Investors in Singapore are adopting a defensive strategy through seeking stable assets with long-term income growth, according to a 2019 outlook by the commercial real estate service firm CBRE Group. One of the most sought-after sectors is the real estate market. A very similar trend has been common in Egypt – for decades. Real estate is considered a safe haven amid economic and political instability; consequently, the Egyptian real estate sector constituted 16.4% of the GDP in fiscal year 2017/2018.
Throughout 50 years, Singapore urbanized its landscapes, moving from a swampland filled with slums to one of Asia’s leading real estate investment locations. Despite expectations that the residential market would plummet due to stricter government measures, demand for the sector soared. So, what can Egypt learn from the real estate sector’s development in Singapore?
The relationship between the government and the private sector
“Today, the government is the key player in the real estate sector in Singapore,” Shi-Ming tells Business Forward. “It was and continues to be the policy maker, regulator, land owner and developer, providing not only housing, but also soft and hard infrastructure.”
He highlights that government agencies play a key role before the private sector partakes in the market. Government agencies are essentially responsible for industrial buildings, housing units, planning and development.
Public housing through the HDB
A successful government example in the Singapore real estate experience is the Housing and Development Board (HDB), launched in 1960. Becoming the country’s largest housing developer, the HDB supplied homes for over 80% of the Singaporean population.
The initial capital investment of a development was covered within a maximum period of 10 years since its establishment.
Focusing on local labor
A resilient market performance is often attributed to the building quality which has improved in Singapore over the past years due to a government legislation favoring the local labor market, according to associate professor at the National University of Singapore Yu Shi-Ming.
Aiming to prevent the construction industry from relying on cheap, foreign workers, the government imposed a quota and tax for foreign hires; a mechanism that attracted locals to greatly contribute to the industry’s growth.
Forcing new building technologies
The government also encouraged companies to adopt new building technologies by passing legislations that stipulate the use of new construction methods. For instance, it dictated the usage of prefabricated prefinished volumetric construction (PPVC) to 65% for some land tenders. This enhances productivity, as it includes on-site assembly of off-site manufactured materials, and saves construction time.
The government also encourages the construction of eco-smart cities where members of the Real Estate Developers’ Association of Singapore (REDAS) are guided by vigorous environmental sustainability principles to reduce carbon emissions.
Hence, many buildings currently include energy-efficient systems, pneumatic waste conveyance systems and dual chutes for recyclables.
Managing population growth
By 2030, Singapore’s population is expected to increase to around 7 million, while Egypt’s population is forecast to reach, according to Brookings. Shi-Ming believes that high population densities could only be mitigated if the government conducts proper planning and design for land use.
“Egypt is a big country and handling an important issue like unoccupied housing and unused lands is not simple; therefore, proper planning, government transparency and regulations are key,” he tells Business Forward.
What can Egypt learn?
However, Singapore did not only rely on its government to develop the sector; it also introduced long-standing beneficial strategies such as Real Estate Investment Trusts (REITS) which involve collecting rents on leased properties and distributing the income as dividends to shareholders.
“The adaptation of REITS secured additional funds from commercial real estate, contributed to the deep market, recycled capital, acted as an investment alternative to retail inventory and provided indirect exposure for foreign investors,” Shi-Ming explains.
He also recommends secured public and private partnerships (PPP) as another success key to the rapid development of real estate.
Egyptian developers believe that the government has an influential effect on Egypt’s real estate market since “many private companies are currently carrying out successful partnerships with the government without obstacles,” founder and chairman of Mountain View Amr Soliman tells Business Forward.
Director of Corporate Accounts and Facilities Management Support at C&W Services in Singapore Chee Kit Ho recommends that with a solid performance in keeping up with innovation, amid abundant real estate financing, organizations should hire talent from different geographical territories for better cross-border consultancy in the future.