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Industrial to residential

The government is to sell land owned by companies slated for privatisation to help pay off their debts and restructure costs

Safeya Mounir , Wednesday 11 Dec 2019
Industrial to residential
The government will sell unused plots of land of public sector companies
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The Ministry of Public Enterprise has decided to change the zoning of 182 plots of industrial land owned by public-sector companies to real-estate use. The move is planned to help fund the restructuring of state-owned companies, said Hisham Tawfik, minister of public enterprise.

The ministry will sell the plots to the private sector. Companies affiliated to the ministry owed the ministries of petroleum and electricity and the National Investment Bank debts worth LE38 billion, Tawfik said. 

The ministry was formed in the early 1990s to oversee the privatisation of publicly owned companies. The companies were divided among various holding companies according to their area of business.

There were 247 unused plots of land owned by companies affiliated to the ministry, with their size ranging from one to two million square metres, Tawfik told attendees at a meeting of the Egyptian Businessmen’s Association in March.

He confirmed that the majority of the unused plots were outside factory zones and did not affect production operations, adding that the revenues from the land sold off would be used to pay off debts and upgrade the companies.

According to Mohamed Halabi, a planning expert responsible for the divestment of assets at the Ministry of Public Enterprise, three plots of 300,000 square metres will first be sold in Cairo, Daqahliya, and Upper Egypt.

He said the ministry had obtained 32 ownership certificates for the plots of land, with the rest expected to be obtained by the beginning of 2020. The process was taking time, he explained, due to the large number of plots and the different procedures required in each governorate.

The Ministry of Public Enterprise has agreed with the concerned parties to pay 15 per cent of the net sale to the governorates in return for changing the land licences, Halabi said, adding that it would be cooperating with the National Bank of Egypt, Banque Misr, and the Banque du Cairo to promote the sale.

The value of the land to be offered for sale is valued at billions of pounds and will cover the debts of the companies and finance restructuring plans, including for the textile industries, Halabi added.

He said the majority of the land planned for sale was owned by pharmaceutical, spinning, mineral and chemical companies, which shouldered the biggest debts.

Tawfik announced last year the ministry’s plan to sell the land of 14 companies, out of 25 owned by the government, and to use the proceeds in developing the spinning and weaving companies. The Ministry of Public Enterprise expects revenues from the sales to reach between LE25 and LE27 billion, with these being directed towards implementing a comprehensive development plan for the textile and weaving sector.

Tawfik said the 14 plots were located in residential areas, which required changing their zoning from industrial to residential use before offering them for sale.

Alaa Fekri, a member of the Real Estate Investment Division at the Cairo Chamber of Commerce, said the offerings would be successful if market conditions were taken into account, since the majority of the companies were suffering liquidity problems.

Down payments should be set at a suitable price with installments extended over an adequate period to enable buyers to purchase the land, he added.

Until 2005, investors had paid in installments without interest payments, he said. Later, the New Urban Communities Authority had imposed interest payments on installments, adding to purchasers’ liabilities.

“If the land is marketed in attractive ways, there will be many requests to buy it, particularly as much of it is located in premium areas,” Fekri said.

The government started selling public-enterprise sector land some months ago to pay off the debts of the companies concerned to the National Investment Bank, the Tax Authority, and various insurance companies, in addition to developing the companies themselves.

The Heliopolis Company for Housing and Development, affiliated to the Holding Company for Housing and Development, announced in June that it had auctioned off eight plots of land between 27 May and 17 June.

In September, the Ministry of Public Enterprise and the Ministry of Housing witnessed a cooperation protocol between the New Urban Communities Authority and the companies affiliated to the Cotton and Textile Industries Holding Company, one of the companies of the Ministry of Public Enterprise, to develop land the companies own.

According to the protocol, the New Urban Communities Authority would prepare a plan to make the best use of the land and gain the most revenue. It would also issue the needed licences, approve the division of the land under development, design and construct the infrastructure, implement construction work, and offer units for sale.

Ahmed Mustafa, chair of the Cotton and Textile Industries Holding Company, said the company was committed to obtaining the approval of the Supreme Council for Planning and Urban Development to change the use of the land designated in the protocol to mixed-used development, obtain a certificate to this effect from the Alexandria governorate, and pay 15 per cent of the net worth to the governorate in return for changing the licences.

The Holding Company for Cotton and Textile Industries is preparing to offer 16 unused plots of land to private-sector investors for new projects. Mustafa said the plots ranged between 5,000 and 25,000 square metres in size.

If the plots offered for sale are located in less up-market areas, they could be used to build middle-class housing projects in partnership with the state, Fekri said. The land could be provided without charge, he suggested, in return for the state obtaining a number of units.

Tarek Shoukri, president of the Real Estate Investment Chamber at the Federation of Egyptian Industries, believes that the sale of the plots is a good way of providing more land for construction in places that suffer from a scarcity of it, such as in the Delta.

He added that the timing was suitable for sale through the New Urban Communities Authority and that the pricing should be decided according to location.

*A version of this article appears in print in the 12 December, 2019 edition of Al-Ahram Weekly.

 

 

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