ADQ’s Egypt project lights fire under region’s real estate

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• Ras El-Hekma plan sparks interest
• 75% jump in deals on north coast
• Egyptians buying second homes

The $35 billion investment by the Abu Dhabi sovereign wealth fund ADQ in Egypt’s tourism sector appears to have spurred a jump in real estate transactions on the country’s Mediterranean coast.

In February ADQ unveiled its plan to build Egypt’s “largest new city” in Ras El-Hekma, and develop the coastal region into a Mediterranean vacation hotspot. 

Now, the property consultancy Savills reports, there has been a 75 percent year-on-year increase in real estate sales in the area around Ras El-Hekma.

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Nearby spots such as Dabaa and Sidi Henish, all east of the city of Alexandria, registered a 68 percent year-on-year rise.

ADQ’s investment includes $11 billion to be distributed among other projects across Egypt to aid its economy. The country is struggling with currency volatility and a drop in revenue stemming from the impact the Red Sea crisis is having on Suez Canal shipping.

“The area is fast becoming a prominent regional tourist destination, attracting a broad customer base that includes both Egyptians and GCC nationals,” said Catesby Langer-Paget, head of Savills’ Egypt office. 

“There is also a growing trend among Egyptians purchasing smaller second homes in emerging areas like Dabaa, Ras El Hekma, and Sidi Henish, primarily for investment purposes.” 

Egyptian and Emirati stakeholders were in talks in May to begin issuing construction contracts in Ras El-Hekma, with a plan to break ground before the end of this year. However, Nader El Biblawi, chairman of the Egyptian Travel Agents Association, was quoted as warning that the development process was still “extremely premature”.

In July, the Cairo-based Talaat Moustafa Group (TMG) said it would separately invest $21 billion to build another tourism destination on Egypt’s Mediterranean coast to rival Europe’s most sought-after locales. 

At the start of the year, ADQ and the Abu Dhabi-based Adnec Group had agreed to acquire 40.5 percent of TMG Holding’s hospitality division, ICON Group, through a capital increase.

• Abu Dhabi’s $35bn throws Egypt a liquidity lifeline
• Egypt allocates land for airport at ADQ’s metropolis
• Egypt receives second tranche of UAE’s $35bn investment

In February, Saudi Arabia’s Public Investment Fund and the Qatar Investment Authority were reported as being among multiple Gulf players looking to develop the Ras Ghamila area in Sharm El-Sheikh, on the Red Sea.

Last month, Saudi Arabia’s investment minister, Khalid Al Falih, said while meeting with Egypt’s prime minister, Mostafa Madbouly, that the kingdom wanted to turn its $10 billion deposit with the Central Bank of Egypt into an investment, in a structure similar to the one ADQ used for the Ras Al Hekma deal. Analysts expected the Saudi money to go into the Ras Ghamila project. 

Langer-Paget said: “Looking ahead, the north coast market is expected to continue its upward trajectory over the next one to two years. With some developments extending their operations into mid-October, the region is gaining traction as an even more viable destination, from an economic standpoint.” 

Similar dynamics, where tourism-focused investment drives real estate growth, are visible elsewhere across the Mena region.

In the UAE, the announcement that Wynn might bring the nation’s first casino to Ras Al Khaimah in a couple of years has prompted a flurry of hospitality and residential construction, as developers bet on a tourism boom in the still underdeveloped northern emirate.

Other neighbouring nations, such as Kuwait, Qatar and Bahrain, are similarly putting large amounts of money into building entertainment-focused infrastructure to appeal to locals and visitors alike and push wider real estate and economic development.

Stephen Flanagan, partner and head of valuation and advisory for the real estate consultancy Knight Frank in the Middle East and North Africa, told AGBI in July that Bahrain’s focus on enhancing its sports and events offerings makes sense not so much a stand-alone strategy, but rather as a means of “catalysing” surrounding real estate projects that might otherwise be struggling to take off.