Interview with Khaled Nasser, Regional Director of RE/MAX Egypt

First of all, what is your evaluation of the construction and real estate sector in Egypt at the moment? What are the latest developments?

My evaluation of the industry in general is that it is very strong. I believe this for many reasons: first of all, Egypt has the highest population of all the countries in this region and over 60% of our population is below the age of 30, i.e. mostly young people. A large proportion of the population is therefore looking to grow or upgrade their real estate assets. There are a lot of newly-weds and other couples looking for new homes. As a result, there is always a demand for real estate in Egypt. The second thing is that we have a culture of real estate ownership in Egypt, so for the past few decades, every family has wanted a home. This is an established part of Egyptian culture: if you want to save money, you save it into a home or you save it to buy a home or some kind of real estate. The third thing is that real estate investments in Egypt have proven to be the most solid, least risky, least sensitive investments. No matter what happens in the economy, Egyptian real estate has proven to be very resilient to economic changes. This has therefore created a sense of trust among Egyptians. When they want to invest somewhere safely, they go to real estate rather than putting their money into bonds or the stock market or any other kind of investment in Egypt.

How big is the market when it comes to real estate agents, both in Cairo and in Egypt more generally?

It’s gigantic. It’s so big, I can’t even describe how big it is. When you look at different segments of the population, it’s so big that no company can really take on a big stake of the market, especially when you look into re-sale market. The primary market has been limited over the past few years due to all the socio-political issues that we have been having. Land development and properties that the government was willing to make available for developers to buy and develop have been limited, but the re-sale market is huge.

What is the proportion between local companies and international real estate agencies?

We are talking here about thousands of local companies, but I would say that the international companies form only about 2%-3% of the market at the most.

If you look at size and market share, the international companies have a tiny presence compared to the local firms. This refers, of course, to all segments of real estate, and I’m talking about all the different cities in Egypt. Most of the international brands are generally concentrated in the Greater Cairo area; they have a minimal presence outside Cairo and Giza. There’s a huge segment of real estate, which encompasses the lower B class and C class properties, that is very difficult for international real estate companies to penetrate or even work in within the structure of their international branding. By contrast, when it comes to the upper segments of real estate, commercial real estate, for example, I would say the international brands then make up about 20% to 25% of the market.

How does 2014 look in terms of the sales forecast? What do you see coming for the second half of the year?

We sincerely believe that there is going to be a great improvement in the real estate market in the near future. A lot of people are expecting a hike in real estate prices due to the new political stability. Anyone with a bit liquidity, or anyone planning to buy property, is probably therefore making a faster decision to buy right now before the prices go up. We actually started seeing the effects of this at the beginning of 2014, and the trend is set to continue for the second half of the year. Regarding the political conditions, there have been a lot of talks in the government about various changes in taxes and subsidies, therefore this has affected the prices as there is a lot of ambiguity about what will happen. As no one really knows what will happen to the prices in the next year, anyone planning to buy will probably decided to go ahead and buy now rather than later.

In which segment do you see the highest demand? Where is the niche for the investments when it comes to real estate?

Right now, I think that mid-income and low-income housing is probably the safest bet right now; luxury homes have been in limbo over the past few years. Commercial real estate is certainly also a desirable goal, and there has been a lot of interest in commercial real estate investment. There is also a great deal of interest in investing in income-generating properties too.

Now, moving on to RE/MAX Egypt, can you give us an introduction to your presence in Egypt, your history, and your current market share?

As many people may know, RE/MAX is one of the biggest real estate companies in the world. It’s the leading brand for real estate. We are present in 97 countries and have more than 6,400 offices and over 93,000 agents across the world. We consider RE/MAX to be the leading brand, or icon, when it comes to real estate.

I started RE/MAX in Egypt back in mid-2012. Although there were a lot of security issues in the country as well as a great deal of political instability and several major economic challenges, we decided to establish RE/MAX in Egypt really because of two things. The primary reason was the trust in the real estate sector that existed in Egypt - we had a lot of confidence about the strength of this sector in Egypt. At the same, we had confidence the tools, brands and systems of RE/MAX in addition to the conviction that a company like RE/MAX was needed in Egypt. When we founded RE/MAX here, we therefore looked at the real estate industry, and the competitors we would be facing, and used this information to set a strategy for entering the Egyptian market. It is actually a very difficult market and not at all simple to work with. Over the past year and a few months, we have succeeded in establishing seven offices, mainly in the Greater Cairo area, Cairo and Giza. We have also recruited more than 130 agents. The concept we are following is entirely innovative here. What we as a corporate office decided to do was not to open our own offices, but rather to build the best of the best infrastructure for RE/MAX, to develop the best education programmes and provide the best technology package, with the best legal infrastructure to support us. We offered local companies the opportunity to join RE/MAX through a franchise. By doing this, by acquiring the RE/MAX franchise and investing in the franchise license, they are transformed overnight into an international and world-recognised brand. They use our tools and systems, and we give them all the training they need as office franchisees or office managers.

One of the biggest challenges for real estate companies in Egypt is retaining their agents, retaining staff. 99% of real estate companies in Egypt have a significantly high turnover of staff. This makes it very difficult for a real estate company to grow, especially as this business is very people-oriented. If you can’t retain the people, you can’t build the company - it’s as simple as that. What we therefore decided to do for our agents is to give them the opportunity to join RE/MAX not as employees but as business owners and business affiliates of RE/MAX. When our agents join us, they work on a high commission concept, they get to self-promote their business and they can still manage their own business, but have access to RE/MAX facilities, RE/MAX tools, RE/MAX education and the RE/MAX brand. We also connect them to the whole network of offices across the world. As a result, the RE/MAX agents in Egypt are currently the only ones in the country who can help their customers buy, sell or rent properties across 97 countries. RE/MAX agents across the world do the same thing. They send our real estate agents here in Egypt a lot of customers who want to invest or rent real estate in Egypt. This is all possible thanks to our systems and tools.

Apart from the challenges, which, as you mentioned, are linked to the human factor or finding local talent, what other challenges do you face on a daily basis?

One of our biggest challenges is changing the culture. We offer a completely different concept. We present a completely new type of opportunity to the real estate industry. People are always reluctant to change and it is very difficult to change people’s mindsets. The challenge we are therefore facing is to find the visionaries who are out there. Once you have those visionaries, and they begin to create success, you can then find those willing to follow. The other main challenge is that the by-laws and regulations essentially give a green light to a lot of customers to sometimes not honour their contracts or payments. This can create some negativity among our agents. However, when we look at the overall spectrum of these types of cases, they represent a minimal factor in our business. It’s almost a negligible problem and is certainly within the norms. Just every now and then when we do face this kind of problem, we are lacking the legal back-up to be able to fight it.

You have only been in Egypt for a short period of time, yet you have won several awards. Can you tell us about these, please?

Well, we have awarded our agents for sure. One of our most recent actions as RE/MAX has been to join in with a local movement to create a real estate syndicate that represents the real estate industry. There has not yet been any kind of board, association or syndicate in Egypt that represents the real estate industry, especially real estate brokers. One of the things that I have personally done was to go along to the Ministry of Labour with a group of people, and then in conjunction with the Ministry of Labour we created the syndicate. It has now been established and we have just had a press conference announcing the start of this syndicate. Our doors are now open for as many real estate professionals to join the syndicate as is possible. Our plan going forward is to significantly develop the real estate sector and to be the major voice of the players in this sector. We have over four million people working in it, and would like as many of them as possible to join the syndicate. That way it can become a loud, strong voice in favour of introducing the right regulations and by-laws to help develop the real estate sector and protect the professionals working in it and even the customers from the bad practices that exist. The syndicate has awarded RE/MAX for its participation in the syndicate and I am the Vice-President of the syndicate. We have been significantly involved in setting it up. The people here are slow to realise how fast RE/MAX is growing. One day soon they are going to wake up and find RE/MAX everywhere: in just the past year we have grown to be the fastest and largest real estate network in the region. We have started up RE/MAX in Egypt, in Saudi Arabia, in Kuwait, in Qatar, Bahrain, Lebanon, Tunisia, Morocco, Jordan and Oman.

On another point, there is a lot of investment that is going to come from the GCC countries. What do you as a company expect from that? What benefits do you think it will bring? And what can you give the GCC investors in return?

As I mentioned, RE/MAX is the fastest-growing real estate network in the Middle East right now. The countries and markets that we have penetrated in the last 8-10 months include Egypt, Saudi Arabia, Qatar, UAE, Bahrain, Lebanon, Oman, Jordan and North Africa - Tunisia and Morocco. We are also looking to move into the Algerian market soon. The interesting thing is that RE/MAX is the only company that has a network that connects all these real estate agents together. For example, right now a real estate agent in Saudi Arabia can offer a Saudi Arabian investor properties in Egypt and Lebanon or anywhere in the Middle East; the same goes for Egyptian real estate agents and for real estate agents in the UAE. Our aim for our network is to use it to become something like a major ‘real estate shopping mall’ for investors. They will be able to dream of what they want and we will be able to provide them with real estate professionals in any sector and any market who can give them all the information they need to make the right decision and put their investment into the right real estate. I don’t know of a single company that can offer that, so with the current support we are seeing from the GCC countries and knowing that the GCC investors are very interested in real estate, we are expecting a lot of investors to be coming to Egypt in the near future, specifically from the Saudi Arabian market, from the UAE, Kuwait and Bahrain. RE/MAX has a presence in each and every one of those countries, and we also have a very wide base professional agents in Egypt who can show the investors the best real estate in this country and advise them on where to invest. We are therefore extremely positive that RE/MAX will be able to make an enormous contribution to the Egyptian economy over the next few years. To achieve this we are counting on our local talent to provide the best of the best consultation and advisory services for any investor from anywhere in the world.

Looking to the future, what is your vision for RE/MAX Egypt? Are you still looking to further expand the franchise?

Absolutely. We have plans to have 30 offices in Egypt within the next three years and more than 300 agents. We are certainly planning to expand beyond Cairo and Giza to the other cities and governorates in Egypt. We’re planning to start up in Alexandria this year, and would also like to be present in the Nile Delta area, in Upper Egypt and by the Red Sea area. So as you can see, we have some significant plans for RE/MAX in Egypt with our systems.

Lastly, what is your personal vision for the country?

Right now, personally, I’m very optimistic, although there is another side that is a little more conservative with regard specific practices. We know that there are a great many challenges, but what we want to see is a realistic plan and vision to follow as well as a government that can actually deliver that plan. We don’t want to hear big promises that cannot be kept. I would personally like to see a government that can actually put together a solid, detailed plan outlining milestones that we can achieve. I would also like this plan to be independent to individuals: what happens is that a new Minister comes to a Ministry, and he has a plan for himself over his term of office, but then when he goes, the next Minister comes and does something completely different. We don’t want to see that because Egypt cannot really afford to continue in that fashion. We need to have long-term, solid, national plans for the country, because we have a lot of natural resources and with visionaries and good leaders, I believe that Egypt can really pull it off in a very short period of time.

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