The cabinet stated on 23 November that an initiative will be launched to sell real estate units in Egypt in dollars. Some private-sector developers will take part in the initiative, and a range of incentives will be provided, a statement said.

The time of launching the initiative, which mainly targets Egyptians living abroad and foreigners, has yet to be announced.

The initiative comes almost six months after the New Urban Communities Authority initiated a similar move to sell plots of land in premium locations in foreign currencies in order to help the government curb the dollar crunch.

As Egypt’s needs for foreign currency have been on the rise since the start of the Russian-Ukrainian war, the government has issued several initiatives to increase dollar revenues.

They include offering savings certificates denominated in dollars and offering high yields, facilitating the import of cars for expats without customs duties on the condition that the customs value is deposited in dollars in the Ministry of Finance’s account for five years, and settling the conscription status of young men of military age for $5,000.

However, “the decisions to sell land and real estate in dollars add more pressure on foreign-currency availability,” said Alaa Fekri, a real-estate developer and a member of the Real Estate Investment Division at the Cairo Chamber of Commerce.

Fekri said that Egyptian investors who want to buy a piece of the offered land but cannot find the dollars to do so sometimes solicit the services of brokers who gather foreign currency from expats at the parallel market rate.

The brokers then add a commission of five per cent above that rate in return for their services. Subsequently, an account is established in the buyer’s name, and the transfer is executed in favour of the New Urban Communities Authority.

The buyer may be paying a lot to get the dollars, but in return he gets a premium piece of land, Fekri said.

But this means that instead of the state benefiting from remittances that Egyptian expats transfer via Egypt’s banks, these expats sell their dollars on the black market to brokers to benefit from the difference between the official and the parallel market rates.

“This is one of the reasons for the drop in remittances from abroad,” Fekri said.

According to the Central Bank of Egypt (CBE), remittances from Egyptians living abroad decreased by 30.8 per cent on an annual basis in 2022-23 to record $22 billion.

Fekri pointed out that countries in similar situations sometimes act in a different way, giving the example of Russia, which stopped the trade in euros and dollars to support the ruble.

Around 80 per cent of recent land plot sales by the authority in Egypt were executed in dollars and the rest in the local currency, he said.

In August, the authority offered four plots of land in New Cairo and 6 October city for a total of LE660 million on the condition that the buyers pay in dollars.

In November, it offered 12 land plots in four cities for immediate allocation through a sale that mandated payment in dollars transferred from overseas. Applications were open until 15 November.

The authority is targeting total revenues of LE5.3 billion from the sale of these plots of land.

According to Gasser Fawzi, managing director of the Mena Real Estate Investment Company, this approach creates inequality among investors.

The authority prohibits Egyptian investors from selling land or residential units in dollars, whether to foreigners or Egyptians residing overseas. Therefore, private investors in the real-estate sector must acquire dollars from the black market to cover their needs for foreign currency, thereby adding more pressure on dollar availability, he said.

The gap has recently widened between the official exchange rate, which is close to LE31 per dollar, and the parallel market rate, which has reached LE50 per dollar, due to an upsurge in demand for foreign currency in the black market and the challenges in obtaining it through the banks.

Real-estate developers should be permitted to sell their properties in dollars, Fawzi said, especially as the state aims to boost property exports to acquire more dollars.

The authority’s decision to sell land in dollars results in increased costs and the lack of a fixed price for the land since the price of the dollar fluctuates, he said. Not allowing investors to sell in dollars means that they must constantly adjust their costs with each change in the dollar’s value, Fawzi added.

The authority’s decision to sell land in dollars will decrease the availability of prime land plots for buyers in the local currency, thus creating unfair competition among investors in this sector, he said.

Fathallah Fawzi, vice-president of the Egyptian Businessmen’s Association, said the initiatives were detrimental to the economy.

He argued that the plan generates additional demand for the dollar and contributes to a surge and instability in the price of land. This is transformed from a stable expense into a variable cost, fluctuating in tandem with changes in the dollar’s value, he concluded.

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* A version of this article appears in print in the 14 December, 2023 edition of Al-Ahram Weekly