26 July - 1 August 2001
Issue No.544
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Al-Ahram Weekly Online 26 July - 1 August 2001 Issue No.544 |
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| Published in Cairo by AL-AHRAM established in 1875 | Current issue | Previous issue | Site map | ||
Mortgaging lives
The idea behind the new mortgage law, to be issued shortly, is not new, and a look at the laws governing financial institutions in Egypt makes it obvious that the new law has been in force and the banking sector has been implementing it for some time now.
The legal development in question, then, involves businessmen who borrowed to invest in real estate but could not repay the bank loans because the housing sector expanded only at the high end of the market, never in the low-income sector that represents the bulk of demand in Egypt. The problem is two decades old: some 1,800,000 flats, both sold and awaiting purchasers, stand vacant. There is, in other words, a surplus of expensive housing, and a lack of economy housing. The new legislation attempts to remedy this problem by transferring businessmen's debts to buyers, by giving them possession of apartments for a portion of their price and devising long-term repayment schemes.
Such a law, at present, is unlikely to revitalise the housing market or contribute positively to the economy. When the government enthusiastically began to repay its debts to companies and businessmen several months ago, this was translated not into economic vitality but rather into foreign currency speculation, which ultimately reduced the value of the pound. It is entirely possible that, once freed of their debts to the banks, the real-estate investors in question will demand further loans to buy currency and stocks, possibly dealing a severe blow to the economy. After all, the past 30 years' experience of real-estate investment have made no significant addition to the infrastructure of the housing industry: real-estate investment has not spurred the growth of related industries.
* This week's Soapbox speaker is a professor of economics and director of the Centre of International Economic relations at the National Planning Institute.
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