Egypt requires long-term housing masterplans

05 January 2016

The government and the private sector must work in sync to implement long-term plans that include integrated communities outside of densely populated areas

In early November, Egypt’s population hit 90 million according to the state statistics centre, and with much of the population residing along the Nile Delta area and in Cairo, it is no surprise the government has selected housing and deurbanisation as a main priority.

Egypt’s Ministry for Housing, Utilities & Urban Communities estimates that 500,000 new homes need to be built every year for five years to keep pace with a population expanding at a rate of 2 per cent a year and to plug the estimated backlog of 3 million housing units.

The biggest illustration of the government’s focus on building better managed communities across the country is the announcement of a new capital city to be built east of Cairo. During the investment conference in Sharm el-Sheikh last March, the government announced its plans to help ease densely populated areas and its plans to push communities outside of the Nile Delta.

Capital city

In October last year, Egypt’s presidential office set a two-year deadline for investors and contractors to start work on the first phase of the new capital city project.

Although local media reports have suggested President Abdul Fattah al-Sisi has set a two-year deadline for the completion of the first phase, a spokesperson from the housing ministry told MEED at the time that the deadline “refers to starting work within 24 months, not finishing it”.

The spokesperson went on to confirm that a specialised committee aimed at becoming a one-stop-shop for potential investors and the public would be set up by the end of the October 2015. No details of the committee have been released since.  

The first phase of the project, which is expected to be 1.8 million square metres, will include government buildings, a proposed medical city and several housing schemes.

The ministry spokesperson told MEED that all public buildings will be developed by the government in partnership with state-backed Arab Contractors, which will take on the construction work.

The housing ministry is understood to be negotiating with local investors for the development of the proposed medical city, while the housing projects will be developed as part of the delayed One Million Homes scheme.

In September, Egypt confirmed the signing of a memorandum of understanding (MoU) with China State Construction Engineering Corporation to participate in developing parts of the new administrative capital.

Affordable housing

Fewer than 200,000 new units have entered the market in urban areas this year, meaning the country’s housing shortage is set to continue, with no indication that government efforts are working.

The One Million Homes project stands out as the biggest effort by the authorities to press ahead with low-end housing units across the country. So it came as a major blow when the housing ministry failed to agree the terms that would have seen the UAE’s Arabtec develop the entire project.

Instead, Arabtec will now take part in the initial phase, consisting of only 100,000 units. The housing ministry has insisted the project will go ahead in its entirety and a ministry spokesperson told MEED that other international, Arab and local investors are being approached. It has since been made clear by the authority that the One Million Homes scheme is set to become a ministerial policy rather than a single project.

The issue is that while Egypt’s failure to attract foreign investors for lucrative high-end real estate schemes continues, the authorities will find that attracting investors for low-end housing is near impossible.

“Chief among Egypt’s [barriers] is the fact that the government is the country’s largest landowner through various state-owned agencies, and it has been in its interest to maximise profits from land sales,” says Yahia Shawkat, founder of local research centre 10 Tooba.

Investment climate

The major barrier surrounding developing new cities has been the government’s inability to offer a favourable investment environment for developers.

Egypt is short of dollars and local banks have been unable to offer developers opportunities to locally raise the finances required for both luxury high-end and low-cost real estate schemes.

Land prices have been unfavourable, with many developers opting for out-of-city luxury developments rather than mixed-use and multi-purpose residential schemes that fall in line with the government’s quest of redeveloping urban slums and incorporating them into integrated communities.

“Egypt needs fully integrated masterplans,” says Mohamed Tarek, business development director at the Egypt office of Athens-based Consolidated Contractors Company. ”Creating communities is not just about housing and the government must be brave enough to take steps towards fully planned urban developments and city planning.”

There was some encouragement when the authorities supported and pressed ahead with the Maspero Triangle scheme. In November, the UK’s Foster+Partners revealed its masterplan for a $500m redevelopment project in downtown Cairo.

Maspero Triangle

The Maspero Triangle District consists of commercial, retail and residential buildings in the Maspero area. The scheme will also develop the banks of the River Nile in the area and include the construction of a bridge that connects the project with the affluent area of Zamalek.

It is understood the owner of the project will be the Ministry of State for Urban Development & Slums. A source from the ministry told MEED the work is expected to be completed by 2020, although it is unclear how the project will be funded.

The Maspero area has about 20,000 residents living in informal and illegal settlements. Previous proposals to develop the site have been met with opposition over worries that low-income families would be evicted from their homes and businesses to free the land for luxury schemes.

“The government must think about how it wants to integrate communities and whether it will mix low- and high-end areas, or whether it will separate communities,” says Shadey Ghoneim of the local ElGhoneim Architects.

The social considerations are vital for Egypt, as the government attempts to develop masterplans that can cope with the number of middle class people moving to areas outside of Cairo such as the Fifth settlement and Sixth October City, as well as finding ways to redevelop inner city slums. The government also wants to ensure it has a streamlined transportation network policy to service new areas. 

Ghoneim believes the government’s main priority is ensuring it can develop a good masterplan and method before it thinks about “simply pressing ahead with real estate and housing schemes”.

Land prices

Adding to the pressure of building large numbers of homes is the issue of inflated land prices and unclear land allocations, which are often under the control of either the housing ministry or the armed forces.

Government control over land across the country, coupled with the 2007 removal of all restrictions on foreign ownership, meant land prices rose 148 per cent year-on-year during 2007-11, according to the Washington-based Middle East Institute.

Overvalued land prices mean local and international developers find that affordable housing has little financial feasibility in Egypt, with many high-end luxury developments pressing ahead in isolated locations.

“We have to think about something new,” says Hesham Shourkri, chairman and CEO of the local Rooya Group. “Land is too expensive for developers to cut from cash flow to make it worthwhile. Low-income housing should be built against the price of land and then sold to the government.

“The best thing instead of subsidies is that the developer is obliged to build a certain number of apartments for low-income housing and [hand them over] to the government. Such a model could see the private sector building large numbers of low-income homes.”

Working together

Overall, as Egypt’s population growth shows no sign of slowing, it will be vital for the government and the private sector to work together to offer mixed-use community solutions for a range of income groups outside of Cairo.

Inner city slums, overcrowded areas and inflated land prices in the capital mean Cairo will soon no longer be an option for developers, which have already started looking outside the Nile delta for new residential schemes. 

The development of the Suez Canal Zone will further encourage developers to look outside Egypt’s major cities, making places such as Ain al-Sokhna and Suez favourable locations to develop integrated communities.

Housing for the people of Egypt is a long-term vision that both the government and private sector must embark on together. “It is a matter of long-term visions that the government must apply and force the private sector to partake in, in order to achieve the communities that are needed,” says Ghoneim.

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