In association with an American leading Strategy Consulting Firm “Monitor Group”, NECG participated actively in evaluating the Housing Finance market opportunity in Egypt and Algeria, developing strategies to grow the housing finance market and identifying opportunities of investment for the International Finance Corporation (IFC).
IFC was interested in investigating the feasibility of establishing a market-oriented housing finance system in Algeria and Egypt, which could involve the creation of a new dedicated primary lending institution.
The purpose of the requested study was to document the current housing finance system and legal framework in order to answer specific questions and assist in the development of a long-term strategic plan.
In general, the study (i) summarized the current supply and demand for housing; (ii) summarized the current mortgage lending activity and environment; (iii) addressed the legal, regulatory and operational issues affecting the development of an efficient mortgage lending system that would increase access to homeownership for the low and middle income population; and (iv) developed alternatives in light of the experiences of other developed and developing countries (such as the US, UK, France, Tunisia, India, etc.).
The mission’s scope of work covered the following:
Overview of the Financial Market and the structure of the banking system;
Overview of the Housing Market: A description of the supply and demand of housing, new households formations, affordability issues, and taxation and fiscal subsidies to housing;
Financial / Mortgage Markets: Type of primary markets that exist, number of mortgages that have been originated, number of banks, percentage of mortgages that are for new purchase vs. refinancing, pricing of various mortgage products, banks currently offering mortgage loans, respective market share of each of the mortgage lenders, etc.;
Lending Guidelines: Description of the various mortgage products being offered by banks, level of mortgage standardization regarding loans, various origination costs, typical process, key underwriting/eligibility criteria, insurance requirements, information sharing regarding borrower’s credit history, appraisal process to determine the value of properties in Algeria and Egypt, etc.;
Overview of the legal framework and regulatory environment;
Recommendations in terms of alternatives/options in light of the experiences of other developed and developing countries and the identification of the opportunities, the business risks, and the regulatory changes needed as well as the rationale behind those changes along with an outline of a business plan for a primary housing finance institution which fits the Algerian and Egyptian markets’ contexts.
In order to conduct the above, the team adopted the following approach:
Reviewed existing data available with IFC and the World Bank;
Gathered secondary data;
Conducted field interviews with housing finance companies, banks, real estate developers and lawyers;
Performed a consumer research in each country to understand customer perspective: Needs, motivation and behavior of the middle class towards housing and housing finance.
