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1 March 2012 / Muneeb Ansari

Land Corruption Compromises Reflect Justice vs Stability Debate

An article in Business Today Egypt from January 19 on how the country’s real estate market has coped in the year since the revolution. As expected, the economic uncertainty felt in other sectors of the economy has affected the real estate market as well. This article provides a good overview of some of the issues facing the sector and some of the major developers in this time of economic and political uncertainty.

Housing and land scandals, if we remember, were big news in the weeks after Hosni Mubarak stepped down last February, and aggressive prosecution of them by the courts hindered the real estate sector as well. These were popular moves, since many of these companies were seen as connected to the corrupt political elite who ruled the country, and the homes they were building largely did not cater to the needs of the majority of Cairenes.

One thing to note is that these legal disputes seem to be closer to resolution, through compromise:

[T]he most likely scenario regarding land disputes is that they will be settled via a middle path where developers agree to pay additional considerations for their land rather than a worst-case scenario where land purchases are annulled. Also, we expect the focus of disputes to shift to project execution rather than the circumstances of land acquisition,” stated a report issued by real estate analysts at investment banking company HC Securities and Investment.

This raises an important consideration of the tension between economic growth and creating accountability. As we heard from the land scandals last year, a lot of land was sold to big, well-connected developers without proper public bidding, and for much-lower than market prices, potentially costing the Egyptian government significant revenues. Much of that land has been developed now, and this new mechanism of compromise means there will be no whole-scale revaluations  or purchase annulments. As the article says:

At the end of November, that’s exactly what happened for Egypt’s biggest listed developer, Talaat Moustafa Group (TMG). An administrative court upheld TMG’s purchase of 8,000 feddans of land on the outskirts of Cairo, overruling an earlier lower court decision in June. TMG was accused of buying the land directly from the New Urban Communities Authority instead of bidding on it in a public auction. Since 75% of the land has been developed or is under development, only the last quarter will be subject to revaluation.

Should these land developers pay what the market prices were? In the current economic climate, is that a realistic thing to ask, as investors, especially foreign ones, might choose to put their money elsewhere?

Should they be allowed to keep the land in the interests of restarting economic activity? What becomes of accountability then, especially if the profits from these developments go to a limited number of developers? As you see from the photos, these luxury gated communities being built are not going to serve the majority of Cairenes and Egyptians, whose housing needs often stand in stark contrast to what these developers provide.

This issue is part of a larger debate occurring in Egyptian society, as the economy has taken a big hit following the uncertainty over the last year. Land is especially important, given the high profit margins it provides and the power that comes with that, along with its historic role in being a tool for the military, and former regime business elite in accumulating wealth, and being used as a tool of coercion by the old/current regime. There is some heartening news however, as these issues are starting to be debated in Parliament. MP Bassem Kamel of the Social Democratic Party chaired a committee hearing recently offering critiques of Cairo 2050.

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