x Abu Dhabi, UAEThursday 27 July 2017

Egyptian property market in deadlock

Amid thousands of complaints Egypt's property market has virtually ground to a halt.

Egypt's property market has all but ground to a halt as the office of the public prosecutor has become swamped with complaints and allegations of corruption.
Egypt's property market has all but ground to a halt as the office of the public prosecutor has become swamped with complaints and allegations of corruption.

CAIRO // Egypt's property market has all but ground to a halt as the office of the public prosecutor has become swamped with complaints and allegations of corruption connected to land deals.

"Everyone is acting differently now," said Hisham Gaafar, a prosecutor at the office. "They are not afraid now. Many of the reports are connected to important people."

Total complaints have tripled to about 3,000 so far this year, many of which are about land deals.

Many of the complaints Mr Gaafar receives may never make it to the courts because of a lack of evidence, but they are a real threat to investors from Egypt and beyond who have put their money in the booming property market.

In cases where the court has found a transaction was inappropriate, judgments are being made to rescind the deal completely.

Companies such as Emaar Properties, the Middle East's largest developer, have invested heavily in Egypt's property sector to take advantage of the rising demand for homes in a country where custom requires a young man proposing marriage comes backed with a property deed.

Other major Gulf players that have set up there in recent years include Majid Al Futtaim Group and Damac Properties from Dubai, and Qatari Diar.

While cases have not emerged publicly with projects from those developers, Al Dahra Agricultural Company, based in the UAE, has already felt the swift judgment of an Egyptian court. An administrative court ruled that its purchase of 100,000 feddans (43,000 hectares) from the government was against the law because the land was not auctioned at market prices.

The court ruled the deal was void, but Al Dahra said it was no different from many other land deals with the government. The company originally said it would invest US$500 million (Dh1.83 billion) in the project in the south-west of Aswan. Even more dramatic could be the investigations into some of Egypt's largest projects, such as the Palm Hills October project, covering more than 300 hectares, from Palm Hills Developments.

That company is headed by Yassin Mansour, a confidante of Mr Mubarak, who is now being investigated for improprieties.

The uncertainty over deals has led to a paralysis in the property sector, which had grown by more than 22 per cent in the three years leading up to last year, and was worth an estimated $270bn, according to the Egyptian ministry of investment.

"Now development is on hold," said Ayman Sami, the head of the Egypt office of Jones Lang LaSalle. "Things are very quiet and investors are quite worried."

Mr Sami has an optimistic long-term view for property because the fundamentals of a cash economy with a burgeoning population will continue to drive demand.

But the top layer of developers is now under intense scrutiny from investigators, meaning their projects could grind to a halt.

"I don't think the developers were all involved in these improper deals, but whoever was will now face the consequences," Mr Sami said.

He said those who could benefit from the turmoil were savvy investors who could find finished properties and buildings at distress prices, and second-tier developers who were less affected by the investigation into government land deals.

One fear in the local property community is that all deals done in the past few years will be tarnished.

Mohamed Serry, the managing director of the Serry Law Office in Cairo, said his office had been inundated with people rushing to have transactions certified by the authorities.

Their concern is that officials could come to believe they have acquired the land illegally.

The rest of Mr Serry's clients linked to property have gone silent, he said, adding that with the dismissal of many top ministers and government officials, there was little room for any property deals over the next three or four months.

"We don't know who is in charge of what any more," he said. "I expect to see the value of projects go down and many delays in delivery, or even the projects stopping work altogether."

bhope@thenational.ae