Egypt Independent

Are litigation games hurting Egyptian real estate?



Anyone following the Madinaty dispute knows that the government is up to its head in this case, despite Prime Minister Ahmed Nazif’s reassurances to shareholders and buyers that their rights would be preserved. Truth be told, President Hosni Mubarak’s intervention to resolve this issue helped soothe the nerves of both buyers and shareholders, as well as improve stock prices for Talaat Mustafa Group (TMG), one of Egypt's largest publicly traded developers.

History shows that cases like the Madinaty one cannot be resolved without the President's personal involvement. This became especially evident after the government seized Sharm el-Sheikh City from Lebanese investor Wajih Siaj in 1996. The seizure came after the government discovered the Tourism Ministry had sold the land to investors, including Israelis, under the justification that tourism in Egypt was semi-dead. Six hundred and fifty thousand square meters of land on the Egyptian-Israeli border were allocated to Siaj at a price of LE1.5 per meter, the full sum to be paid over ten years. Quite a deal if you ask me, especially for an ambitious investor aspiring to become a billionaire.

Siaj filed a lawsuit against the Egyptian government in international courts and won US$134 million in compensation. The two sides then made a settlement according to which Siaj received US$74 million and was allowed to continue his investment activities in Egypt.

The affair shook the image of the Egyptian government. After having paid dearly for the Sharm el-Sheikh case the government rightly feared that Madinaty shareholders could also resort to international courts. Hence, the president was personally entrusted with making a decision on the case.

Lost in the recent ruckus over Madinaty is the fact that the government has long engaged in questionable land deals with wealthy businessmen, often favoring foreign and Arab investors over Egyptians. The Sidi Abdel Rahman settlement on the Mediterranean coast was sold by the Egyptian Tourist Authority at an auction to Arab investor and chairman of Emaar Properties Mohamed al-Abbar for a mere LE70 per square meter, an unbelievably low price. One is tempted to suspect a deal was cut with the government not to raise the price any higher. The sale of land in Tahrir Square to the French Accor company once again revealed a bias towards foreigners in the market for state-owned land. After the deal was exposed, the government changed the terms of the contract to give Accor land-use privileges rather than ownership rights.

In light of these shady deals with foreigners, the government was compelled to look the other way when it came to Madinaty. It's as if the government was compensating TMG for Sidi Abdel Rahman with the Madinaty land. Had the government sold the land at a public auction in compliance with Egyptian law, it would have avoided the State Council’s ruling which rightly annuled the Madinaty land sale. But the fact remains that the government has engaged in equally questionable behavior with foreign investors.

I don't understand why the Madinaty case went to court after the project was already in the late stages of development. Why didn't anyone raise a fuss when the land was still barren desert? If the government’s intention was to collect the land's price difference then wouldn’t it make sense to do the same with other speculators who buy and sell empty Egyptian land? At least Madinaty plots were only sold to buyers after being developed.

It's time to put an end to the activities of Egypt's land mafia, whom President Mubarak has called on to pay the government a percentage of the huge profits they make from real estate speculation. Of course, the government continues to turn a blind eye. In the end, the main issue in the Madinaty case is for shareholders and buyers to have their rights protected and for this litigation game to end so that real estate investments are not damaged in the process.

Translated from the Arabic Edition