Mortgage Finance Development in Egypt

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					Ministry of Investment




                          Mortgage Finance Development in Egypt




                                        Ministry of Investment
                                           14th May 2007  


                             Euromoney Egypt Housing Finance Conference
                            Funding, Promoting and Regulating Housing Finance in Egypt   1
Ministry of Investment
                         Introduction:

                         Role of Ministry of Investment:



                          ►
                          ►   Setting up legislative and institutional framework supporting
                              Setting up legislative and institutional framework supporting
                              Mortgage Finance industry.
                              Mortgage Finance industry.
                          ►
                          ►   Coordinating with ministries and affiliates to support Mortgage
                              Coordinating with ministries and affiliates to support Mortgage
                              Finance and clear barriers it faces.
                              Finance and clear barriers it faces.
                          ►
                          ►   Promoting and raising awareness of Mortgage Finance.
                              Promoting and raising awareness of Mortgage Finance.
                          ►
                          ►   Supporting and developing mortgage finance Primary and
                              Supporting and developing mortgage finance Primary and
                              Secondary markets.
                              Secondary markets.
                          ►
                          ►   Attracting private local and foreign investments for creating
                              Attracting private local and foreign investments for creating
                              competitive and efficient market of Mortgage Finance.
                              competitive and efficient market of Mortgage Finance.




                                                                                                2
Ministry of Investment   1- Developing Legislative Regulations and Executive Procedures:


                           Prime Minister’s decree No.465 of year 2005 in amendment of some provisions
                            of the executive regulations of the Mortgage Finance law as follows:

                          - Facilitating ways for mortgagee to document his income.

                          - Defining the low income mortgagee benefiting from the Mortgage Guarantee
                            and Subsidy Fund.( All and every person whose annual gross income is less
                            then 12 thousands pounds or 18 thousands pounds for a person, his spouse and
                            minors).

                          - Setting standards for approving the agents and appraisers.

                          - Possibility of acceptance other guarantees from the mortgagee in case of
                            unregistered real estates that are registrable.

                          - Amending and activating the basic terms and the three Tripartite Mortgage
                            Contracts (purchase, establishment, repair and renovate) aiming to clear the
                            investors problems to document their incomes and enforce the agreements
                            forms.
                          - Issuing regulations organizing the operation of credit bureaus in accordance
                            with Law No.93 of year 2005.

                                                                                                       3
                         2- Developing Mortgage Finance Authority Institutional Framework:
Ministry of Investment




                         -   Preparing new organizational structure and introducing new departments
                             of Investor Protection and Monitoring, Research, Information Technology
                             as well as legal department, In addition to developing the employers
                             technical and administrative skills.

                         -   Appointing MFA Chairman, Vice Chairman as well as executive team
                             work with experience in the financial sector.

                         -   Continuing development of the institutional setup and the internal
                             working systems in MFA coping with the market developments.




                                                                                                 4
Ministry of Investment
                          3- Development of Property Registration:


                         • Reducing Registration fees at a maximum of EGP 2000

                                   Ministry of Justice Decree No. 5454 of year 2006
                                      On securitization fees of law No. 70/1964
                                                    Article 3




                                                                                      5
Ministry of Investment
                         Development of Property Registration (Con’t):




                          Starting the implementation of the National Title Registration Program in nine
                           pilot areas in cooperation with the Ministry of State for Administrative
                           Development.

                          Implementing a modified deed System that can be transformed to Title
                           registration in 2 pilot areas El-MuKatem and Shubra El-Kheima. 

                          Exempting mortgage finance contracts from relative stamp tax.




                                                                                                     6
                             Real Estate Registration In New Urban Communities
                             Real Estate Registration In New Urban Communities
Ministry of Investment




                              An agreement was signed between the New Urban Communities Authority
                              (NUCA) and MFA provides:

                         •     The possibility of transforming the land allocation letter at the new urban
                               communities into legal document valid for registration.
                         •     NUCA may waive the land allocation to the mortgagers, if he desires as a
                               finance guarantee.
                         •     The possibility of the projects’ partial registration at the new urban communities
                               in return for fully payment, something which gives the mortgagers access to
                               deal with such lands and buildings thereon.
                         •     Cancellation of the transaction fees of the real estates and lands specifying for
                               various activities in new cities in case of mortgage finance.




                                                                                                            7
Ministry of Investment




                                                      Minutes of Agreement

                          On Tuesday, September 21, 2006 a meeting was held between the
                          representatives of the New Urban Communities Authority (NUCM) and the
                          Mortgage Finance Authority (MFA), The meeting was attended by:

                          Mr. Safwat Ghanem: Deputy Chairman for Economic, Financial and
                           Administrative Affairs, NCUM
                          Eng. Mohamed Galal Sayed El Ahl: Head of Executive Organization for the
                           National Housing Project.
                          Counselor, Mohamed El Demerdash: Advisor to the Minister of Housing, Utilities
                           and Urban Development.
                          Mr. Ezzat Abdel Raouf El Hag: Chief, Commercial and Real Estate Affairs at the
                           New Urban communities Authority.
                          Mrs. Mona El Shebeny: Financial Advisor, to the Minister of Housing and New
                           Urban Communities.
                          Ms. Insherah Hosny: General Manager, Legal Affairs Department .
                          Mr. Ashraf El Kady: Deputy Chairman, MFA
                          Dr. Sherif Oteifa: Advisor to the Minister of Investment for Mortgage Finance
                           Affairs.

                                                                                                      8
Ministry of Investment




                         Reference to the letter of the Minister of Investment # 3996 dated 18/4/2006 to
                         the Minister of Housing, Utilities and Urban Development that includes a study of
                         some of the urgent issues related to the activation of the mortgage finance market
                         in Egypt. These issues are as follows:
                         •Letter of land allocation at the new urban communities and how to covert it into
                         a legal document valid for registration.
                         •Partial registration for projects at the new urban communities.
                         •Reduction/cancellation of transaction fees in case of mortgage Finance
                         •The meeting attendees have reviewed the points included into the above
                         mentioned letter and they have concluded the following:

                                                             (Item One)
                         The preceding preamble, the provisions of law 59 of 1979 concerning the
                         establishment of new urban communities, law 148 of 2001of issuing the
                         Mortgage Finance Law, Law 88 of 2003 of issuing banking law and the real estate
                         executive regulations enforced at the New Urban Communities are considered an
                         integral part of this agreement.
                                                                                                         9
Ministry of Investment




                                                            (Item Two)
                           As regards the allocation letter of the New Urban Communities Land and
                                  how to convert it into a legal document valid for registration

                         In view of article two of the executive regulations of the Mortgage Finance Law
                           which stipulates that if the land is allocated to an investor from the government
                           or from any of the public juridical persons, the financier may accept that the
                           investor waives the allocation as a finance guarantee. This should be done after
                           the approval of the entity allocating the land on such a waiver.

                         Accordingly:
                         • It has been agreed that the new urban communities will accept waiving the
                           allocation to the financier if he wishes so as a guarantee for finance. The
                           Financer shall subrogate the investor in all the obligations resulting from
                           allocation.
                         • If the investor wishes to limit the finance he receives to construct the project on
                           the land allocated to him, the provisions of the tripartite agreement.
                         • As regards lands of small areas that are allocated through an allocation or
                           notification letter and are subject to the mortgage finance, it has been agreed
                           that registration of such lands will be allowed only after paying the full amount
                           of the price without the provision of earnestness.
                                                                                                           10
Ministry of Investment




                                                               (Item Three)
                              As regards partial registration of projects at the new urban communities
                          Both parties have agreed on the possibility of partial registration for part of the
                                  large areas of allocated lands according to the following provisions:
                         • Payment of installments due should have been made on the whole allocated area till
                           the date of submitting the application for partial registration.
                         • Full payment for the part to be registered should be made.
                         • As regards the provision of earnestness on the part to be registered, it has been
                           agreed that the provision of paying the full amount of this part is sufficient. This will
                           be applicable on the lands subject to mortgage finance.

                                                              (Item Four)
                          The New Urban Communities Authority agrees to register and mortgage the
                          buildings established on the areas allocated for individuals and investors without the
                          lands, provided that the applicant has paid all the Authority's dues till the date of
                          applying for registering the mortgage. This shall be done according to the provisions
                          included into article 40 of the approved real estate regulations applicable at the
                          Authority of New Urban Communities.


                                                                                                            11
Ministry of Investment




                                                                (Item Five)
                         As regards decreasing or canceling assignment (transactions) fees at the new
                         urban communities in case of mortgage finance and for the purpose of alleviating
                         the burdens on investors and in order to foster development, the Authority has
                         previously agreed to decrease the assignment expenses for buildings and lands
                         subject to mortgage finance system from 10% to 2% and then 1%. The board of
                         directors of the New Urban communities Authority has also decreed at its meeting
                         dated 27/6/2006 to cancel all the assignment fees for buildings and lands allocated
                         for the different activities ate the new cities.

                                                              (Item Six)
                         Upon the request of the MFA, the Authority of New Urban Communities has
                         agreed to include an item into the contract it signs with the entity/person to whom
                         the land is allocated. Such an item necessitates that in case of selling the unit built
                         on the land allocated to him –through the mortgage finance system, he shall
                         register to the buyer in case of paying the full price and paying all his obligations
                         related to the allocation.



                                                                                                             12
Ministry of Investment




                                                            (Item Seven)
                         The Authority for New Urban Communities provides the mortgage finance
                         entities with the data for inquiry on the projects of individuals and entities, that
                         are related to mortgage finance contracts where the relevant dues have to be
                         paid at the Authority for New Urban Communities. This is in addition to inquiry
                         on any pledges or liens on such projects.

                                                           (Item Eight)
                         This agreement shall be valid after being approved by the competent authority.

                         New Urban communities                        Mortgage Finance Authority

                         Safwat Ghanem                                             Ashraf El Kady




                                                                                                           13
Ministry of Investment   4- Promoting and Raising Awareness of Mortgage Finance:




                           Developing MFA portal (www.mf.gov.eg including all data and
                           Developing MFA portal (www.mf.gov.eg including all data and
                                                       www.mf.gov.eg)
                                                        www.mf.gov.eg)
                            information necessary for dealers in mortgage finance market as well
                            information necessary for dealers in mortgage finance market as well
                            as developments recorded in the mortgage finance industry in Egypt.
                            as developments recorded in the mortgage finance industry in Egypt.

                           Setting up a call center no.5366022 receiving the dealers queries.
                           Setting up a call center no.5366022 receiving the dealers queries.

                           Holding series of meetings and seminars on mortgage finance as well as
                           Holding series of meetings and seminars on mortgage finance as well as
                            setting workshops for media and press members.
                            setting workshops for media and press members.

                           Providing training courses for companies’ and banks’ staff for
                           Providing training courses for companies’ and banks’ staff for
                            introducing the basic principles of mortgage finance.
                            introducing the basic principles of mortgage finance.




                                                                                                 14
                         Registered Brokers – Appraisers – Auditors and Agents
Ministry of Investment




                         Brokers                                            Appraisers
                                                                   250
                                                                                                                            100
                                                                   200                                                      80
                                                       214                                                                  60
                                            209                    150                                            91
                                                                                                         82
                                   188
                           163                                     100                        15                            40

                                                                                                                            20
                                                                   50           33
                                                                                                                            0
                                                                   0                 Jul-04        Jul-05 Jul-06 Mar-07
                                 Jul-04 Jul-05 Jul-06 Mar-07


                         Auditors                                             Agents
                                                                       35
                                                                                                                                30
                                                                       30
                                                                                                                                25
                                                                       25
                                                                                                                  28            20
                                                       32              20
                                                                                                                                15
                                                                       15
                                             24                                                                                 10
                            23       23                                10
                                                                                                       14
                                                                       5                                                        5
                                                                       0                                                        0
                                 Jul-04   Jul-05   Jul-06 Mar-07                         Jul-04      Jul-05 Jul-06 Mar-07



                           Note: Training courses were prepared to approve more mortgage
                           finance experts (brokers, appraisers, auditors and agents)                                       15
Ministry of Investment   5- Supporting and Developing the Secondary Market:



                            The establishment of the Egyptian Mortgage Refinancing
                             Company (EMRC) with 24 Shareholders, including 20 banks with
                             the Central Bank of Egypt, two Mortgage Finance Companies as
                             well as the International Finance Corporation (IFC), and the
                             Mortgage Guarantee and Subsidy Fund (GSF).

                            EMRC has been created with an initial capital of LE 200 million.
                             EMRC will act as the market maker, provide sources of long-term
                             finance for companies and banks, and handle securitization
                             transactions.

                            The World Bank (WB) provided EMRC a loan of EGP 214
                             million.




                                                                                                16
Ministry of Investment
                         6 - Guarantee and Subsidy Fund (GSF):




                           Stimulation the Role of the Mortgage Guarantee and Subsidy Fund,
                            Amending the subsidy system provided in a way that the beneficiary
                            investor will be provided monetary subsidy in the form of check of 15
                            per cent of the housing unit's value at a max of EGP 10,000.

                           Application the One Stop Shop model where citizens filling applications
                            and the fund shall help them to have access to subsidy and finance in
                            coordination with the concerned parties.

                           Appointment of the Managing Director.

                           Development of the fund’s mechanisms in a way that separated between
                            the subsidy and the guarantee systems provided by the fund.



                                                                                                    17
Ministry of Investment
                         Guarantee and Subsidy Fund (GSF) Con’t:




                          People who received subsidy during 2006 amounted to 304.

                          The GSF started granting 3,779 units with a 15% of the unit cost as a
                           non-refundable subsidy (EGP 10,000 per unit) of total EGP 32 million
                           in New Damietta, El-Shrouk, 6 October.

                          Agreements were signed with the National Bank of Egypt, Taamir
                                               
                           Mortgage Company  and the Housing and Development bank to
                           finance those whom are subsidized by fund.
                           Another agreement is underway with Bank Misr.




                                                                                                   18
Ministry of Investment
                         7- Activation of Insurance Role in Mortgage Finance:



                         Coordination procedures taken with the Insurance Sector:

                         • Activating the insurance coverage related to mortgage finance through
                           using life and fire insurance policies.

                         • Preparing insurance studies on the introduction of insurance policies
                           against non-payment and invalid ownership documents.

                         • Insurance Companies Long term Investments in the Mortgage Backed
                           Securities.




                                                                                               19
                         8- Coordination Between Real Estate Companies and Lending
Ministry of Investment     Institutions:  




                         • Signing cooperation protocols between the Real Estate Companies
                           affiliated to the Ministry of Investment and the lending institutions
                           including Banks and Mortgage Finance Companies. The signed protocols
                           aim to apply the Ministerial Decree concerned with the replacement of the
                           direct installment system through Real Estate Companies to financial
                           institutions or mortgage finance.

                         • Ending the direct installment system from 31/12/2007.

                         • Securitization of the Real Estate Companies Portfolio.




                                                                                                  20
Ministry of Investment   Securitization Issuances:



                                       Securitized
                                        Portfolio     Securitized Portfolio
                                                           (Contact)           Egyptian Arab
                                        (Contact)                               Land Bank
                                                         2nd Issuance
                                       1st Issuance
                         Issuance      140,000,000        159,000,000           150,000,000
                         volume
                         Issuance          100                100                   1000
                         price
                         Interest         11%               10,75%            1% below Central
                         rate                                                 Bank discount rate

                         Coverage         2,25                2,13                    ­
                         rate




                                                                                              21
Ministry of Investment
                         9- Housing Demand Study in Egypt:



                           Conducting a study on “Annual Housing Demand and its development
                           in Egypt” included in its first Phases the Greater Urban Cairo region.

                           The study surveyed a sample of 9082 families.

                           Total current housing demand in the Greater Urban Cairo region
                           amounted to 604,000 units as follows:

                          - 217, 000 units in Giza.
                          - 342, 000 units in Cairo.
                          - 45, 000 units in Shubra El-Kheima

                           The study shows high demand on units of 63 m2 to 140 m2 and less
                           demand on units less than 40 m2.




                                                                                                    22
Ministry of Investment
                         Housing Demand Study in Egypt Con’t :



                          81 % of the housing demand for people whose income less than EGP 1000 per
                          month.

                          Demand divided into: 35 % (Purchase), 61 % (rent), 4 % (serviced Land).

                          93.9 % of the demands are in favor of installment payments.

                          The preferred mean installment value is around 330 EGP per month and mean
                          down payment EGP 13000.

                          The higher demand for lease is for middle size units of (63 m2) with rent values
                          not exceeding EGP 200 monthly.




                                                                                                    23
                          Mortgage Finance Contracts in the two Mortgage Finance
                          Mortgage Finance Contracts in the two Mortgage Finance
                          Companies (March 2007)
                          Companies (March 2007)
Ministry of Investment




                                                                                             1428
                          1500
                          1200                                     971               940
                           900                             772

                           600                                                             488
                                                  257329
                           300     3   3     72                  199     93 32 125
                             0
                                   2004       2005          2006         Mar-07       Total
                                                                                     (March
                                                                                      2007)

                                                  ir
                                            Taam Mortgage Finance Com  pany
                                            EgyptianHousing Finance Company
                                            Total
                         Additional Two Mortgage Finance Companies have been Registered
                                    and will start operation: “ Tamweel and Amlak”                  24
                         Number of Mortgage Finance Contracts by Type (March 2007)
                         Number of Mortgage Finance Contracts by Type (March 2007)
Ministry of Investment




                          1600                1399                                             1428
                          1400
                          1200
                                  912                                                  940
                          1000
                           800
                           600          487                                                  488
                           400
                           200                         19      19     9   1    10
                             0
                                 Housing             Commercial       Land              Total

                                    Tameer Co.              The Egyptian Co.        Total



                                                                                                      25
                         Mortgage Finance Companies’ Contracts by Location (March 2007)
                         Mortgage Finance Companies’ Contracts by Location (March 2007)
Ministry of Investment




                          Governorate              Total Number of Contracts


                                                             921
                             Cairo

                                                             407
                              Giza


                         Other Governorates                  100


                             Total                            1428

                                                                                     26
                         Total Mortgage Finance Loans from Banks and Mortgage Finance
Ministry of Investment
                         Companies:


                             Mortgage Finance development (July 05 - March 07)
                           1200
                                                                                                                                            (1064) )
                                                                                                                                   (992)
                           1000


                            800
                                                                                                                        (650)
                                                                                                                                                755
                                                                                                         (571)                        720
                            600                                                           (514)
                                                                                                                         415
                            400                                                  (302)                      331
                                                                                              300
                                                   (193)           (206)
                                                                                  125
                            200        (16)
                                                      119          121                                                                272       309
                                                                                  177         214           240          235
                                        16             74            87
                              0




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                                                                                                                                                 27
                                                                    MF companies                                   Banks

				
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