Egypt is calling for foreign investment in its new capital city, which is so far being funded entirely by domestic money.
The unnamed project is under construction 45 kilometres east of the current capital, Cairo, covering an area the size of Singapore.
It was announced in 2015 during a time of political turmoil in Egypt and is being built to ease the pollution, congestion and over-population in central Cairo and position the nation as a business hub for North Africa.
With limited interest from private developers at the time, the government backed the project in a bid to kick start the economy. The project is being overseen by Egypt’s Administrative Capital for Urban Development (ACUD). The ACUD is a partnership between the Army and the New Urban Communities Authority.
“This is the moment to create a proper city that is competitive across the region and a hub for Africa,” said Ayman Sami, Country Head, Egypt, JLL.
Once complete, the new administrative capital will house up to seven million people, including the government, the Presidential palace, businesses, and a young, professional population.
Chinese-built business district
Central to the project is a business district, which is being built by China’s State Contracting Engineering Corporation and financed largely by Chinese banks.
China Fortune Land Development Company (CFLD) is in final-stage negotiations to invest US$20 billion in the second stage of the project. Outside of this, the new capital is being partially funded by the sale of land to private developers.
“The new CBD is the project’s showpiece to support the private sector and increase investor interest,” said Sami. China is financing the development of twenty skyscrapers, one of which will become the tallest tower in Africa at 345-meters.
Sami hopes that Egypt’s strong economic fundamentals will give investors confidence.
“Even during the revolution, the real estate market held up,” he adds.
Limited investment opportunities inside the existing capital city will also encourage investors to look further afield for deals.
Investors from the UAE are expected to lead the charge; Sami says a Saudi developer recently signed a deal to build a shopping centre.
Build it and they will come?
Thirty banks have committed to moving their headquarters to the new business district, including the Central Bank of Egypt, and foreign embassies are expected to relocate. This could happen by 2021 as businesses look to escape the overcrowding in central Cairo.
“Companies have been steadily shifting to the east of Cairo as it’s became more and more congested,” said Sami. “The new city represents a further shift eastward in terms of footfall and economic activity.”
Meanwhile, the huge government district, which will house 36 ministries parliament and the presidential palace — all built around a central ‘green river’ — is set to be occupied by as early as mid-2019.
Although hundreds and thousands of construction workers commute daily, no one living in the new city yet.
Demand for housing is likely to be strong.
Cairo’s population is expected to hit 40 million by 2050 and competition for housing is fierce in the current capital. In 2017, sale prices in New Cairo spiked by 50 percent and, while housing in the new city will likely be only slightly more affordable than current Cairo, it promises a cleaner, greener, more sustainable way of life.
The Ministry of Housing has built 25,000 residential units already in one of 20 planned housing districts. Private real estate companies have bought plots of land and apartments are being sold off plan.
“The market has been very tough this year so developers are offering incentives; you can pick up an apartment and pay over eight years which was unheard of in the past,” adds Sami.
Making investment easier
Egypt remains a tricky market for foreign players but the government has introduced several measures to encourage international investment in recent years.
A new investment law was designed to eliminate bureaucracy and promote new opportunities to a wider pool of investors and the government has recently further streamlined the processes through a one-stop shop at the General Authority for Investment & Free Zones.
Tax incentives and the flotation of the Egyptian Pound in 2016 have gone some way making Egypt more affordable for foreign investors.
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