The Alliance of Egyptian Contractors’ dream project of building 2 million units for low-income buyers could be the solution to Egypt’s housing and employment crisis. But can Alliance Head Omar El-Tahtawy convince the government to say yes?
by Nehad Adel and Noha Mohammed
With Egypt’s poverty rate at an all-time high of 26.3% and unemployment hovering at 13%, it’s next to impossible for poorer families to find affordable low-income housing. Real estate investment tycoon Omar El-Tahtawy has thought of a simple yet brilliant business model to end the housing crisis: He has brought together some 500 contracting and real estate companies under the umbrella of the Alliance of Egyptian Contractors to build 2 million low-income housing units to be sold at just LE 59,000 each.
But the real beauty of the model is the way he plans to get the home seekers on board. “Buyers who cannot afford the LE 10,000 deposit are offered employment in the project. If he is to make LE 100 a day, he’ll walk away with LE 75 and the remainder will go into a fund toward the deposit. That way we’ll have provided employment opportunities and guaranteed the buyer a unit,” says El-Tahtawy.
His dream is to see the Arab world become “an Arab nation without a housing crisis,” achievable through this initiative that welcomes any and all industry players. While convincing contracting, building materials and real estate investment companies it is their civic duty to provide these units at a lower profit margin may have not been too difficult for El-Tahtawy — he managed to do so in just over three months — he has yet to hear from the government on whether it’ll agree to earmark lands for his dream project. Egypt Today sat down with El-Tahtawy to talk about the new Alliance and his plans to shake up the property market in Egypt. Edited excerpts:
You’re a successful real estate business tycoon. Why have you chosen to take on the low-income housing segment when there may be more money to be made in compounds and gated communities?
I am a simple Egyptian citizen who holds an Egyptian ID, has Egyptian features and comes from a simple family in southern Upper Egypt. I am a man who strongly relates to the culture and traditions of Upper Egypt, much like many other Egyptians. When it was time, I started to look for a job opportunity, and I began as a contractor in Upper Egypt, then came to Cairo.
I was fortunate because I was in a field I liked so I was able to get creative and innovate. Believe me, Egyptians are very capable of creativity and innovation.
Maybe this is the main reason behind my dream of an Arab nation without a housing crisis. My project is to build 2 million housing units for low-income buyers. About three months ago I thought of a joint venture and then formed the Alliance of Egyptian Contractors. We are an economic alliance addressing specific economic issues, and we are about 500 now and growing. There is a good incentive for both smaller companies here as well as larger companies within and outside Egypt to come together.
The Alliance of Egyptian Contractors, all of whom have a strong sense of patriotic duty, comprises a number of small company owners. These are the subcontractors through which the bigger-name real estate investment companies execute their projects. … The people building Egypt are the small companies, those dedicated to the nation.
The more prominent firms are more concerned with how much is in it for them — how much they’ll be expected to pay up front and the profits they’ll rake in. I know of such investors who have purchased land here in Sheikh Zayed for LE 452 a meter and who then go on to sell their villas for LE 9 million to customers who only get to move in after three years. Those LE 9 million villas cost what to build?
Egyptian land, which is the right of all Egyptians, is sold off to these large investment companies who develop it and then sell it to a certain segment of the population. The A class are the lucky ones who can afford to own properties. Where are the B and C classes? You’ve got huge swathes in those B and C classes who earn either minimum wages or no wages at all and for whom there are no housing units. That land belongs to all Egyptians, to the ghafir [watchman], to the bawab [doorman] and to the office boy, the taxi driver, the manual laborer, to the traffic policeman. Where’s the right of every individual to a roof over their heads? Where’s their right in that LE 9 million villa?
You’ve got some 2 million people living in cemeteries, between 9 and 13 million unwed females, many of whom are held back from marriage for economic reasons. You have a high unemployment rate that’s inching towards 13%. You have 1,700 ashwa’iyyat [slum] areas in Egypt. The Egyptian market has a deficit of 500,000 housing units.
We have many tools that can help us overcome this. We have a lot of investment capital, lands – lands that are perfect for property development all over the country, but there are no vehicles for execution. The government may not be capable of filling this demand. We can now say that we can act as that vehicle in the hands of the government to execute a project this size.
How can the Alliance accomplish a project this size?
Throughout Egypt there are close to 150,000 real estate investment companies, and over the past three months, we’ve managed to bring together 500 contracting companies. This is just the beginning and we’ll need more to help get such a mega project rolling.
The project is open not only to contractors but to engineers. We’re offering 50,000 job opportunities and attractive salaries, and we are encouraging trainees too so they can come and gain experience. All graduates are welcome to come and learn — who better than the Alliance to give guidance and pass on practical experience? I’m inviting engineering students in their final year who need practical experience to join us, to adopt for their graduation projects our initiative — an Arab nation without a housing crisis.
The Alliance also includes a number of cement companies, steel companies and other building materials companies. These people are putting our links and announcements on their pages and so on. They’ve volunteered to give us discounts on their building materials. We’re also reaching out to companies trading in bricks, cement, steel, sand and pebbles, and to electric cable companies as well. We’re calling out to everyone who has an Egyptian ID to come and join us.
You first introduced your affordable housing project in 2011 — why not before?
The idea of the project first took shape shortly before [President Hosni] Mubarak was ousted, and Omar El-Tahtawy the businessman pinged on the public’s radar right after Mubarak stepped down. The project was presented to then-Prime Minister Ahmed Shafik, but it was put on hold given the economic situation at the time. The project has been reactivated now that we have the Alliance.
I never tried to push it before then because of the way Lagnet el-Siyasat [Policies Committee] and the People’s Assembly operated — I was never into those political games. We did once approach the Policies Committee and [Mubarak’s] National Democratic Party (NDP) but we pulled out straight away. I have no affiliation neither to the NDP or any other party.
You believe this project could potentially change the face of the local real estate market. How so?
When we start this project, there will no longer be an apartment selling for LE 1 million, there won’t be an apartment for LE 500,000. The time has come for us to work with our own hands, the time has come for us to start expecting a smaller profit margin — we don’t want this huge gap in prices. Just look at some real estate companies that purchase land at LE 200 a meter and then go take out exorbitant ads. What do you think the average citizen feels, seeing the land that is rightfully his being sold for these staggering amounts?
You’re also hoping to consolidate this Alliance as a solution to the housing crisis throughout the Arab world, not only in Egypt. How are you planning to attract Arab companies?
A number of contracting companies in Saudi Arabia, the UAE, Jordan and Sudan have all expressed great interest in working with the Alliance to build housing units. They too are dreaming of a unified Arab nation where there is no housing crisis. These investment companies are already making lots of money, but they have no problem slashing profits when it comes to a project like this one. They too will bring down their profit expectations, but they’ll be playing on expanding the number of units they’re offering to make up for the dip.
It’s a human cause and one of national service. There are some things that cannot be given a price. This initiative will go down in history as something that has helped build the Arab nation. Any Arab nation willing to invest in low-cost housing is welcome to join. If that country needs Egyptian manpower or engineers, I’ll get them over there. They’re already starting to work on plans for cities in Kuwait, compounds in Saudi Arabia, they’re all working nonstop.
One of the best examples is one of our young engineers, a fresh graduate, has come up with a blueprint for an “Egyptian City” that can be applied in any Arab country. It’s a complete blueprint with design, construction and architecture guidelines in several languages. These young engineers, when they take their creativity abroad, they can be considered ambassadors of Egypt.
When will the project take off?
We’ve started the correspondence process with the government, but we have yet to hear from the prime minister. As soon as there is cooperation between us and the Egyptian government, we’ll get the project rolling. We’re hoping to start at the beginning of 2015 and to build half the units within the first year.
While we do want this to be a service offered in all Arab countries — we’ve already been approached by the Sudanese government to build housing units and they’re prepared to give us land at LE 500 a feddan — we want to fix our housing problems first before heading out to help neighboring countries.
Why hasn’t the government been responsive even though you’ve already put in a request to Prime Minister Mahlab to present your initiative in more detail?
The government is very busy, so we’re working on a publicity campaign to raise awareness about the megaproject. This month we’ve invited contractors and real estate companies not only from Egypt but from the Arab world to a conference so we can discuss what we can do together. So far we have companies from 13 different countries attending, including Saudi Arabia, Jordan and the Emirates.
The government has already earmarked millions of pounds for iskan shabab (youth housing) and there are scores of low-income projects that are already built up. In fact many of these remain empty, so what real need is there for more cheap units? And why would the government choose to back your initiative and grant you land and building permits when it already has its own plans?
Since 1970 the Ministry of Housing has not divulged an official housing plan. Egyptian lands are the rights of the Egyptians, and the people are now in dire need of this land. Egyptians are deserving of many things, and their fate is not to end up in slums or sleeping under bridges.
Corruption has been rampant in some of the ministries, [and the system never worked to the benefit of the citizen]. So to purchase a low-income 130 meters apartment, buyers had to go through the bank and pay LE 60,000 upfront — which is a very large sum. The system also meant the buyer needed to make a big salary so he could pay the installments. The proposed iskan shabab units were 64 meters at cost LE 130,000. The conditions could not possibly be fulfilled.
I challenge any engineer in Egypt to come and tell me how much the units the Ministry of Youth under Mubarak sold for LE 140,000 actually cost them. No more than LE 35,000. How can they sell something that cost them LE 35,000 for LE 140,000. Where’s the logic? Where’s the feasibility plan? There was a lot of corruption. The right of citizens to a roof over their heads is stolen under the cover of corruption. It’s this corruption that’s leading to a delay in marriage and to a spike in unemployment, and to employees themselves turning corrupt — despite themselves, because they cannot afford a housing unit. Today that cover of corruption has been torn away.
But the government will then have to reconcile with those major companies who have already signed contracts or else you’ll end up with too much supply for the demand. Do you think it’s probable?
Any investment company wants to make a profit, and the profit margin in Egypt was huge in previous times. But now is a time to listen to the needs of the youth and work to give them their right to a home in their own country. The big investment companies can execute their projects in any other country, but the national projects, like the High Dam, like the Suez Canal, are for the Egyptian nation.
Following the market trend of heavy investment in land development for A-class buyers, is it not likely that real estate companies might try to hinder or obstruct your plans?
I’m not saying the project is not without its detractors. Some of the main opponents may in fact be these big-name real estate investment companies. We’re offering units at very affordable prices. These people who buy up plots of land at very low prices, develop it and then sell off units for millions of pounds — you don’t want these people to consider me an enemy? They might even want to try and kill me!
What’s in it for the contractors who are part of the Alliance?
There’s nothing wrong with serving the nation and fulfilling the dream of a country without a housing crisis and doing it at a slim profit margin. That’s the basic concept behind this project: instead of building a unit and raking in LE 20,000 or LE 30,000 [per unit] in profits, we offer it to a fellow countryman at a narrower profit margin. In other circumstances that countryman might not have been able to pay the price. He could well have tried to immigrate illegally in a boat and work abroad to come home with the LE 140,000 you need to buy a unit now. What we’re doing in the Alliance is neither creative nor innovative. All it really is is an awakening of conscience. et
— Additional reporting by Nevine Gaber
Leave a Comment