In early December, experts from the construction, engineering and finance sectors gathered in Cairo for a round-table discussion that focused on finding ideas to help Egypt tackle the issues affecting its infrastructure and community developments.

Egypt’s Ministry for Housing, Utilities & Urban Communities says at least 500,000 new homes must be built every year for five years to keep up with a population expanding at a rate of 2 per cent a year, and to ensure the country can tackle the estimated backlog of 3 million housing units.

The government’s commitment to housing its citizens in better-managed communities was illustrated in March 2015, when it announced a new capital city would be built east of Cairo.

But Egypt’s challenges go beyond an ambitious plan to develop a new administrative city. The development of low-cost housing and communities for the country’s poorest poses a short-term challenge that must be addressed to alleviate economic and political pressures.

Those pressures are exacerbated by the many bureaucratic and financial barriers that slow down the implementation of any short-term, meaningful solutions badly needed by citizens who languish in informal and illegal housing in already overcrowded cities.

Puzzling barriers

“I find myself sometimes puzzled by what exactly the barriers in the way of developing low-cost housing in Egypt [are],” said Hussein Mansi, CEO of local building materials supplier Lafarge Egypt, which arranged the round-table discussion.

“It is a huge mass market and I don’t understand why contractors and developers alike are not taking advantage of it. Despite there being huge demand, the private sector is not encouraged and the government is struggling to finance it.”

As a result, the country is left with a situation where illegal settlements and construction are widespread.

“Illegal building is rife in Egypt, with independent and illegal developers and individuals making a lot of money without economies of scale,” said Mansi.

Egypt’s housing crisis has become a subject of discussion in many boardrooms and ministerial meetings. “Private developers and contractors often feel this is not their business, but it is,” said Mansi.

“Small, illegal developers have found they make a lot of money from-low cost housing. But real developers feel they will struggle to make the same returns on a larger scale,” said Yehia Raafat, a partner at the local Raafat Miller Consulting.

“Once the private sector is engaged, they may find there is money to be made, but they will take longer to study the feasibility of a project with instalment payments needing to be made over a maximum of 15-20 years.”

Luxury developments

Land prices have been high, with many developers opting to build out-of-city luxury developments rather than the government’s favoured strategy 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 (CCC).

”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.”

Alternatives to the current affordable housing model are limited, with many calling on the government to do more to engage with and encourage the private sector to develop low-cost housing. “Maybe you should transfer the subsidies the government offers to the private sector and encourage their involvement,” said Miller.

“There needs to be an alternative to the current situation,” said Fawaz Maamari from Lafarge Holcim. ”Maybe a PPP [public-private partnership] option with the government subsidising the price of land.”

Land prices

“The challenge facing developers is land prices and that works well because the government wants low-cost housing [developed] outside of the city to clear prime real estate plots,” said Radi el-Helw, executive director at the Cairo office of Dubai-based investment bank Arqaam Capital.

If Egypt can offer an attractive investment environment for local and international developers, it has a greater chance of pressing ahead with affordable and low-cost schemes across the country. But as Tarek said, the government still faces the question of how to create and develop communities, rather than to simply build cheap and low-cost housing units.

“Housing is only one component of developing communities,” said Sherif Baky, business development manager at the local office of Kuwaiti developer Kharafi National. ”It is not the entire job – the country needs a masterplan and a strategy.

“We saw the government move people [following the 1992 earthquake] and we had the development of new communities such as Sadat City and Zilzal area – people end up making their own businesses and informal transportation links emerge.”

Illegal slums across Egypt have created their own communities, sometimes out of the government’s control, according to CCC’s Tarek. Mini economies have emerged across the country, he said. “Egypt must build cities that can create jobs and not simply house people.”

Access to finance

Part of this process is ensuring people have access to the finance the government has said it is willing to provide in order to encourage private sector involvement.

According to local sources, the housing ministry has finished negotiations with the Washington-based World Bank and will receive $125m towards its social housing project in the first weeks of 2016. It has not been disclosed when Cairo will receive the remaining funds.

Egypt plans to use the five-year loan to press ahead with several affordable and low-income housing schemes.

The social housing project was launched in 2014 to tackle the housing shortage. Cairo has set aside £E13bn ($1.6bn) to build low-income houses that will help meet its target of developing 500,000-600,000 new homes annually. It hopes to attract additional funds from the private sector through revenue sharing and other agreements.

“Microfinance is a very useful tool at the moment and something the private sector can and should take advantage of,” said Tarek.

In an effort to tackle Egypt’s housing crisis, some have called on the government to run a twin strategy of building affordable units as well as redeveloping existing units and urban slums.

Maspero Triangle

There was some encouragement when the authorities pressed ahead with the Maspero Triangle District scheme. In November 2015, the UK’s Foster+Partners unveiled its masterplan for a $500m redevelopment of the area in downtown Cairo.

The district consists of commercial, retail and residential buildings in the Maspero area. Where it reaches the River Nile, the banks will be developed and a bridge will be constructed that connects the project with the affluent area of Zamalek.

Maspero has about 20,000 residents living in informal and illegal settlements. Previous proposals to develop the site have been met with opposition, due to concerns that low-income families would be evicted from their homes and businesses to free up 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,” said Shadey Ghoneim of the local ElGhoneim Architects.

But the scheme has suffered lengthy delays and some think there will be more changes to the plans. “Maspero Triangle is a project that has been talked about for so long and is unlikely to be carried out the way we are told,” said Miller.

“The land is already owned by GCC investors and the location of the project means developers are unlikely to give away prime real estate plots to redevelop existing slums and low-cost housing. This project will involve a mass resettlement of the people living in the Maspero area.”

Integrated communities

Ensuring sufficient transportation links in new areas means the government may be forced to look towards projects similar to the Maspero Triangle scheme and the redevelopment of existing areas.

As the round-table discussion drew to a close, the complexities facing Egypt as it attempts to address its housing crisis were evident.

Calls for different levels of private sector involvement, an improvement of the investment environment, a balancing of land prices and managing the illegal construction market are all major challenges that must be tackled by a government hoping to develop 500,000 houses a year.

Some have said the government must step back from its role as a developer and concentrate on masterplanning, coming up with the vision for integrated communities that can be implemented by the private sector.

The many barriers to building housing for Egypt’s citizens illustrate the difficulty the Arab world’s most populous nation faces. But there was agreement among those at the round-table talks that the government’s role should be limited to encouraging the private sector, subsidising land prices and developing masterplans.

Although housing and real estate projects are struggling due to investor concerns over currency controls and the support of local banks, 2016 must be a year of implementation and streamlined efforts to tackle the housing crisis.

Housing has significant demographic and social ramifications that President Abdul Fattah al-Sisi’s government cannot afford to manage alone, particularly as there is growing dissent from a population impatient to see results from the promises to offer solutions to the housing shortage.