Egypt regulators raise mortgage caps

 

Egypt regulators raise mortgage caps

 

By Ahmed Kamel

The Financial Regulatory Authority (FRA) has amended the mortgage caps, raising finance to a single client to 15 per cent of a mortgage firm’s shareholders’ equity, up from 10 per cent, to meet higher demand for expensive housing units.  The new increase applies to natural persons, spouses and minor children for mortgages designed for residential purposes.

The authority has also increased the funding cap for non-residential purposes to 30 per cent, up from 20 per cent of the net shareholders’ equity of the mortgage company. The objective is to boost mortgage finance, which fell by 11.9 per cent to LE1.12 billion in the first half (H1) of 2020, according to FRA data.

The decline reflected falling supply and demand for new units in Q2. Only one residential project was completed in Q2 2020, bringing the total stock to 159,000 units.

The decree will enable mortgage firms increase funding for residential and non-residential units. The move is expected to boost to the local real estate market, which has been hit by a slump in the wake of the Covid-19 pandemic.

FRA said in a statement that the move came in response to a proposal by the Egyptian Mortgage Federation to support mortgage companies in meeting the needs of clients, who are eligible for high funding.

There are 14 mortgage firms in Egypt, according to FRA data.

In the same vein, FRA is working on a plan to provide property developers with credit facilitations for mortgages. The mortgage finance is facing a number of challenges as roughly 500,000 new housing units should be added annually to meet rising demand.

The real estate developers urge the government to allocate more land plots for housing, especially in Greater Cairo, which comprises Cairo, Giza and Qaliubiya governorates.