Eng. Osama Shalaby, Ajna Urban Development`s Chairman of the Board of Directors, revealed that his company aims to pump investments worth EGP 300 million during the next year 2020 for the implementation of constructing Ajna`s first project "Carnelia" in Ain Sokhna.
The company is planning to run a new development project in the northern coast on an area of approximately 100 acres. The implementation of the project`s first phase will start in the mid of 2020.
In an exclusive interview with SEE, Shalaby added: "Ajna targets a sales volume of EGP 15 billion in its projects during the next five years.”
What is the value of funds required for the contracting business at the "Carnelia" Project?
We intend to pump EGP 300 million in Carnelia`s construction works during 2020 in the ground leveling, and the formation of terraces for covering the project's heights. According to the plan, the project units are distributed at different heights from the sea surface with levels starting from zero directly on the seashore up to 160 meters.
What is the size of the land portfolio currently available to the company?
We do not aim to have a large land portfolio in light of the current abundance of lands through the quantity and period of offering lands with multiple offering mechanisms, including direct allocation, partnership, and public bidding.
So we don’t have to bear the burden of creating a land portfolio as before. The first is to take advantage of our investments in implementation and development on the ground.
I would like to clarify that Ajna Urban Development Company is an entity specialized in real estate development in partnership rates with the landowners who represent a separate investment entity.
Our study of the different business models in the market has demonstrated that integrating ownership with development leads over time to deadlock in real estate development and financing structures and therefore the most effective is the separation between them.
Ajna does not directly own the projects' lands. We have a separate company owned by a number of investors who contribute to Ajna which is responsible for providing the required lands according to the company's vision and directions; this removes the burden of the land cost and directs our investments to development directly.
Is Ajna heading to partner with the state in the coming period to reduce the burden and cost of development projects?
The idea of a partnership between the state and the private sector in real estate projects recently is experiencing great success. The company that cooperates in a partnership project with the state begins work directly and provides financing ranging between 35 to 50% of the project’s cost, which is paid as a price for the land.
Partnership with the state is a better business model to reduce the financial burden on the developer and contribute to speedy urban development. We have studied all opportunities in the proposals of the Urban Communities Authority and we have applied for some of them.
Are you studying a specific area to start a new project?
The company strategy is based on developing high-quality residential, commercial and mixed-use projects.
We are currently focusing on the Carnelia project in Ain Sokhna, which is our first project on the market.
The project is located 30 km from the gates of Ain Sokhna, and 15 km from Zaafarana Road. It includes a group of villas, twin houses, townhouses, and different apartments with areas ranging from 90 square meters to 350 square meters, with an investment size of EGP 3 billion pided into 5 stages. Delivery is planned to start in 2024.
We have been keen to deal with acclaimed international consultants in the real estate field in order to present a distinguished project that includes innovative products. The interiors of the Carnelia Project have been prepared by the famous Mexican architect Javier Cuevas, founder of Creato Architects.
Cuevas is famous for designing distinguished buildings and has previously worked on many projects throughout the Middle East region. He is very familiar with the needs of clients and the Carnelia Project represents his first residential complex. Cuevas adds a distinctive feature "Ultramodern" to the external designs, by employing his vision for the project.
We had a keen desire to collaborate with someone who is experienced and knowledgeable about the nature of the land for the region we are developing, and this is why the choice was made to Sites International Company, because of its great experience; thanks to the founder of the company, Dr. Maher Stino. He is one of the five best experts in the field in the Middle East.
In addition, the company has cooperated with Collier Consulting, which is one of the largest companies in the field of investment consulting, to develop the hotel for the project.
We are preparing a plan to launch a new project in the northern coast, with an area of 100 acres; its land is owned by Ajna. We aim to develop a project in New Cairo in the coming months. We are also studying entering into southern Upper Egypt through partnerships or land purchases, especially Sohag and Minya.
What is the appropriate space for your next project in New Cairo?
The company's vision focuses on developing small and medium-sized projects. It is not a requirement that it be large to ensure a focus on product quality and to be developed over a short period of time and to engage in other projects. The area of the New Cairo project will not exceed 50 acres, and we target customers from El-Tagamu El Khames and Heliopolis.
One of the most important strategies of the company is qualifying to compete in more than one location in light of recent market variables. We choose sites for our projects that allow the customer to move in and live in immediately upon receipt, so we are always looking for spaces for our projects that are in line with our plans for residential projects.
Why don't you see the larger areas as a suitable opportunity for the company?
During the past three years, the real estate sector was exposed to unprecedented changes in light of a group of factors that led to the formation of the market again. The changes produced new mechanisms and a change in the features of the real estate market as a whole, starting from marketing, offering, and the form of competition between companies to the rise of the competition after entering new developers. This prompted companies to adapt to the new changes in order to continue and complete their expansions.
In view of the extensive experiences shared by the shareholders of the company and members of the Board of Directors, we have studied the various business models in the market extensively. The study proved that with the multiplicity of state mechanisms for periodic and continuous land availability, the maintenance of large areas and their development in multiple phases has become a financial burden on companies. This is due to the companies ’commitment to pay the state’s dues represented in the value of the land and to develop the land simultaneously.
Also, the change in the price of land has become at lower rates because the country is currently pricing it according to new mechanisms that reduce the difference between its current and future price significantly. Hence, the optimal model in light of recent variables and the data on the basis of which the project economies are calculated, as well as ensuring the speed of development is the small and medium areas.
What are your expectations for the real estate market during 2020?
The real estate market is improving. According to the indicators of the Egyptian economy, there will be a noticeable activity due to the low-interest rates, the dollar price, the high foreign exchange reserves, the certificates of the international financial institutions, and their stable view of the Egyptian economy. All of these things contribute to the growth of the real estate development sector, especially after the launch of the initiative to support interest to purchase units in the real estate financing system.
Will we suffer from a recession next year?
The Egyptian real estate market has the ability to absorb more different projects due to the population and the high annual increase rate. This means that there has been and will not be a recession in the market as the volume of demand is still greater than the volume of supply. There is a high demand for buying real estate and reserving residential, administrative and commercial units in any housing project that is announced.
The Egyptian citizen tends to buy real estate instead of buying bonds or depositing his money in banks because investing in real estate is considered less risky than investing in the stock or bonds. In the coming period, the decline in the prices of some building materials will be reflected in the cost of construction and consequently its price.
Would the recent Central Bank initiative to providing 50 billion to support the real estate sector and sell the units benefit at a 10% discount?
The real estate sector is in need of many similar initiatives, as they have an important impact in moving the market. This initiative specifically targets the middle class, whose purchasing power has been greatly affected. This initiative is aimed specifically at the middle class, whose purchasing power has been greatly affected and is the most needed for the property.
However, the legal controls on real estate financing currently will make its impact limited, because the conditions for real estate financing are that the fully executed, registered, and fully-fledged units are financed. Most companies offer units under construction. Often the lands are in the installment phase, as the company implements the projects and pays the land installments at the same time. This means that the percentage of those who benefit from it will be limited, except by amending some provisions of the law to maximize the benefit of the initiative
We hope that the real estate finance sector will witness an improvement in the expected level with the volume of the Egyptian real estate sector. The real estate sector contributes to the financing process informally, through long-term payment periods and advances of no more than 5%. Likewise, the fund's value is weak, and EGP 1 billion is achieved at its best time, due to several reasons, including the high price of the property and real estate registration. Units can only be registered after the project has been fully registered.
We also hope in the coming period to find a solution to the problem of real estate registration because it is of great importance in strengthening the real estate financing mechanism. There is no future for the real estate market without the presence of appropriate real estate financing mechanisms that enable citizens to enter the real estate financing system. It also greatly enhances the state’s tendency to export Egyptian real estate.
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