Mortgages still make up a tiny percentage of Egypt's property market, years after the country passed sweeping mortgage laws.
Lessons in Egypt's experience with mortgage law reform
When Egypt passed sweeping mortgage laws in 2001 similar to the legislation being considered in Saudi Arabia, many experts thought the legal changes would transform the housing market.
It has not happened.
Nine years later, mortgages still make up a tiny percentage of the market. Only about 75,000 current homeowners used financing to buy their homes, and mortgages represent only 0.5 per cent of the country's GDP, according to government statistics.
Consumers have been turned off by mounds of paperwork and high interest rates, often 13 to 14 per cent, analysts say. There are also problems with registering property. And bankers have been wary of committing capital to mortgages.
"When you start a mortgage business, it takes a little while for the banks to understand the business," said Naveed Siddiqui, the chief executive of Capitas Group International. "Risk managers want to tread carefully."
There are signs that the business is picking up. The number of mortgage companies has grown from two in 2005 to 11, and now new laws that some believe will encourage banks to expand their mortgage business are under consideration.
The laws enacted in Egypt in 2001 are slightly different from those proposed in Saudi Arabia, but they have common goals. Both attempt to set up a framework to regulate the mortgage industry while creating a legal system within Sharia law to assure lenders they will be able to repossess property if a borrower defaults.
The Egyptian law included setting up a mortgage finance authority to oversee the industry and provide some level of transparency. But it has not been enough to attract international capital, which will also be a key factor in developing the business in Saudi Arabia, industry experts agree.
"I think it's coming," said Dr Khaled Sedky, the chief portfolio officer of Palm Hills Development in Cairo. "The whole symphony needs fine tuning."