Investing in the Cities vs compounds in Egypt, A Closer Look at Real Estate Investment

Whenever we consider capitalizing in real estate, regardless of the kind of unit we are looking for, we are always faced with the difficult choice of either investing in the city versus the new compounds. Naturally, each option has its pros and cons. On one hand, compounds come with a myriad of luxuries which are hard to resist, but then again, there is the old, irresistible charm of the city. So, how do we choose? To help clarify this dilemma, we spoke with three experts; Mr. Mahmoud Attar, Broker Owner of RE/MAX Today, Mr. Michael Fanous, Director of Sales Primary Division at RE/MAX 1st Choice, and Mr. Gamal Farah, Real Estate Consultant at RE/MAX 1st Choice.

The Pros and Cons

According to Mr. Attar “Compounds are easier in terms of payment and people tend to lean more towards them due to the security and services they offer, which gives them an advantage”. Nevertheless, Mr. Attar also believes that there are certain perks to investing in the city. “For those who can afford it, it is a more guaranteed investment. The various neighborhoods in the city have existed for a long time and are also complete with services unlike the new places which will only show after being fully constructed.”

Mr. Farah, however, has a different point of view. “The longterm lease in compounds comes at a very minimum down payment, a luxury you do not find in the city. As for investment, people stay away from the city and go to locations where the ROI has proven to be very high and lucrative.”

Payment Facilities

When it comes to payment terms, all three experts agree that when purchasing a unit in a compound there is a vast range of facilities which are not easily available when purchasing a unit in the city. Quoting Mr. Attar “For the client, investing in compounds is easier because they make a small down payment and then the rest is paid in installments over a few years. During this time, the value of the money paid in installments decreases. In the city, they buy directly from the owner who usually wants the entire sum in cash. ” That does not negate the fact that some people simply prefer the convenience of the city. “The units are already constructed and ready to live in. You know the neighborhoods, the surroundings, and the facilities, in addition, services and public transportation are already working,” Mr. Fanous explains.

Most Popular Locations

Both Mr. Attar and Mr. Fanous agree that compounds are the more popular option for most buyers at the moment. “People want to escape the crowded capital and are chasing the potential of making a good ROI,” Mr. Fanous explains. However, Mr. Farah believes it actually depends on the age of the buyer. “It has to be split according to age groups, those who wish to stay in the city, and the ones who wish to build a life outside of the city. The age bracket of 50-65 are the ones who will buy in the city. They are not going to leave because they are tied to the community. And when they do move to compounds, we get a lot of calls from them wanting to go back to the city. However, the younger generation, who are frustrated with the denseness and the deteriorating infrastructure of the city, are the ones who will choose the more spacious and new compounds.”

There are certain locations that are considered the most popular and the safest investment within the city and compounds. “Zamalek and some areas in Heliopolis and Maadi are considered the most popular areas in the city. In terms of compounds, New Cairo and its vicinities, as well as Sheikh Zayed are high in demand,” Mr. Fanous states.

Mr. Farah, on the other hand, believes that the most popular locations for compounds highly depends on the reputation of the developer. “The compounds built by very reputable developers are the most sought after despite their location. It depends on the developer’s name and quality of work. If it has proven to be of high standard from previous projects, people will invest with them and will also recommend them to others.”

The Matter of ROI

All three experts agree that the more guaranteed ROI is that of the compounds. According to Mr. Farah “People who want to invest do not go for the city because the ROI in those locations is nothing compared to investment in compounds.” Mr. Fanous even singled out New Cairo. “New Cairo has a more guaranteed ROI due to its high and increasing demand,” he says. Mr. Attar believes the high ROI of compounds is a result of the installment systems. “The amount of money paid in installments becomes of less value over the years, this means the ROI for the buyer is better. On the long term, the price you paid in installments makes you feel like you’ve paid less than someone just purchasing now,” he explains.

The Factors One Should Consider

Whether investing in compounds or the city, there are certain factors that one should first consider. As a start, Mr. Fanous believes the following is a good and helpful comparison. “The payment plan plays an important role in comparing the cash value of the down payment needed to purchase in a compound versus the value of the upfront cash needed to buy in the city. Other factors to consider include when the unit is expected to reach its potential as well as the demand in that area in order to sell with the maximum ROI,” he explains.

For compounds, Mr. Attar and Mr. Farah both agree that the developer’s reputation is essential. “The reputation and previous experience of the developer, the area where the project is developed and its accessibility are all important factors,” Mr. Attar says. However, these are not the only factors mentioned by our experts. Mr. Farah continues by stating other dynamics such as “Whether the project will be delivered finished or semi-finished, the time of delivery, the location of the compound, and the facilities available such as schools, malls… etc. In addition to the accessibility of services in general such as electricity or water, because when you live there you pay a hefty sum for those services, and some compounds do not deliver their full responsibility.”

For the city, Mr. Farah believes there are some fundamental factors to take into consideration as well. “It all depends on making sure that the documents of ownership are all verified and registered. Also making sure of the condition of the unit, especially if it is in an old building. You must look at the plumbing, electricity or wiring, and details of the building itself. Finally, you must also make sure you are investing in a decent clean area, with good public transportation and parking places,” he concludes.

Whether you are looking to invest in compounds or the city, the general consensus seems to be that you must do extensive research first. Find a developer and agent you can trust, and make sure the unit you are purchasing is a smart, guaranteed investment.