The verdict on Tuesday piled more pressure on the company, which has seen its share price tumble almost 70 per cent this year as it struggled with mounting debts and liabilities.
Analysts say tight cashflow may make it hard for the company to make any additional payment for the land on Cairo's outskirts if it is ordered to do so by the court.
"We have no comment on the court ruling, which the company will take the necessary procedures to appeal," Palm Hills investor relations manager Bassem el-Shawy said in an emailed statement.
The court ruling comes in response to a suit filed by engineer Hamdy Fakhrany concerning the state's sale of 960,000 square metres of land in a Cairo suburb.
Palm Hills shares rose 1.1 per cent on Wednesday after dropping 3.6 percent after the verdict.
Egypt's stock exchange briefly suspended trading as the market opened, saying it was awaiting a response from the company to a request for unspecified information.
Property firms in Egypt are reeling under a string of legal challenges to their land holdings since a court ruled last year that a state deal with Talaat Moustafa Group (TMG) , the country's biggest developer, was illegal.