The recent news that the 1 million homes project between Arabtec and Egypt’s armed forces is under threat will be a set-back for all the parties involved.

Sources close to the project have told MEED that Egypt’s authorities want to impose new conditions for its implementation. On top of a renewed profit cap, the Egyptians are understood to want the entire project to be built using only local materials.

It is difficult to understand why the authorities are keen on new conditions, but it does seem like the turbulence of Arabtec over the past year is catching up with the UAE firm. Egypt could be mitigating against any instability it sees in the company.

For Egypt, it is vital that an ailing housing problem is alleviated and solutions are found quickly. The country’s cities suffer from chronic housing shortages, made worse by the lack of affordable homes, with a backlog of up to 3 million units. However, only about 200,000 units are completed a year, mainly targeting the mid-level and high-end markets. Many lower-income Egyptians live in informal housing.

For Arabtec, the turbulence continues. In the past year it has suffered contracting profits and several leadership changes that have made the company seem increasingly unstable.

While it remains unconfirmed whether the deal to build 1 million affordable homes in Egypt has indeed fallen through, this is not the first dispute between Arabtec and Egypt. It will be difficult for Arabtec to accept the conditions that are reportedly going to be imposed.

The military’s more assertive stance in the construction sector comes as work is set to start on the building and infrastructure projects launched in March at the Egypt Economic Development Conference (EEDC).

Both parties may find they need to compromise, as the project bears equal importance for a country in desperate need of housing and a firm that is starting to gain a reputation for instability.