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Egyptian bank eyes stake in Dubai’s biggest private property developer

Egypt's government controlled Housing and Development Banks is understood to be eager to increases its own range of real estate investment options.

It is considering a 51% stake in Damac Properties, Dubai's largest private developer which has a number of projects planned in Egypt worth about $20 million. Damac has also said that is expects 20% of its revenue for 2009 to come from Egypt.

Both companies refused to talk publicly about details of any potential deal but analysts in the region believe that HDB has wanted to increase its presence in the real estate sector for some time. It already owns a real estate company in Egypt.

There are concerns if the deal goes ahead. 'We believe a change in ownership of Damac could be detrimental to the bank's Egyptian real estate company in the short term,' said Patrick Gaffney, an analyst with Egyptian investment bank EFG-Hermes.

'We expect potential homebuyers would become concerned about the stability of developers, leading to a greater number of cancellations and even weaker sales. We would also be very concerned with any changes to the terms of contracts these buyers hold with Damac,' he added.

However, HDB management said the bank is just starting due diligence and no decisions have yet been taken, Gaffney added.

Damac is developing a $16.3 billion residential and tourism project on Egypt's Red Sea coast and a $360 million commercial and retail venture in 6th October City west of Cairo.

The company said in December 2007 it would spend 30 billion Egyptian pounds over 10 years on another residential and commercial project near Cairo to tap demand for housing in the most populous Arab country.

Like many developers in Dubai, Damac has had to look at cutting costs due to the global economic downturn. It said in November it would not be expanding into new markets and is looking to reschedule the construction of some projects.

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