Egypt and Arabtec Holding have been negotiating and disputing the details of the one million home project since its announcement in 2014.
Arabtec will now develop only 100,000 units that make up phase one of the major housing scheme, not the originally planned one million homes across the total development.
The breakdown in the deal is set to be damaging for both parties involved. For Egypt, it is vital that an ailing housing problem is alleviated and solutions are found quickly. 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 unclear why Arabtecs role will now be limited to the first phase, it could end up being a good thing as Arabtec eliminate the risks that would come with committing to such a major project in a country that continues to struggle with financing and the delivery of major schemes.
The Egyptians on the other hand are set to stand strong behind the one million home scheme. A spokeperson from the ministry told MEED that the project will press ahead in its entirety with other developers and contractors invited to invest.
The reality is that few details of the initial deal with Arabtec have been released and local contractors have been frustrated with the lack of transparency which will mean that the Egyptians may struggle to attract the interest needed in order for the $40bn plan to materialise.
Despite this, the scaling down of Arabtecs role in the project can only be seen as a major blow for the Egyptians. Issues surrounding financing, which are exacerbated by cash-strapped local banks, have highlighted the governments inability to secure the vital support needed to press ahead with major construction and real estate developments.
Negotiations continue as the government fights a similar battle over the development of the proposed new capital city project, and many will now be wondering if Mohamed Alabbars Capital City Partnerships will also scale down its role in the project as the ministry invites other local and Arab investors.
Real estate and housing sit at the heart of the governments economic strategy, and an inability to press ahead could mean the authorities begin to face pressure from ordinary Egyptians. President Abdul Fatah al-Sisi will feel his ministries must push ahead with major projects in order to fulfil the economic recovery roadmap launched at the investment conference in March.