Urban economics and urban assessment expert Dr. Eng. Seif El-Din Farag explains the reasons for Egypt's lack of trust between real estate buyers and developers in the Egyptian real estate market, including the lack of trust itself.
One of the most important problems of the Egyptian real estate market is the lack of trust between real estate buyers and developers, for several reasons initially including "seller" and "agent", so we must know the difference between them. The "seller" is entrusted with marketing and selling, he undertakes that for several different companies, while the "agent" is more specialized, where he sells for only one developer.
The reason for this lack of confidence is not just a matter of quality or type of services provided by both parties, but because they are not assured that they will receive what they have purchased until they receive it in hand, which we all know is not a short period of time, sometimes it takes years.
The problem with the "seller" profession in Egypt is that it is the professional who has no profession, where any unqualified or inexperienced person can allege that he is a "seller" and practice that profession. Moreover, in many cases, the seller may open a specialized office. The "seller" profession is a profession without a union, association, or any organization that legalizes the profession.
The "seller" in Egypt is not obligated to have qualifications or experience. Therefore, we find some of these sellers are illiterate and they have no idea about real estate contracts. They have no idea of how to do real estate investment analysis. The result: they are not qualified to advise customers on the type of property suitable for them (after all, their job is to sell).
Every day we see news about fraud committed by these sellers and their victims are customers who bought real estate units from them without having any idea about what this seller does.
In Egypt, the seller profession is a random profession without a practicing license despite its importance which is that the seller is the first person the buyer meets. The seller often fabricates a set of lies to complete the transaction and collect the commission then disappears however what may happen thereafter leaving the developer paying for the ignorance of some "seller" which was for attracting customers in any way. In most cases, the most of seller's promises don't realize after concluding the contract.
The developer suffers from an unskilled worker or an employee who does not have a distinct skill, who adopts cheating as a pattern in his dealings with his customers and puts himself as an excuse to explain his inability to do something.
The Egyptian market lacks compliance in all its components, including compliance with laws and regulations, the absence of contracts approved by real estate developers and approved by competent authorities, and many other problems that made it difficult for investors to trust the market
It is necessary to establish a professional institution for real estate sellers and prepare a code of ethics that they should adhere to during their practice and prevent them from cheating and committing fraud in any form if they want to preserve their credibility which reflects positively on their reputation when dealing with customers.
The most important item a buyer asks about when beginning a transaction is the loading ratio, as the seller quickly answers that this ratio is within 5%, when in fact it sometimes exceeds 35%. When the buyer asks about delivery dates, the seller answers that the system is ready by year's end. And all contract terms favor the developer when negotiations begin. Therefore, we advise the buyer to resort to a lawyer when entering into the contract and not to sign any fiduciary receipts against him.
Before concluding any contract with the developer, it is necessary to check the performance of the developer in previous projects and make sure that there are no problems related to the project that he is currently working on. In addition, it is important to review the terms of payment very closely and not to pay more than 10% of the total price of the project as an advance payment.
In the last article, because of the current randomness that destroys the trust between the buyer and the developer, as well as the delivery schedules of projects also constitute a bigger problem, we suggested the necessity of having a specialized governmental authority to monitor the real estate market as the Consumer Protection Agency is burdened with many problems, the real estate market has more problems and the regulation of the "seller" profession is an urgent requirement in the real estate market.
Nowadays, the Egyptian real estate market is becoming more and more difficult to deal with due to the lack of trust between the buyer and the developer. The developer often claims that he will hand over the unit on time while the buyer encounters endless obstacles before he receives his unit.
Until the completion of receipting their new units, most of the buyers are often residing in new-law residential units. However, they are surprised that the reception of their units is delayed for years while continuing the bleed of the yearly increasing new-law monthly lease. The developer often invokes the delay of utility delivery. The ultimate problem is that when the buyer decides to terminate the buying transaction and recover his money, then he will suffer the procrastination and manipulation of him and may end to recover his money in irregular spaced payments after administrative deductions.
While developers invest in building residential units, they find it difficult to sell them because most citizens do not trust them due to past experiences with other developers who did not deliver their units on time or at all, or even worse, they have sold some units multiple times! This has led many citizens to stop investing in new residential buildings because they do not want to experience what others have experienced.
But if the buyer decided to resell his unit, he will be in a big problem, because the Egyptian real estate market is going throw a slowdown, which makes the resale more difficult, as the buyer needs to be paid in cash which is not currently available in the Egyptian real estate market. In addition, the developer will impose a ratio for a waiver.
I think that we must have standard contracts formulated by specialists to balance the rights and obligations of both the buyer and the developer, as the courts are full of such cases. Finally, the political leadership has obliged the developer to pay 30% of the project value before announcing the sale. However, I think that the Egyptian real estate market still needs an additional package of laws, among which are the necessity of completing the common utilities of the project before announcing the sale, as well as the necessity of finishing the concrete construction.
In spite of it having 15%of the workforce in the country and there are 105 industries based on it including rebar, ceramics, and cement, The Egyptian real estate market is one of the leading sectors.
For example, when we talk about the construction and development industry in Egypt, we are talking about one of the most important sectors that affect many others like iron, steel, wood, and aluminum industries, as well as all means of transport related to cement, ceramics, sandstone, and rocks. We are also talking about many other industries like the glass industry which is related to some furniture industries specialized in decoration. All these depend on a stable real estate sector.
However, the lack of trust between the buyer and the developer is a disaster that must be addressed to rebuild the trust between them in order to preserve the national economy through several necessary measures, which must be urgent to protect the specialists in this field, eliminate random and give legitimacy to various items of contracting.