Amnesty proposed for registration and repairs on unlicensed housing

A tried and tested solution to many breaches of the law throughout the world is to legalise the activity – and then tax it. This is the approach the Egyptian authorities have considered towards the issue of illegal construction. A draft law put forward in August 2014 will permit an amnesty period of six months in an attempt to tackle a problem that has existed for decades, but has spiralled in the past four years since the revolution in January 2011.

By its very nature there is no exact record of the number of illicit buildings that have been erected in that time, but some analysts calculate that it may be as many as 50,000. Others put the figure far higher, although there may be confusion in the numbers between buildings and homes, since some multi-storey buildings contain multiple homes.

Salvage Work

The minister of housing, utilities and urban development, Mustafa Madbouly, told local press that the law is intended to cover units put up without building permits. There are major safety concerns about some of the unofficial housing, but the overall approach is to help with a rescue plan for what can reasonably be saved and even to make loans available to get the work done.

Certain boundaries will not be breached. Before 2011 some illegal houses were demolished on the orders of officials from the governorates. Madbouly said the amnesty law would not be available to owners of buildings that are in violation of the zoning or height regulations laid down by the Civil Aviation Authority and the Supreme Council for Planning and Urban Development. Nor do the act’s provisions cover units built on land affiliated with public bodies or in breach of rules laid down by the armed forces.

Many of the most recent illegal buildings were put up on agricultural land following the ouster of former President Hosni Mubarak, when many Egyptians scrambled to build before some form of normality returned. According to the minister of agriculture, Adel Al Beltagi, around 63,000 ha of agricultural land was lost in the first three years after the revolution, an increase of two-thirds over the 12,600 ha lost annually anyway to such activities before the revolution. Others put the total figure at 37,800 ha lost in those three years, instead of a “normal” 4200 ha per year. Either way, the loss is significant.

Explanations for building works offered by the plot-owners interviewed over the years vary from blaming the poor returns received from cultivating the land to providing homes for the extended family to trying to increase the de facto value of the land and make a healthy profit by selling it.

Recent Escalation

Building on agricultural land was outlawed by the 1966 agricultural law and its subsequent amendments. Recent reports by various government departments have highlighted the problem. The Ministry of Planning said the real estate sector had “deteriorated since the revolution, adding to the explosion in illegal building” and Khaled Wassif, a spokesman for the Ministry of Water Resources and Irrigation, put the highest estimate to date on the scale of the problem. He was reported as saying that the number of illegal buildings “has tripled since the revolution”. The six-month amnesty law is part of a concerted attempt to curb the level of these transgressions and to make inroads into making the backlog safe and legal.

Safety Requirements

According to Nafesa Hashem, the head of the Ministry of Housing, Utilities and Urban Development’s housing and utilities section, the law stipulates the establishment of a technical committee to revise the compliance of unauthorised buildings, including safety requirements, before any amnesty can be granted.

There is also a cost factor. To be granted an amnesty, the owner of an illegal building has to pay a fine equivalent to the original construction cost. Once the fine is paid and assuming the building is adjudged safe, any threat of legal action against the unit and its owner will be removed, including the possibility of demolition. Yet for buildings beyond rescue where requests for an amnesty are refused, the decision will be referred to the local governorate for a decision on total or partial demolition of the building. More than half – 55% – of the fines will go towards financing social housing, with another 20% allocated to informal housing development.

Loans

The basic philosophy of the new law is to legitimise as many of the constructions as possible. Apart from the income derived from fines, the main benefit would be the provision of acceptable homes rather than adding to a housing crisis seen as one of the prime causes of the revolution in the first place. To help the rescue process the government has approved the establishment of a cheap loan scheme to help people who built illegally or bought bare apartments in unplanned buildings but do not have the money to finish them.

Madbouly was quoted by Reuters as saying, “Instead of, as a government, directly constructing new buildings we are going to offer an initiative through which we give a soft loan to people to go and finish those vacancies.” The loans will have low interest rates and long repayment periods “to encourage the people to come and start finishing this and occupying these vacant plots, specifically those in unplanned or low-income areas”, he added.

The credit scheme should help some homeowners who may be willing to take part in the amnesty scheme but do not currently have enough money. The fines equivalent to construction costs may also present difficulties. They will fall in some cases on the less reputable developers who built multi-storey blocks with neither permits nor in some cases regard for safety standards. Builders of individual houses may face both fines and completion costs.

Government Support

Under the “home finishing” scheme, the government will offer loans of LE30,000 ($4260). The money will be sourced by the central bank and will be geared towards funding low- and middle-income housing.

No date for the scheme’s implementation was available at time of press, but it was expected to begin before the end of 2014. The paperwork and bureaucracy will catch up with the facts on the ground. As the scheme is dealing with illegal constructions, it follows that there are no papers demonstrating proof of ownership. Officials from the Ministry of Housing, Utilities and Urban Development estimate that at least 450,000 buildings were put up without permission in the three years after Mubarak’s fall, and Madbouly said that informal settlements make up 40-50% of urban areas.

Collapses

The campaign inaugurated under the amnesty act may also be the start of a long process to squeeze out unsafe illicit building. The reported toll for March 2014 alone was 10 dead, more than 13 injured and dozens of people losing their homes. In Alexandria a wall collapsed onto a coffee shop killing six people and injuring seven; a six-storey building in Nasr City, Cairo collapsed and 13 families lost their homes; a three-storey building in Giza collapsed, killing two; and on March 30, an four-storey building in Cairo collapsed, killing two people. That same day, the online newspaper Mada Masr quoted state media as saying that the building “was old and not constructed on concrete columns”.

Unsupervised and unlicensed construction saves on the costs associated with implementing building regulations, thereby maximising the profits from a construction project. “There is a lack of awareness of building safety among the general public. The government should work with the private sector to initiate educational programmes,” Hatem Kheir, general manager at Kheir Group, told OBG.

Threat

Apart from the financial losses and the danger to human life, the spread of construction onto agricultural land constitutes a severe threat to the food chain and the economy.

Less than 4% of Egypt’s total area of around 1m sq km is devoted to agriculture, mainly because of the vast desert areas that make up much of the country. Even so, the sector is a key part of the economy. “The seizing of land and erecting of residential buildings on it is causing irreparable damage to the country’s agriculture,” said Wassif.

Despite land reclamation programmes taking place, desertification adds to the problem of local food production, and the construction of a dam in Ethiopia may limit Egypt’s fresh water supplies. Egypt is the world’s largest importer of wheat and expects to bring in 10m tonnes in the financial year ending June 30, 2015, with domestic production far lower.

The Nile Delta is the one of the most densely populated parts of the country as well as being home, along with the Nile Valley, to the vast majority of Egypt’s wheat production. Pressure on and threats to the agricultural areas were mentioned by President El Sisi during his election campaign. At one point he proposed building cities in the desert to relieve demand on farmland north of the capital.

Just as there is no certainty regarding the exact hectarage of farmland lost to construction, nor is there a firm figure for the number of unofficial dwellings. Satellite images are said to show the footprint of informal neighbourhoods being enlarged several times over in some places.

Ayman Abu Hadid, the agriculture minister, said in April 2013 there had been 850,000 cases of “encroachment” on farmland since 2011. Informal districts house more than half of the 20m people estimated to live in and around Cairo.

Lengthy Process

Even removing illegal settlements from farmland might not produce immediate beneficial results. Gamal Siam, an agronomist at Cairo University, has been quoted in the local press as saying that between clearing land for building, constructing brick and cement structures and their subsequent destruction, the land loses its agricultural value. Restoring it for agricultural use is difficult and takes years, he said. “If the current rate of farmland loss continues, in 50 years or so we will have lost every piece of our agricultural land,” said Siam.

It is worth noting that during periods of high pressure on the regular real estate sector over the past three to four years, it was the informal – that is to say illegal – sector that helped to sustain activity in the construction materials industry, especially cement and steel. Without the current campaign to safeguard, restore and even extend the agricultural areas, the damage wrought by that bonus could have had consequences far outweighing the temporary gains.