Egypt proposes mortgage law changes to boost home ownership

CAIRO Oct 10 (Reuters) - Egypt's financial regulator hasproposed changes to the mortgage law to allow remortgaging andhigher borrowing levels for people on low incomes, in a drive toboost home ownership in the country of 83 million.

However, Ashraf el-Sharkawy, chairman of the EgyptianFinancial Services Authority (EFSA), announcing the proposals onWednesday, said that no changes could go ahead until they wereapproved by a yet-to-be-elected parliament to replace the onedissolved this year. No election date has been set.

Conservative lending rules and red tape have long beenblamed for holding back development of the mortgage sector inEgypt. As well as helping more people to buy their own home,particularly poorer Egyptians, economists say a more activemortgage industry would boost the economy.

Mortgage lending is equivalent to less than half a percentof gross domestic product (GDP) in Egypt, compared to 13 percentin Morocco, according to a 2011 report on Africa housing byFinMark Trust, a body mainly funded by British government aid.

Mortgage lending in Britain, by comparison, is equivalent toabout 80 percent of GDP.

"The mortgage finance industry needs a push in Egypt,"Sharkawy told a Euromoney conference in Cairo.

"Now it is time to change this law to add new instruments:remortgage, refinance your mortgage, equity finance and othertypes of finance like murabaha finance," he said, referring tothe Islamic financial instrument "murabaha".

He said one change to the law proposed by EFSA involvedincreasing the amount that those on low incomes could borrow,raising the value of installments they could pay each month to40 percent of their salary, up from 25 percent.

"Because of the (property) price increase this 25 percentcannot buy a small flat," he said. "So we are suggesting to haveit up to 40 percent."

The shortfall in affordable housing in Egypt is the highestin the Middle East and North Africa region at 1.5 million units,followed by Iraq at 1 million and Morocco at 600,000, accordingto a 2011 report by property firm Jones Lang LaSalle.

The report also said that 80 percent of Egyptians fell intothe low-income sector.

The government is seeking to revive the economy and improvethe lives of poorer sections of society who complained of beingleft out during economic liberalisation under ousted leaderHosni Mubarak.

But, highlighting a deadlock in policy action that isfrustrating investors in Egypt, Sharkawy said the changes to themortgage law needed approval by a parliament that has yet to beelected. He said the draft changes had been sent to the cabinetfour months ago.

The lower house of parliament, elected earlier this year,was dissolved based on a court order that declared the voteviolated the constitution. But new elections will not be helduntil a new constitution, still being drafted, is written.

(Reporting by Asma Alsharif; Editing by Edmund Blair and SusanFenton)


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