Real estate is one of the most competitive fields in Egypt today, with new developers continuously entering the market. In 2007, one such new entrant was Inertia, which in the span of 13 years became an important player in the real estate market, with a slew of innovative projects under its belt. Recognising Inertia’s impressive success, eniGma featured its dynamic Co-Founders, Ahmed El Adawy and Hussein Rifai, on its cover in November 2017. This month, for our Men’s issue, we are pleased to have CEO Ahmed El Adawy once again on our cover, as an example of an inspiring young successful entrepreneur changing the face of the country. eniGma’s Ezz El Turkey also got the chance to obtain an exclusive interview with El Adawy at Inertia’s stylish headquarters in Sheikh Zayed. Here are excerpts from the fascinating interview.
Can you catch us up on Inertia’s progress since we interviewed you in 2017?
Inertia is developing and growing in different ways. The number of our clients has quadrupled since 2017 and our client base has evolved. We have also accomplished many things internally, including the initiation of a very clear governance strategy that the whole company was able to adapt to successfully. The company has grown to a size that has allowed more self-management, and our governance strategy is clear to our team. Last time we met, we didn’t have the luxury to think that way.
Do you think that real estate has changed in the past couple of years? And if so, how?
Yes, definitely, a lot of changes have taken place. New cities are being built and the country’s road infrastructure is being renovated, thereby increasing peoples’ mobility. In certain areas, competition has decreased despite the presence of many professional developers; in others, the market has become more segmented, allowing more developers to exist and increasing the level of competition there. Also, these days, you can benefit greatly by working with the government as it implements its vision set for the country, building upon what’s already in progress.
In general, the market has become more challenging. Our cost elements, such as land, construction and manufacturing are now more expensive. In addition, the removal of subsidies and government support has resulted in a more expensive finished product. Without proportional increases in incomes, it’s difficult for people to continue to afford our product. That’s why they need payment solutions, such as longer instalment periods, which in turn place a heavier burden on us, as developers. At the same time, both developers and end users are becoming more practical and trending towards smaller units. The challenge for developers is to adapt to such new situations quickly. In the last couple of years, many professional developers were unable to adapt and disappeared from the market. Today, real estate development requires more flexibility and faster reactions. The world is changing fast.
Inertia’s work includes design and construction, as well as development. How do you manage these different areas together?
It’s been like this since we started. We first came to life as a design and consultancy firm, which still exists as a separate entity to this day. Inertia has two entities: the construction firm and the real estate development firm, and there’s a great amount of coordination between them. Since 2017, we created more subsidiaries for these two arms of Inertia. On the construction side, we set up a subsidiary concentrating on foundations and another one on finishes. This has helped us become more cost efficient. On the real estate development side, subsidiaries specialise in different commercial aspects. Each subsidiary has its own cost and profit centre in order to achieve our main goal, which is to be competitive. However, the main line of business visible to our clients is the real estate development firm.
What sets you apart from other companies?
What’s different about Inertia is that it is relatively more entrepreneurial than most firms, in a market that doesn’t encourage entrepreneurship. Real estate development is a field that requires deep pockets, with the main players being wealthy businessmen, government firms and banks, and third generation family businesses associated with general construction work. Inertia is different. We started with little resources and yet in the span of the first 10-12 years, we made our mark in the market.
Our success has more to do with the spirit of our company and team than our business model or smart selection of land plots. The truth is that the Inertia team is our main asset. They carry the workload, are very reliable, and need very little guidance. Our team is the main focus in the big picture. Our work environment is comfortable and friendly, and our team members are empowered to act freely in their field and encouraged to react quickly to change. We hope to keep it that way, as that is what we believe differentiates us from our competitors.
After having initiated it many years ago, have you noticed a rise in sub development?
When we started, we didn’t have enough resources, so we worked on sub development, collaborating with landlords as their developer. This allowed us to achieve maximum utilisation of our resources with the lowest possible budget, while building a large inventory of projects. Today, sub development has become the new trend. For example, Inertia was the first sub developer to work in El Gouna, and today there are five or six sub developers there.
The reason sub development has increased is because in today’s circumstances, money and resources are limited for everyone. Today’s end user doesn’t care whether you own the land or not, what matters to them is that you hand the finished product on time. Even investors in company shares don’t look at the land that a company owns the way they did before. Today, they evaluate a company by looking at its management team. Everything in the ecosystem has changed.
Last year, you won the Entrepreneur of the Year award. Why do you think you won?
I don’t think the award was meant for 2019 alone. We see it as recognition for what we accomplished in the last couple of years in a market that was tough for entrepreneurs. Constant turbulence in the real estate field, whether related to permits, licensing or other things, affected many companies negatively in terms of delayed projects and general problems faced. I think the award was in appreciation of our model, which was tested and proved to be sustainable. They awarded us based on that.
What advice would you give rising entrepreneurs?
In general, I think I would stress the importance of consistency, which requires the highest level of persistence. You will face a lot of challenges that you’ll have to solve with fewer resources than those of more established market players. You should not think traditionally, simply doing the same things that others did, because in most cases, your circumstances are going to be tougher than theirs. You need to be extremely persistent and innovative.
What are the changes that you would like to see in the Egyptian real estate industry?
Honestly, there are a lot of things I’d like to see changed. One is, increasing the availability of land for development, which will make prices become reasonable. Another thing is reducing the cost of finance. These elements will help us most to produce good quality projects. The cost of bank financing should be reduced significantly. Even though it was reduced by six percent last year, we need to continue on that path. For so many years, because of so many limitations, Egyptians were confined to living in a relatively small area of the country; in the end this didn’t leave room for creativity. I believe that while the changes I am mentioning are small, together with flexibility in regulations, they can transform the country.
What new projects are you excited to be working on right now?
The biggest project we’re working on is Jefaira on the North Coast. Delivery will start in 2021, and you will see people living there by 2022. We are working continuously is sales and construction in the residential part of Jefaira. The other components are also shaping up. We already have models of hotels and hospitals being wrapped up, and, soon, people will see on the ground our new brand of year-round development. We’re also introducing new concepts for student apartments.
We also have other projects in progress. Our business development team is working on securing land plots and finalising contracts. Moreover, we have two new land launches next year in 6th of October City.
How do you keep Inertia’s work fresh and innovative, ensuring that you always deliver the best of quality?
The whole point is that Inertia is not a one man show. We have very capable Marketing and Design teams, as well as great art direction, which all contribute to the developmental concept and ensure that it’s implementable. Our work mechanism triggers all the elements that are needed. For us to launch three projects per year, 40-50 projects are presented to our development committee, which picks the best among them. The criteria it applies are not only financial, but also about fitting with our developmental concepts and offering options that are different from the norm. How we will operate and what the outcome will look like are among many other things we check to ensure that we have a great project.