Understanding the Dynamics of Egypt’s Construction Sector

Updated 12/2/2023 9:00:00 AM

Egypt’s construction and building sector is considered an engine for the economic growth of the country. The Egyptian government has set a strategic plan for urban development to be achieved by 2052. Under this plan, 44 new cities will be established across Egypt with an annual budget of $850 million. Currently, 24 new cities are under construction.

In this Factsheet, we will dig deeper to analyze the economic importance of the construction sector and explain the reasons for the price increase of residential units.

The construction and building sector’s gross domestic product (GDP) reached EGP 299.8 billion in the first half (H1) of fiscal year (FY) 2022/23. The sector acquired 8% of the country’s GDP during the period mentioned.
In H1 FY2022/23, the construction sector has grown by 5.9%. The government further targets a growth rate of 6% in the current fiscal year. Fitch Solutions projected that the construction industry will expand by 6.8% year-on-year (YoY) by the end of 2023; this expansion will be followed by an average annual growth rate of 7.4% during the next four years.
The public investments implemented in the construction sector during H1 FY2022/23 hit EGP 13.1 billion, representing a sharp annual fall of 30%. The construction sector’s investments accounted for 4.7% of the total public investments.
The construction sector is one of the foreign direct investment (FDI)-attracting sectors. In FY 2022/23, the FDI inflows into the sector amounted to $578.2 million, representing 2.5% of the total FDI inflows to Egypt.
In 2020, the Egyptian government published the New Citizenship Law, which enables foreign investors to gain eligibility for Egyptian citizenship by making financial contributions. One of the available options to make such a contribution is to buy property worth at least $300,000 in government-owned real estate projects.
The number of newly built residential units in Egypt reached 246,000 in FY 2021/22, which showed a 36.65% decline as compared to the previous fiscal year.
In recent years, prices in the construction and building market have surged. The increased prices were mainly driven by two factors, including the continuous increase in domestic demand for residential units and the increase in prices of building materials, especially cement and steel.
The economic repercussions of COVID-19, combined with the government measures to reform the economy such as correcting the exchange rate, encouraged the citizens to hedge against the current high inflation rates through investing their savings in real estate.
According to the latest price updates in November, cement prices reached EGP 2,311 per ton, indicating a 37.9% YoY increase. In addition, steel prices ranged between EGP 38,441 and EGP 40,651 per ton, which represents a 97.4% to 103.8% increase.
Egypt has recently moved towards self-sufficiency in the production of major construction materials. In 2022, Egypt’s production of steel hit 10.3 million tons, leading Egypt to become the world’s top 20th steel producer. During the same year, Egypt was the 5th-top cement exporter in the world, with $570.2 million in exports, making up 4.2% of the world’s total exports.