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The mortgage authority in Egypt
was established in the year 2002. In early 2004 only two
mortgage-financing
companies were established.The first
mortgage company has its chief shareholders the
state-owned Housing and Development Bank and state-owned insurance companies,
which jointly own 96% of its shares.
First Mortgage Company have decided to provide a liberal
mortgage finance strategy. It offers financing up to 85% of a property's value,
at an interest rate of 14%, payable over a maximum of 20 years.
Favorable terms
apply for borrowers with an annual income lower than LE 9000 (around $1450),
including a government-subsidized interest rate of 6%, a longer mortgage period
of 30 years, and a lower installment/monthly income ratio of 25%.
The second company
is Egyptian Housing Finance Company (EHFC), which has as shareholders the
Egyptian American Bank (at 40%, the largest shareholder), the Housing
Development Finance Corporation of India, the German assistance agency KFW, and
the International Finance Corporation (IFC).
Changes
in both companies' strategies are expected with regards to the market
development. Amendments made in 2004 to the Capital Market and Mortgage laws in
2004 permit securitization, which opens the way for an eventual secondary
market in mortgages.
Mortgage Law In Egypt:
Keeping
in view some underdeveloped characteristics prevauling the Egyptian Mortgage
market,the People’s Assembly passed Real Estate Mortgage Law 148 in 2001. The
law allows both banks and non-bank mortgage companies to issue mortgages and
provides, for the first time under Egyptian law clear procedures for
foreclosure on property of defaulting debtors.
In May
2002,Parliament approved amendments to the Banks and Credit Law that
facilitated mortgage activities in banks and lowered property registration
fees.
Real estate registration fees were again lowered in 2003 and early 2004.
The mortgage law established a General Authority for Real Estate Mortgage
Affairs to regulate real estate mortgages in Egypt. Amendments to the existing
Capital Market and Real Estate Mortgage laws passed in June 2004 allow the
issuance of mortgage-backed securities.
Mortgage Law 148 of 2001
has provided a regulatory framework for
issuance of mortgages by bank and non-bank institutions and regulates the
securitization of mortgages with a potential for increasing trading activity in
the stock market.
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Registration Issue In Egyptian
Mortgage Market
One of the major problems to the development of the mortgage
market in Egypt has been classified as the registration issue.
The Egyptian
Government had made the development of the registration system in Egypt a high
priority with the appointment of the Ministry of Administrative Development for
oversight.
A committee has been createdto oversee the development of registration pilot projects and assess theirsuccess. The members of the committee include the Ministry of AdministrativeDevelopment, Ministry of Justice,and the MFA.
Canada’s Steps To Enhance Egyptian Housing
Condition
A project, valued of $500,000, was funded through the Canadian International
Development Agency (CIDA) and the Egyptian Government to allow the Canada
Mortgage and Housing Corporation (CMHC) and its Egyptian partner, the General
Organization for Physical Planning (GOPP), to create the National Urban
Observatory.
The Observatory has solved the Egyptians on the state of the demand and
supply of housing in that country as well as the factors influencing them, such
as the evolution of housing prices, vacancy rates, housing starts, crowding and
social issues in housing.
The World Bank also extended its support to this project by sharing its knowledge
of the Egyptian housing market with Canada Mortgage and Housing Corporation
(CMHC).
Recent Developments In The
Mortgage Market Of Egypt
The Ministry of Investment and the Mortgage Finance Authority (MFA) have stepped forward for
introducing mortgage insurance to the Egyptian mortgage market.
Nevertheless, the Guarantee and Subsidy Fund
(GSF) has already been guaranteeing payment for three months on behalf of
low-income investors.
The three -month
guarantees are offered only once every five years and only in rare cases of
extreme inability to meet payments. The Egyptian Government wants to ensure the
well being of the market while protecting the low-income citizens and providing
him with the tools to enhance his living conditions.
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