Construction is soon to begin on the first phase of a long-awaited government plan in Egypt to develop one million new homes, adding to a building boom and infrastructure projects already under way across the country to spur economic growth.
The first phase of what is estimated to be a $40bn project is scheduled to commence in February with 120,000 homes to be built by UAE-based Arabtec Holding. The first homes are to be delivered in 2017. According to media reports, stakeholders of the project have already sub-contracted different phases of work on the project, which was initially slated to start late last year.
Minister of Housing Moustafa Madbouly said in February that a meeting was held with a delegation from Arabtec Holding to conclude a final agreement to commence construction.
When completed by 2020, the construction of residential units – covering 160m square metres in total – will create one million jobs, according to President Abdel Fattah El Sisi’s administration.
The ambitious investment is one of many that Egypt has unveiled in recent months in a bid to stoke higher growth for an economy that has been battered by four years of uncertainty. Since Al-Sisi’s victory at the polls in 2014, he has stated that national projects are the gateway to providing Egyptians with job opportunities and reviving the economy.
Egypt’s formal housing market has always faced problems keeping up with the sizable demand in a country where the 88m person population is growing by 2.5% a year. The shortage is such that informal construction now comprises a large proportion of residential build, although the government is hoping to address that through large-scale public housing projects.
The million affordable homes will be built across 10 governorates on 13 plots of land which currently belong to the Egyptian armed forces. Financing sources have yet to be made public, although Arabtec said last March that a mix of local and foreign banks would fund the project, while Egypt’s Prime Minister Ibrahim Mahlab had announced in October 2014 the government had reached an agreement that all of the funding would come from “abroad”.
The project is one of many in which the UAE – who along with Saudi Arabia and Kuwait has provided billions in grants and concessionary loans to Egypt in recent years – has a sizable stake. In addition to direct aid, the Emirati government has agreed to extend support for Egyptian building projects including health centres, schools and houses.
In addition to these developments, The New Urban Communities Authority (NUCA) issued seven tenders for development projects in different cities across Egypt in February.
The housing project comes amid a slew of new infrastructure projects in Egypt, the Suez Canal expansion being one of the most noteworthy.
The massive $8.5bn undertaking is scheduled to be completed by August, according to the government. This comes despite fears that the ambitious timeline might be hard to meet – with the project beginning in August 2014 – and recent reports of leaks in the canal’s new walls temporarily halting construction.
The project, which will widen the canal and allow for a two-way passage of ships, was funded domestically through the sale of investment certificates. In addition to the waterway’s expansion, the Suez Canal Zone will turn 67,000 sq. km of land abutting the canal into an industrial zone.
The government is expected to ink a new flurry of agreements for direct investment at a summit in Sharm el Sheikh next month. The Minister of Investment, Ashraf Salman, said in February that there are currently 40 private sector projects in the works, 30 of which will be presented at the Economic Summit in March and offered to investors. Speaking in February, he estimated the projects will attract $15bn-$20bn.
Madbouly said the Ministry of Housing will propose a LE150bn ($20m) project during March’s Economic Summit, named “October Oasis”, to be built in the 6th of October City.
This will come as a welcome boost to foreign direct investment (FDI) levels, which have started to stabilise after a largely downward trajectory over recent years. FDI levels stood at $1.8bn in the first quarter of the fiscal year 2014/15 after reaching $6bn for the 2013/14 financial year. Salman said in November that the government is hoping to nudge this figure upwards towards the $10bn mark for 2014/2015.
But this remains an ambitious target. The political unrest which followed the departure of President Mubarak eroded the confidence of foreign investors. In 2010/11 and 2011/12 FDI suffered a precipitous drop, registering $2.2bn and $2.1bn, respectively. Reversing this decline has become a priority for the government, but until recently the fractious political environment hindered attempts to provide a more welcoming environment for foreign capital.
However, following the May 2014 elections, Egypt appears to have a window of opportunity not only to capitalise on the rising volumes of the past year, but also lay the regulatory and policy groundwork for a more sustained growth in FDI inflows.
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