written.

Source: http://english.ahram.org.eg/News/55335.aspx

[Chocolate Eclair]

Oh my God!!! mortgages, Euromoney, lets hope they keep a better check on the Mortgage Lenders than Europe did? Alot of the money problems being suffered at this moment where by created by people borrowing more than they can afford.

It has eve been proved that people faked their income to borrow more on their mortgage, therefore creating a vacuum or Black Hole for money, remember the 100% mortgage, or the 5% deposit mortgage? What about the Endowment Mortgage, the one that people then had to extend an already 25 year mortgage by another 15 to 20 years to pay of the deficit of the endowment. Most endowments were paying more to the financial manager than the owner of the policy.

This will only help if regulated properly, the thing that needs addressing first is proper jobs and a sustainable jobs market.

[Hafiz]

Interesting idea and good intentions but I think that the devil might be in the detail.

Locals in Luxor will know that there are more than financing problems with the housing/house building market including dodgy building techniques, poor legal documentation, bent planning permits etc.

More finance, given the pent up demand for housing, will probably make all these worse. In addition a surge of demand for housing might, in the absence of a major increase in supply, lead to a big increase in prices - which is the opposite of what is intended.

Attempts to increase supply will also strike problems with the supply of skilled labor and slow government planning approvals and infrastructure.

This is just the type of thing that has caused disaster in the US, Ireland and Spain. In Egypt's case the problems and risks are multiplied.

As an afterthought, the brothers said that they were big on Islamic banking - this proposal sounds completely western to me.

[Who2]

Remember when some kent company was giving £12k moving in bonus over in docklands, they all got nicked, those were the days secretary's with 3 flats good old Maggie..... 'loadsa-money, that's capitalism for you...'Some you win some you lose....
shh! don't tell them about ti e sh re.....

[Chocolate Eclair]

Soory but this will be a bad move, good intentions, but a bad move that will ruin more than improve the economy.

[A-Four]

I can see this system working in a number of places in Egypt, but certainly not in Luxor. As l have written here before people there simply do not understand or want to, that having got the loan they have to pay it back in regular monthly payments, add to this a new factor, being interest,........well that's a big no no.

Luxor is the only major city in Egypt that has no department store, why? Because they want to pay weekly for the item, with the hope that the item is no good by the time they have finished paying for said item.