Egypt’s Need for Low-Income Housing

January 15, 2015 Updated: January 15, 2015

In March 2014, before resigning as Egypt’s minister of defense and pursuing his campaign for the presidency, General Abdul-Fattah el-Sisi announced an agreement with the UAE construction firm Arabtec to build a million affordable homes for “Egyptian youth.” The Egyptian Army facilitated the deal by pledging to donate 160 million square meters of land in 18 locations nationwide. Although Arabtec had never handled a project of this scale or value ($40 billion), one of its largest stakeholders (22 percent) is the Abu Dhabi state fund Aabar. The firm’s letter of understanding noted that the UAE was “very keen to mobilize all efforts to boost support for our brothers in Egypt.”[1] The project made headlines, Sisi was elected president, and Arabtec then fell off the media’s radar.

As a growing source of social discontent, Egypt’s multifaceted housing crisis is an urgent political concern. On the one hand, there is a glut of high-end housing, with over six million units standing empty.[2] On the other hand, there is a shortage of affordable units for those who need them most. With 18 percent of Egypt’s families living in single-room dwellings, the million-unit project was welcome news.[3] The promise that it would produce a million jobs was very welcome news as well. The Army, led by General Sisi, appeared to be responding on a grand scale to the public’s need for affordable housing, with deep-pocketed Gulf allies (Saudi Arabia, the UAE, and Kuwait) on board.

The Gulf states have become increasingly involved in Egypt’s economy since the ousting of Islamist President Mohamed Morsi. Their support—in the form of interest-free deposits to Egypt’s Central Bank, petroleum products, long-term loans, and grants amounting to a reported $11.02 billion (18 percent of the total foreign direct investment in Egypt between July 2013 and June 2014)—has helped keep Egypt’s economy on its feet.[4]

Gulf monarchies that see political Islam as a threat to their legitimacy were relieved by Sisi’s election. At Abu Dhabi’s “Invest in Egypt” conference in November 2014, Sultan Ahmed al-Jaber, the UAE minister of state, affirmed that “Egypt’s economic stability is a must.”[5] As a sign of Gulf involvement in the economy, the Arabtec deal inspired confidence in local markets. “We’ll see similar deals in the coming period, in energy, oil and gas, or roads,'” said Karim Awad, co-chief executive of EFG-Hermes, Egypt’s largest investment bank.[6] With the recent dramatic downturn in oil prices, some in Egypt are wondering if this Gulf enthusiasm might decline.

Egypt’s low-income housing shortage has historically generated more rhetoric than action. In the run-up to the 2005 presidential elections, former President Hosni Mubarak announced a 500,000-unit low-income housing project that as of February 2014 had delivered 360,000 units. Around 50,000 of these remain unconnected to utilities grids and are not useable, according to Yahia Shawket, architect and housing expert for the Egyptian Initiative for Personal Rights (EIPR). Meanwhile, 40,000 Egyptians who applied for units and made a 5,000 EGP ($700) down payment have yet to receive their houses. “That’s 200 million EGP [$28 million] from Egypt’s poorest families that the government basically sat on for eight years collecting interest,” Shawket said. The people protested and were told to apply for the more recent Social Housing Project, but the criteria are different and many may not qualify.[7]

The Social Housing Project (SHP), initiated in 2011 by then Minister of Housing Mohamed Fathy el-Baradei, promised a million units for low income households, that is, those earning between 1,400 and 2,500 EGP per month (between $200 and $350). Successful applicants for the 70-square-meter units, priced at 135,000 EGP ($19,000), would receive a cash subsidy of 25,000 EGP ($3,500) and be given a 20-year mortgage at seven percent interest. These terms, however reasonable, place the homes out of reach for the 20 percent of Egyptians who make less than 1,400 EGP per month. “‘Low income’ does not include the poor,” says Shawket. Moreover, 60 percent of Egypt’s work force is employed in the informal sector and consequently ineligible for SHP units, since they cannot prove their salaries. Further, to meet its target, the SHP would need to build 200,000 units per year but has produced only 50,000 and delivered around a thousand so far.[8]

Continue reading this article at the Middle East Institute.

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Notes:

[1] Simeon Kerr and Heba Saleh, “UAE’s Arabtec Signs $40bn Housing Deal with Egypt’s Interim Military Rulers,” Financial Times, March 9, 2014.
[2] A 2013 study from the Egyptian Center for Housing Rights estimated that more than 6 million units are not in use, mostly in the greater Cairo area. “Forget the Arab Spring, is Egypt Facing a Real Housing Crisis?,” Albawaba, February 28, 2014.
[3] Doaa Khjalifa, “Egypt’s Slum Crisis Persists amid Housing Abundance,” Ahram Online, January 12, 2013.
[4] Abdel Hafez El Sawy, “Why Do Gulf Sovereign Funds Not Invest in Egypt?,” Middle East Monitor, June 16, 2014.
[5] Federico Manfredi, “Dana Gas, Egyptian Government Negotiate Agreement, with UAE Support,” Daily News Egypt, November 27, 2014.
[6] Andrew Torchia and Ehab Farouk, “Huge Housing Deal May Signal Gulf Investment Push into Egypt,” Reuters, March 11, 2014.
[7] Conversation with Yahia Shawkat, architect, Egyptian Initiative for Personal Rights, December 17, 2014. Shawket maintains a blog that follows Egypt’s housing issues.
[8] Yahia Shawkat, “Housing Policy Note 01: EIPR Recommendations on New Income Conditions for the Social Housing Project,” Egyptian Initiative for Personal Rights, April 2014.

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Maria Golia, an American writer, has lived in downtown Cairo for over two decades. She is the author of Cairo, City of Sand and Photography and Egypt (Reaktion Books, UK, 2004, 2010), non-fiction works involving extensive historical research alongside an intimate understanding of the country’s present moment.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.