After the cement .. Egypt's army devoured the real estate market

Mohamed Seif Eldin-Cairo

The crowding out of the Egyptian Ministry of Housing through the Engineering Department of the Armed Forces (responsible for implementation) in luxury housing projects has aroused great concern from real estate developers.

They considered that the increased economic activity of the army negatively affected them, because of the lack of equal opportunities between the parties because of the advantages of the military establishment of the private sector lose the ability to stand in front of them, as well as the recession in the local market since the decision to "float the pound."

In return, the Egyptian authorities justify their preference for the army over the private sector to implement most of the real estate projects in the country because of the high efficiency of the armed forces and the speed of implementation.

Egypt's interim president, Adly Mansour, issued in November 2013, allowed the government to abandon tenders and award projects to any company in urgent cases, and his April 2014 decision banning third-party appeals against government contracts with any party. , Whether related to the sale of state land, construction work or otherwise, to force the army to forcefully enter the real estate and construction market.

In March 2014, the army aggressively stormed the Egyptian real estate market through the Million Low-Income Housing Project in cooperation with UAE's Arabtec (through 13 locations in the governorates) at an estimated cost of 280 billion Egyptian pounds (one dollar equals 16.52 pounds).

Over time, the army turned to luxury projects in the new administrative capital (an area of ​​170,000 acres east of Cairo), and owns 51% of the company that is in the process of developing the city with an estimated investment of 45 billion dollars.

It is also involved in the development of the new city of El Alamein (an area of ​​48,000 feddans) on the Mediterranean coast and the Galala Plateau (an area of ​​17,000 feddans) in the mountainous area north of the Red Sea.

Earlier this year, the Ministry of Housing launched apartments in the new area of ​​El Alamein, with an average price per meter between 30 and 42 thousand pounds, while villas in the new city of Mansoura (northern Egypt), the average price per meter 24 thousand pounds.

The ministry revised the project of Dar Misr for medium housing under the name of luxury housing in six new cities, the price per meter starts from 11 thousand pounds, achieving sales exceeding 10 billion Egyptian pounds, according to press estimates.

Some 70 industries (directly and indirectly) are associated with the real estate sector and contribute 17% of the Egyptian GDP. GDP is estimated at 5.250 trillion pounds in the fiscal year 2018-2019, according to experts who spoke to Al Jazeera Net.

Unfair competition
The real estate developer Nashaat al-Ashry believes that the storming of the state by the armed forces of the real estate and luxury housing market has negatively affected them due to the unequal opportunities between the two parties. As well as his inexpensive labor, such as his use of recruits of engineers and craftsmen in projects. "

Al-Ashry stressed that the investor (local or foreign) does not want to compete with the government, it is a determined competition in its favor from the basis, he quoted in his talk to Al Jazeera Net what happened recently in the cement industry market.

The entry of the Beni Suef factory (production capacity of 12 million tons per year) of the army cement factories large losses, where Alexandria Alexandria Cement Company, during the first half of this year, recorded a loss of 29% worth 169 million pounds, compared to 131 million during the same period Suez Cement announced a 590 million pounds loss for the first half of this year.

The unequal opportunities between the two sides also ensure that the armed forces have access to project lands free of charge or an amount that is difficult to determine in light of the lack of control over military projects and economies, while private sector companies get them at a high price, where the land price represents about 40% of the cost of the property Failure to pay taxes or customs, as explained by economist Mamdouh Wali.

According to press estimates, the army accounts for 90% of Egypt's land, mostly desert desert backing.

From time to time, Egyptian President Abdel Fattah El Sisi decrees the allocation of land to the armed forces, most recently the decision issued in early August to re-allocate 47 islands of state-owned land belonging to the Red Sea Governorate of South Sinai, in favor of the armed forces as strategic land of military importance, and this area was In the past, the Egyptian authorities seek to exploit them for tourism and establish a marina for yachts.

Reluctance
Although many investors have recently entered the real estate market (an estimated 50 developers), there is a reluctance to buy new land because of the army's control, for the first time in 10 years, according to real estate investor Massad Abul-Ela.

Abul-Ela explained in his interview with Al-Jazeera Net that "the majority of investors, especially small ones, took to take contracts from the armed forces subcontracted because of their inability to buy new land attracting the attention of consumers, in addition to high prices or the army control of the distinctive pieces, especially in the new cities."

Capital flight
In light of the uncertainty that dominates the future of the Egyptian real estate sector due to the recession and the crowding out of the military establishment of the private sector, real estate developer Rami Gamil calls on the state to commit to its role in providing a suitable environment for competition between investors and not competitors, so that Egypt will be an attractive country for investors.

Speaking to Al Jazeera Net, Jamal believes that if the situation in the real estate market continues as it is now the government's competition to the private sector, it means further deterioration and capital flight to other countries.

In September 2017, the International Monetary Fund (Egypt granted a loan of 12 billion pounds and oversees the economic reform process) warned against obstructing economic entities under the military establishment to develop the private sector and create jobs.

Economist Mamdouh El Wali agreed with Jamil, calling on the army to build housing for the poor at low prices, taking advantage of his access to land free of charge and the possession of quarries and cement and iron factories because it is more effective socially.

With the implementation of the decision to liberalize the local currency (pound) against the US dollar on November 3, 2016, the Egyptian real estate market entered a recession due to the high prices of building materials, which in turn reflected on real estate, as well as increased supply and lack of demand due to the inability of Most Egyptians buy new apartments.

The flotation led to the rise of real estate prices by more than 110% in the middle places, while 150% in high-end places, according to the owners of three real estate companies - working in the suburbs of Fifth Settlement and Heliopolis east of Cairo - told Al Jazeera Net.

The size of the army economy
Since the overthrow of the late President Mohamed Morsi in the summer of 2013, the role of the military establishment in Egyptian economic life has grown. Estimates vary on the size of the military's role in the local economy.

Egyptian President Abdel Fattah El Sisi denies rumors that the army's economy represents 50% of the local economy, stressing that it does not exceed 3%.

The commercial projects of the armed forces are controlled by three main entities: the Ministry of Military Production (established in 1954) and supervising 20 companies, the Ministry of Defense represented by the Engineering Authority, and the Egyptian Government-owned Arab Organization for Industrialization, which is responsible for 12 companies.