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Housing ministry calls for reinstatement of controversial land law

Current auction system for sale of state land has led to soaring property prices, say officials of Egypt's New Urban Communities Authority

Bassem Abo Alabass, Wednesday 20 Feb 2013
Madinaty residential project
Madinaty residential project (Photo: AO)
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In order to promote large-scale real estate projects in the upcoming period, state-owned land should be sold via direct allocation rather than the current auction system, a senior official at Egypt's New Urban Communities Authority (NUCA) said on Wednesday.

The Egyptian Ministry of Housing, in cooperation with NUCA, has requested cancellation of Egypt's tendering and bidding law (89/1998), since implementation of the law "has caused land prices to soar," NUCA Senior Vice Head Nabil Abbas told Ahram Online.

"We want to revive the previous land law (59/1979), which allows the government to allocate land directly to investors at fair prices, without putting them up for auction," Abbas explained.

In this case, he added, NUCA would review profiles of prospective investors – particularly in terms of their financial solvency – "and choose those most capable of developing the land in question."

Beltone Financial reported on Wednesday that a public land auction held earlier this week in New Cairo had featured average per-square-metre selling prices of between LE3650 and LE11,000.

"Whereas the ceiling price per square metre in this area should not have exceeded LE4000," Abbas asserted.

The previous land law, which the two housing bodies would like to see reinstated, however, has been criticised by some Egyptian activists. They say the law gave rise to numerous corruption cases related to the illegal sale of state land under the former regime of Hosni Mubarak.

Abbas, for his part, dismissed such criticisms.

"Application of law 59 will be strictly regulated by the NUCA," he said. "Whoever is found to have broken these regulations will be prosecuted and face legal consequences."

Jihad Sawaftah, vice president of the Talaat Mostafa Group (TMG), Egypt’s largest listed real estate company, also supports a reversion to the earlier law. He believes that reactivation of the older law would pave the way for the realisation of large real estate development projects.

"Projects like Madinaty would not have been possible under the current auction law, since the auction system can't guarantee that the winner is qualified to develop the land," Sawaftah told Ahram Online.

He went on to stress that government watchdog committees would be mandated with finding any violation that might arise through the new system of direct allocation.

In 2010, a court annulled the sale of state land to TMG's $3 billion Madinaty development project, ruling that the land had been sold at prices below its real value.

At the time, the government drew up a committee to re-value the land in question. Consequently, a new sale contract was signed in late 2010 between the government and TMG.

TMG had obtained Madinaty’s 33.6 million square metres of land from the government in 2005, under the law of direct allocation.

But former presidential candidate Khaled Ali, who raised a lawsuit against TMG challenging the Madinaty contract, said that the reactivation of land law 59 would "open the door to rampant corruption."

"The current tendering and bidding law provides equal opportunity to all investors, while the practice of direct allocation would only benefit specific persons based on secret agreements," Ali told Ahram Online. 

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