By Mohamed Darwish
Disputes that have arisen between the New Urban Communities Authority (NUCA) and real estate investors are among the most important obstacles facing investment in Egypt.
Daily News Egypt spoke to Minister of Housing in the interim government Mostafa Madbouly to discuss these disputes, and the steps taken by the ministry.
When will the ministry issue the final amendments to the internal statute for real estate? What are its main features?
The Ministry of Housing has decided to set up a mediation committee within the amendments of the real estate internal statute. This committee will resolve disputes that arise between the NUCA and real estate investors. The ministry is seeking to issue regulations after the authority’s next board meeting.
The amendments include the settlement of investment disputes and the application of the one-stop shop, which was included within the Investment Guarantees and Incentives Law. The NUCA has introduced the required amendments to the new internal statute to comply with the law.
The final draft of the internal statute will be presented during the authority’s next board meeting. It is expected to be issued after most of its terms were agreed on with the Real Estate Investment Division and the Ministry of Investment.
This delay is due to the NUCA’s discovery of a conflict between some of the material and the Law on Investment Guarantees and Incentives. Therefore, some modifications have been introduced to comply with the law. It was then sent to the Ministry of Investment.
The NUCA agreed with the Real Estate Investment Division on the majority of the terms in the real estate internal statute over several meetings. Administrative fees were reduced by 40% to 50%. Companies that used to pay EGP 1m in fees will now be only paying between EGP 500,000 and EGP 600,000.
A mediation committee was formed as part of the amendments to represent real estate investors. This committee includes the same number of experts from outside the authority as the authority’s representatives in the committee.
The mediation committee is just a step to resolve investment disputes amicably to avoid resorting to the Ministry of Investment’s arbitration committee. In case of failure to resolve disputes amicably, the arbitration committee’s decision is binding to the NUCA.
The real estate internal statute has seen approvals on terms regarding timelines for project implementation and the mechanism of calculating them, as well as not withdrawing lands of real estate projects, except in the case of complete distress.
The one-stop shop system, which has yet to see the light, is also a real obstacle to investors. When will it be activated?
The NUCA will soon sign a memorandum of understanding (MoU) with the General Authority for Investment and Free Zones (GAFI) that determines the application of the one-stop mechanisms, which has been included within the Investment Guarantees and Incentives Law.
The government is seeking to activate the one-stop-shop within 18 months of issuance of the projects licenses to facilitate the procedures for investors. Its application regulations will be included within the internal statute. The GAFI, the concerned mandate-holder on lands, will be linked via an electronic link system. There has also been a decision not to approve any actions on land and real estate available for investment before making sure of the absence of any dispute on them between different administrative bodies.
The NUCA will work in the upcoming period to resolve investors’ problems and ensure they do not recur through the development of clear mechanisms to deal in the projects carried out on the NUCA’s lands in new cities.
The NUCA has reached settlements with major real estate companies in collaboration with the arbitration committee chaired by the Minister of Justice. Two or three of the NUCA’s client disputes will be resolved in every session.
Will lands be withdrawn from investors under these amendments?
A committee was formed to resolve investors’ problems in the NUCA itself before they are escalated to the arbitration committee, especially those relating to small land withdrawals or the withdrawal of residential, commercial and administrative units.
The NUCA has decided to postpone the withdrawal of land from investors until the issuance of decisions by the arbitration committees and the resolution of investors’ problems, so that disputes do not escalate before they are settled.
The easiest decision is to withdraw the land, but it will have negative repercussions on investment in Egypt. The state cannot try to attract capital and at the same time issue decisions to withdraw lands for investment projects.
The NUCA has resorted to committees to resolve problems for investors to avoid being the judge and adversary at the same time, especially with the existence of disputes on projects that were allocated in 2003. The NUCA officials who issued those decisions have retired long ago.
Previous decisions to withdraw lands have created a complicated situation. The authority is now trying to ensure the right of the state and encourage investment, especially as some conflicts have revealed a lack of commitment to connect the facilities in time, which led to the delay in timelines for implementation. Hence, the decision to withdraw could be incorrect in some situations, and it is better to solve them through a neutral party.
Will there be new proposals soon?
The NUCA will subtract 7,000-10,000 pieces of land in eight new cities within the third phase of the Beit Al-Watan project for Egyptians abroad. The new offering includes the areas of New Cairo, 6th of October City, New Damietta, Badr and, Burg Al-Arab, as well as a number of cities in Upper Egypt.
Prices will not see an increase in some cities, while the price per square metre will rise in other cities by 7% to 10%.
The NUCA decided to postpone the delivery of the first phase of Beit Al-Watan’s lands to next January. This is due to a delay in finalising the facilities, as the ministry wants to ensure the lands are handed over fully facilitated.
A new phase of Beit Al-Watan has been put forward in New Cairo due to the large demand among expatriate Egyptians, and the large turnout observed during the second phase.
Second phase lands include 3,183 lots, in addition to 2,100 lots in a complementary phase, which will all be delivered in June 2016. All winners have been notified to begin their allocation procedures.
Offering lands through the Beit Al-Watan project, as well as a part of the ministry’s share in Madinaty and Rehab cities, aims to provide dollar liquidity, especially in light of the continuing volatility of the US dollar exchange price against the Egyptian pound.
There is a possibility of increasing the number of units offered by the ministry in Madinaty and Rehab from 2,000 to 3,000 units, especially with the expected demand for booking, whereby units will be delivered fully finished.
The Ministry of Housing is preparing to put up 2,000 units in the two projects. The price per square metre in Rehab is expected to be $1,000 compared to $770 for Madinaty. This price is for Egyptians living abroad. The price is expected to be EGP 7,960 per square meter in Rehab for Egyptians here and EGP 6,210 in Madinaty.
Will there be any other proposals in the new cities?
The Ministry of Housing is studying meeting the demand for land offerings in a number of new cities, if they can provide enough facilitated lands or other lands that are planned to be facilitated within the NUCA’s plan. If 2,000 people propose to book 200 pieces of land, the demand can be accommodated by beginning the procedures of land facilitating through the booking deposits, finalising the lands and delivering them within 18 months.
A plan will be applied to accommodate land requests in cities where demand is moderate, like Sadat City, 10th of Ramadan City, Burg Al Arab and Badr City, especially as 147,000 people proposed to book 5,000 pieces of land for middle-income homeowners in 10 new cities, followed by 44,000 people competing on 3,260 distinguished pieces of land within the latest lottery.
It also includes offering a large number of pieces of land in Upper Egypt. Submitting request applications for investment lands will be done via the NUCA’s terms regarding the commitment to developing the lands.
What is the return on investment targeted by the ministry for these new offerings?
The Ministry of Housing targets EGP 50bn in the current fiscal year by offering land for investment activities with an area of 15,000 acres. It is now working on providing 10,000 acres with facilities for the serviced lands, as well as for the integrated urban lands and small pieces of investment lands, including lands for distinctive individuals and small investors, in addition to the Beit Al-Watan Project for Egyptians abroad.
The ministry decided to grant lands to companies wishing to invest in Upper Egypt at a price that includes facilitating the lands’ costs, with maturities of up to seven years, including three-year grace period.
The ministry has signed MoUs with major brand companies. What are the details of these MoUs?
The ministry has signed MoUs with major brand companies to get lands in the new cities near New Cairo. They are characterised by high rates of development. This was linked to obtaining similar lands in Upper Egypt for development.
The Ministry of Housing has agreed with Al Bostan Real Estate Development, owner of HyperOne, on the implementation of retail chains in five new cities. Those cities are; New Cairo, Shorouk, Badr City, and New Assiut, as well as a mall in the city of New Fayoum on a piece of land acquired by the company in the recent commercial land bidding conducted by the NUCA.
Al Bostan Company began receiving the sites and is preparing the technical and financial offers, as well as the designs and the cost of investment for implementation to begin obtaining the ministry’s licences and construction warrants. Mall construction is scheduled to be completed within three years from the signing date, to ensure the quick development of these areas. The NUCA will facilitate those lands within the current fiscal year with costs estimated at EGP 15bn. It will also announce offering new lands every three months for individuals and investors.
The ministry received a number of offers in projects such as Zayed Crystal Spark, and another project in Sheikh Zayed. When it will the ministry decide on them?
The NUCA will decide on the offers it received for Zayed Crystal Spark and another project on 410 acres in Sheikh Zayed after the completion of the projects at hand, signed during the Economic Summit in Sharm El-Sheikh.
The Ministry of Housing received an offer from one of the companies to allocate land without facilities, with the company providing the facilities by itself, in exchange for a part of the land area. The ministry is considering the offer now.
What about the 1m housing units project; is it still suspended?
UAE’s Arabtec project to establish 1m housing units in Egypt is not undergoing any developments. Negotiations on the first phase of the project include only 100,000 housing units. The contract will be based on that. Later on, we can consider further phases. The NUCA has finished preparing the necessary sites for the implementation of the first phase in the cities of Badr and Obour. It provided utility networks in preparation for delivering them to Arabtec.
The New Minya city has been excluded from the first phase of the project.
The ministry has received five offers from real estate companies to participate in the implementation of middle-income units under the conditions adopted by
the cabinet. The ministry asked them to prepare the necessary feasibility studies.
The ministry is considering an initiative put forward by the real estate investment division of the Federation of Egyptian Chambers of Commerce (FEDCOC) for the implementation of 500,000 housing units within the project, which is implemented through a partnership between the government and the private sector over a period between five and seven years. The ministry’s share will be delivered in conjunction with the implementation of the project’s phases.
What is the latest news regarding the Real Estate Registration Act?
The Ministry of Housing has submitted a draft law for Real Estate Registration to the cabinet to discuss it and put in place the legislative amendments required to facilitate the real estate financing process, especially in new cities.
What about the 4m acres reclamation project?
The NUCA will capital worth EGP 6bn to the company established by the government to reclaim 4m acres. The Ministries of Agriculture, Irrigation and Electricity, as well as governorate banks and national institutions, will participate in the company’s capital structure.
The Ministry of Housing is involved in the project through several areas, such as the development of several areas including the Al-Amal village in Ismailia, Farafra, New Toshka, and Al-Marashda in Qena.
When will the coalition to implement the North Coast Development Project scheme be formed?
The ministry received 20 offers from Egyptian and foreign advisory offices’ alliances for the development of the North West Coast Development Project scheme, after the global tender for the project is put up with funding from the NUCA. The winner alliance will be chosen before the end of this year. The preparation for the plan will take six months in conjunction with the development of the New El-Alamein city.
I want to explain that the New El-Alamein city is separate from the North Coast project. The NUCA began the first phase of development of the city at a cost of EGP 2bn during the current fiscal year.
The New El-Alamein city will include hotels, an international university, and commercial and administrative activities working throughout the year. In the following development stages of the city, the ministry will discuss partnerships with investors to develop projects in the region.
What about the new administrative capital?
China State Company has offered to participate in the implementation of the towers zone within the new administrative capital via overseas-funded capital handled by the company.
This came after a MoU was signed with the Chinese company to participate in the first phase of the capital. The administrative capital will be an exception under the law of tenders and auctions and will be treated as a special zone city.
The cost of the first phase of connecting facilities to the capital will be EGP 18bn, of which EGP 5bn were allocated by the NUCA within its current fiscal year’s budget. The implementation will begin before the end of this year after placing detailed plans for the facilities and networks of internal roads.
The new administrative capital will be managed by a new entity that is being created. This entity includes the NUCA. The first phase is planned to be on an area of 10,500 acres. Following completion of providing facilities to the lands, the projects will be launched in partnership with developers. The state will contribute through the value of the land.