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Ministry seeking to overcome slow growth in real estate sector in past years: Mostafa Madbouly - Daily News Egypt

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Ministry seeking to overcome slow growth in real estate sector in past years: Mostafa Madbouly

We are taking market developments into account and are planning for projects that attract new investments, says Housing Minister


As the Ministry of Housing works to put together a strategy to revitalise the real estate sector and provide housing for low- and middle-income citizens, some believe that it is not enough to meet the rising demand on the market and bridge the housing gap that has formed over the years.

The policies of the Housing Ministry rely on injecting new investments through its investment arm—the New Urban Communities Authority (NUCA)—while at the same time implementing projects that accommodate these new investments, such as the New Administrative Capital east of Cairo.

Officials at the Ministry of Housing believe it was successful to double its investments in the housing and utilities sectors, in addition to increasing the budget allocated for NUCA to EGP 37bn for the current fiscal year.

But these policies are facing objections due to the rising price of lands, especially in cities close to Greater Cairo, including 6th of October City and New Cairo. This, of course, reflects on the final sale price of housing units.

Al Borsa interviewed Minister of Housing Mostafa Madbouly to learn more about his plan to solve the housing crisis in Egypt and the ministry’s ability to meet the constant demand of the sector.

What elements are determining the ministry’s work in the coming period in light of the growing size of advertised projects?

The Ministry of Housing aims to overcome the slow growth in the real estate sector in past years and examined the outcome of implemented projects.

The ministry has taken the developments of the sector into account. The new amendments introduced to the Social Housing Project and approved by the cabinet included offering 6,000 units for rent to those with a monthly salary below EGP 1,500.

The ministry will allocate 20,000 units for unions and include a new segment under the project offering units for families with incomes under EGP 5,000 and individuals under EGP 4,000.

What are the amendments? And how will the ministry deal with those who commit violations?

Amendments to the project take into account the changes in the sector to ensure that units are offered to various income segments, especially in light of the growing demand.

The Social Housing Law includes terms binding for the beneficiaries of units, and punishes manipulators with prison time, as the units are subsidised by the state.

Does social housing help alleviate pressure off Egypt’s housing crisis, or will other means to alleviate pressure be needed?

The housing crisis in Egypt is not new. The most recent period has seen the offering and implementation of more units than ever before.

For example, 159,000 units worth EGP 37bn have been completed in two years. We are currently implementing 209,000 units, including 158,000 units in new cities worth EGP 60bn. Moreover, we are also preparing to offer 102,000 units in other governorates and new cities valued at EGP 13.5bn. Collectively, this will add up to around 500,000 housing units.

In contrast, previous years saw the implementation of less than 30,000 units per year in new cities. But investments by NUCA were increased to bridge the gap for low-income citizens.

What is the purpose of increasing NUCA’s budget this much?

NUCA’s investments in the current fiscal year amount to EGP 37bn, which is roughly 65% of NUCA’s total value of investments since it was established in 1979. Most investments are in the fields of social housing and connecting electricity, water, and gas to properties.

We have a report on the annual evolution of NUCA’s investment body in the fiscal year 2012/2014, which states that investments worth EGP 4.8bn have been implemented. The figure increased to EGP 7.7bn in the year that followed, EGP 12bn in 2014/2015, and EGP 22bn in the last fiscal year.

The increase in NUCA’s investments reflects the growth in the number of implemented projects. This is the state’s solution to meeting the demand for housing units.

The ministry has moved from focusing solely on low-income citizens to higher income segments—what is the reason for that?

The ministry’s projects offer lands and units for middle-income citizens. We earmarked EGP 14bn in the current fiscal year to connect utilities to 30,000 feddans in new cities for these projects.

Our attention in solving the housing crisis extends to provide lands for higher income segments, especially the middle class, which is keen to own private houses. Therefore, the ministry’s projects include social housing, distinguished housing, and outstanding housing.

For this reason also, the ministry started a new initiative to provide middle-income housing units through the Dar Misr Project. About 31,800 new housing units will be established in eight cities during the current fiscal year. Moreover, we will begin implementing 25,000 more units in the second phase across 12 cities. The third phase includes offering 55,000 units in 17 cities.

How will the Ministry of Housing face speculation over public lands for sale by brokers?

Speculations that have happened in the past pushed the ministry to amend the offering protocol and approve the allocation mechanism for the highest bidder in the outstanding lands. This yields returns for the government and meets part of the demand on luxury housing.

Increasing the number of lands offered will limit speculations. The plan includes developing 80,000 plots in new cities. We completed a draw for 21,300 plots. The high demand that reached 178,600 individuals pushed us to offer a supplementary draw for 58,800 more land plots.

Amid the US dollar shortage, the ministry announced several phases for the Beit Al-Watan Project. Will there be new phases? And did the project help solve part of the crisis?

The Ministry of Housing was able to provide US dollar resources through offering lands to Egyptians abroad through the Beit Al-Watan Project. Exactly 4,788 pieces of land were booked in the project’s third phase in 6th of October City, New Cairo, New Damietta, Sheikh Zayed, Badr, New Assiut, New Qena, and New Aswan.

The ministry is also collaborating with the Ministry of Immigration to offer a new phase of the Beit Al-Watan Project. This phase will include our kind share in Madinaty and Rehab districts in New Cairo.

The most recent offering of Beit Al-Watan lands included 3,000 land plots, 2,000 of which were in New Cairo, next to 2,568 units in Madinaty and Rehab.

Are there mechanisms to raise the turnout in the new phases?

There will be incentives for Egyptians abroad to encourage them to buy lands and housing units, as well as inject funds for investment. We are still penning these incentives and will present them to the cabinet. We are considering offering a number of land plots for Egyptians abroad allocated for investments. The ministry will draw a list of these lands to be offered to Egyptians during the upcoming visits by the minister of immigration.

What are the latest statistics on sales of NUCA lands?

NUCA has made good sales across several axes. Statistics show that the authority awarded 650 feddans worth EGP 10.5bn, as well as 270 feddans of service lands worth EGP 2.8bn.

Moreover, NUCA also offered distinguished housing lands through public draw and sold 700 feddans worth EGP 6.5bn. We also announced offering small plots of housing units as part of the social housing programme. Furthermore, we allocated plots of a total area of 120 feddans worth EGP 350m, in addition to industrial lands.

The recent period saw more attention given to real estate projects. What is the government’s plan to support the sector?

The Ministry of Housing and the government work to support the sector. We are aware of the challenges facing us. Hence, the plan in the coming period relies on generously offering lands to investors, individuals, and for cooperation with the private sector.

We seek to attract private foreign investments from Arab countries to participate in projects, including the New Administrative Capital, New El Alamein, and East Port Said projects. The state is also keen on encouraging investments, local and foreign, and overcoming obstacles facing them to ensure the right of the state and drive the growth of the real estate sector.

What are the latest developments of the New Administrative Capital?

We initiated the executive steps of the project. There are Egyptian construction companies involved in the implementation of the residential quarter of the capital. The government district will be initiated soon.

The New Administrative Capital is a development project that aims to create an integrated business community, served with high quality infrastructure. Moreover, it plans to attract international companies and relocate some of the population from Cairo. Cairo will then become an old heritage tourist attraction.

When did the idea of ​​the capital emerge, and do we really need it now?

The idea falls in line with a number of previous studies. There were always initiatives to relocate ministries out of Cairo. Several locations were chosen, but plans never came to fruition.

The New Administrative Capital is planned to have space for different ministries and the cabinet, as well as a diplomatic district for embassies and a business district for companies and international institutions. Furthermore, it will have an exhibition area, residential quarter, and technological zones, as well as a number of universities and major hotels.

When will the government district be implemented?

The New Administrative Capital Company signed an agreement of intent with the Chinese company CSCEC to establish the government district. Construction will begin very soon.

There will be 18 buildings for ministries to be built in cooperation with Egyptian construction companies.

The first precedence is of 12,000 feddans with investments valued at EGP 60bn. The total area of the capital is 168,000 feddans. The company was established with EGP 6bn of paid-up capital from the armed forces and NUCA.

What is the situation of the first precedence?

There are four construction companies that began implementing utility networks of 3,000 feddans in the first phase of 12,000 feddans. These companies are the Arab Contractors and Egyptian Contracting Company (Mukhtar Ibrahim), Concord, and the Orascom-Hassan Allam alliance.

The cabinet has issued decisions to assign extending facility operations to a number of companies to speed up the implementation process, as the prime minister announced the project’s first phase is being implemented.

What are the available opportunities for construction companies in the project?

We will award 95% of construction work to Egyptian companies over several phases; the first one on 40,000 feddans and the first precedence on 12,000 feddans. We aim to complete the construction work in three years.

There are seven construction companies implementing 640 buildings in the residential districts, including Arab Contractors, Talaat Moustafa Group, and Concord.

The residential quarter in the New Administrative Capital will be established on 1,000 feddans and includes 30,000 units of areas ranging from 110-180 sqm. There are two areas for villas and townhouses that include 190 villas and 71 townhouses in the first area, and 139 villas and 50 townhouses in the second.

The plan to attract foreign investment was based on partnership projects and began in Sharm El-Sheikh. What is the ministry’s plan to continue this?

The Ministry of Housing will offer the second phase of partnership projects between NUCA and real estate developers. This phase includes eight plots of land in Sheikh Zayed, 6th of October City, New Damietta, and New Aswan, totalling an area of 2,855 feddans.

The ministry has succeeded in converting four memoranda of understanding to final contracts with Egyptian and Arab companies. These projects are located on 2,000 feddans with investments amounting to EGP 131bn. One of the projects is underway, while three are awaiting the ministry’s final decisions.

Did partnership projects achieve the desired goal?

In the economic conference in Sharm El-Sheikh we decided to accept only four projects, despite receiving many proposals. This makes it easier to discuss agreements with developers and make offers more competitive.

In the coming period, the Ministry of Housing will focus on diversifying partnership projects and will include other cities, such as New El Alamein, in addition to offering larger areas between 1,000 and 2,000 feddans.

Partnership projects faced opposition when first launched, but experience proved they were successful.

What is the ministry’s plan to provide new investments in real estate?

New cities and projects, such as the New Administrative Capital, New El Alamein, New Toshka, and East Port Said, help provide lands for investments that will be enough for the rising demand until 2018.

The construction on New El Alamein began as part of the plan to develop the northeast coast, which has potential to grow. The area south of the coast, between El Alamein to Sallum, will be used for reclamation projects.

What are the construction stages of New El Alamein city?

A number of new environmental communities will be established first to serve safari hotspots and possibly reclaim millions of feddans for desalination of seawater to secure bio-fuel and fodder plants.

New El Alamein will include hotels and an international university, next to commercial and administrative activities that operate throughout the year. In the coming phases, the ministry will discuss partnerships with developers to set up new projects.

There will be a one-kilometre long corniche that will be used as a model for the remaining 14 kilometres. Moreover, we will begin implementing the city council building and a headquarters of the company that will manage the city in cooperation with the Ministry of Housing and the armed forces.

How big is the city? And what are the most important targeted activities?

The city will become a model coastal city that offers comprehensive development and diverse economic activities, including tourism, industry, trade, scientific research, and other activities.

The total area of ​​the city is 48,000 feddans. The first phase includes two main districts of 8,000 feddans.

The first phase will offer many investment opportunities, as it will include the fairground area, entertainment zones, hotels, a university, and regional services centre.

Hotels will be on an area amounting to 296 feddans, and the area will include 15,500 hotel rooms. The first phase is expected to see the construction of 12 hotels.

The ministry announced new real estate bylaws for NUCA. What is the purpose of them and how will they benefit the real estate sector?

The new bylaws of NUCA include clear measures to regulate the offering of lands and contracting with real estate developers to ensure the right of the state in dealing only with serious investors.

The proper management of communities and encouraging investment are the key determinants of NUCA operations in the coming period to stimulate investment and utilise the returns in building social housing.

How will the ministry deal with the conflicts that arise with investors?

A committee has been formed to solve arbitrations with investors before they escalate further, especially those related to small land plots.

NUCA resorts to arbitration committees to avoid being the ruler and the adverse at the same time, especially in light of conflicts on projects that date back to 2003.

 

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