Aloula Forecasts 60% Decline In Mortgage Finance If Interest Rates Rise


(MENAFN- Daily News Egypt)

Al-Tameer Mortgage Finance Company (Aloula) has reported a significant 56% increase in total financing, reaching approximately EGP 2.5bn from January to October 2023. According to Chairperson Ayman Abdel Hamid, mortgage financing portfolios represent 90% of this total, with the remaining 10% allocated to individual financing.

Abdel Hamid shared with Daily News Egypt that Aloula's profits have surpassed EGP 160m, marking a 27% growth compared to the previous year.

In March 2023, the company executed a factoring transaction valued at EGP 1.5bn and is preparing to issue another worth EGP 1.95bn in the second quarter of the following year.

Aloula is exploring new financing solutions for 2024, aiming to streamline the financing acquisition process.

Abdel Hamid noted that the rise in interest rates during the initial eight months of the year resulted in a 40% reduction in mortgage financing volume. He anticipates that further interest rate hikes could lead mortgage finance companies to suspend individual financing, focusing solely on government social housing finance programs.

He predicts a potential 60% downturn in mortgage financing if interest rates increase. However, if market conditions and interest rates stabilize next year, he expects the mortgage financing market to expand by 15% to 20%.

The current mortgage financing interest rate stands at approximately 25%.

The Monetary Policy Committee (MPC) has maintained the Central Bank of Egypt's (CBE) key rates: the overnight deposit rate at 19.25%, the overnight lending rate at 20.25%, and the main operation rate at 19.75%. The discount rate also remains unchanged at 19.75%.

Abdel Hamid commented on currency valuation, stating,“A new devaluation could significantly impact real estate prices, potentially leading to a 25% to 40% price surge for real estate units from December to next March.”

He provided historical data on mortgage financing:“In 2019, the total financing was EGP 2.65bn, with EGP 911m (approximately 35%) for regular customers. In 2020, the amount increased to EGP 3.4bn, with EGP 1.768bn (about 52%) for regular customers, attributed to lower interest rates. In 2021, EGP 8.137bn was provided, including EGP 2.999bn for regular customers, a 37% decrease.

“In 2022, mortgage finance for regular customers dropped to 22%. However, in 2023, until the end of August, EGP 1.8bn was allocated to ordinary customers out of a total of EGP 5.365bn, representing a 33.5% rate, a 38.6% decrease from EGP 8.746bn in the same period the previous year.”

Regarding the most in-demand areas, he pointed out that new urban communities are the largest areas that have been financed recently, such as New Cairo, Fifth Settlement, New Administrative Capital, North Coast, 6th of October, Sheikh Zayed, and Ain Sokhna. For the time being, funding for residential units in New Cairo achieved an increase of about 25% over the west Cairo area, while the volume of clients increased on financing for units in the North Coast at a rate not exceeding 10% compared to last year.

He revealed that there are ongoing discussions with the Financial Regulatory Authority, the Egyptian Mortgage Federation, and other concerned parties about the possibility of providing mortgage financing for off-plan units or under construction.

Mortgage finance companies are capable of providing finance for this type of unit, but this must be done according to the law, which is what it seeks to achieve, he concluded.

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