A decade or so ago, a property owner wanting to obtain clear title to a flat or a piece of land needed to complete some 77 procedures in 31 separate offices, a bureaucratic nightmare that hindered the growth of the Egyptian mortgage industry. Unfortunately, the situation since then has scarcely improved.
A Peruvian economist, Hernando de Soto, made a study of Egyptian real estate in the late 1990s and early 2000s, and estimated that it took six to 14 years to register a dwelling on desert land bought from the state, and that registering one built on agricultural land bordered on the impossible.
Because it was so difficult to register property, Mr de Soto argued, Egyptian real estate, among the country’s most valuable assets, was locked away, making it virtually dead capital. The lack of proper titles discouraged any notion of providing mortgages, a financial tool that would help to ease the country’s chronic housing shortage and act as a spur to its financial markets.
At the time, economic think tanks, media and the government itself grabbed on to the results of the study most enthusiastically.
The government jumped into action. In 2001 it passed a law permitting mortgage companies. In 2004 it set up pilot one-stop shops where properties could be registered, surveyed, appraised and insured all under one roof. It set up a credit bureau so mortgage lenders could share information about a prospective home buyer’s creditworthiness. It cut property registration fees to a maximum 2,000 pounds (Dh937).
So a decade or so later, how is it going?
It’s still a mess.
Sherif Samy, chairman of the Egyptian Financial Supervisory Authority, says that more than 90 per cent of the units in Egypt still do not have proper titles. “The title registration regime is very antique, time-consuming and cumbersome,” he says.
Largely as a result, the mortgage industry has yet to take off.
In the first 10 months of 2015, mortgage finance companies provided mortgages worth 732m pounds, up 54 per cent from 474m pounds a year earlier. The jump was mainly owing to mortgage companies buying portfolios from real estate companies, rather than any surge in new mortgage activity.
The stock of mortgages at the end of October was 2.5 billion pounds. Mr Samy figures that banks, which don’t announce figures, may have provided another 2.5bn pounds. This is a trifling sum in Egypt’s 2.2 trillion pound economy.
A major part of the problem is laws passed in the 1940s and ‘50s that require a chain of ownership to be established before proper titles can be granted. If someone died in the ‘50s, he or she may have left dozens of heirs, each of whom must be tracked down. The task is often complicated by the possibility of back taxes owed.
Titles are somewhat easier in the new urban communities on the outskirts of the major cities, where the land was acquired directly and fairly recently from the government.
Mr Samy says Egypt needs a more modern title registration regime that would give priority to the obvious tenant.
There are two main bodies involved in title registration, the real estate registry, or the shahr aqqari, which is under the justice ministry, and the Egyptian Survey Authority, which is under the irrigation ministry.
Mr Samy, who is involved only in his role of mortgage regulator, this year recommended to the government that it combine the two under a single organisation. He says this new organisation should then subcontract the work of registering properties to private engineering firms. The government could then make spot inspections to ensure the work was being done properly.
Any change in the organisation would require a concerted effort by the prime minister or even the president, he says, because it would affect several ministries, including justice, irrigation and housing.
“Even if we change the law, the capacity to register all the outstanding [properties] will take 30 to 40 years,” he says.
The result would be less corruption, less time spent in bureaucracy and better regulation. It would protect property rights and reduce the number of disputes the amount of litigation.
In the meantime, improvements to the capital markets law this year that opened the way to securitisation have made it easier for mortgage companies to replenish whatever financing or funding they bring to the market once the title registration problem is ironed out, Mr Samy says.