On The Land Auction

Over two days the Ministry of Housing ran two land auctions for 8 pieces of land, however one was withdrawn.The total land area auctioned was 4,940 acres (Feddans) or 20.748 million square meters 18 companies were bidding for one of the highest earning in history for the Egyptian government with almost 18 Billion EGP. 

Location

Area
Acre
Area M2 EGP/M2 Total Winner

New
Cairo

460.00 1,932,000.00 1,288.00 2,488,416,000.00 Ro’ya

Zayed

410.00 1,722,000.00 852.00 1,467,144,000.00 Prince Meshe’el

Zayed

300.00 1,260,000.00 852.00 1,073,520,000.00 Prince Meshe’el

6th October

210.00 882,000.00 1,302.00 1,148,364,000.00 Al Hokair

New
Cairo

1,500.00 6,300,000.00 752.50 4,740,750,000.00 Damac

New
Cairo

1,980.00 8,316,000.00 733.50 6,099,786,000.00 Barwa

New
Cairo

80.00 336,000.00 4,005.00 1,345,680,000.00
Lake
City

Total

4,940.00 20,748,000.00   18,363,660,000.00  

The average price of desert land devoid of any infrastructure in this auction reached EGP 885.08, compared to the previous prices of EGP 5 to 10 per M2 and the EGP 160 per M2 of Sidi Abdel Rahman.The highest price was EGP 4005 per M2 and the lowest was EGP 733.50 per M2.  It is definitely a win for the Egyptian government whose focus was to maximize the return in order to use the acquired funds to bridge the gap of an ever increasing public deficit.  But the question is who loses? Definitely Egyptians are on the loss side because all of the bidders are business organization aiming for profit and not philanthropies they will need to maximize their return on investment (ROI). How will they do it simply by raising the price to a level that becomes profitable and who will pay this price definitely Egyptians are the ones to incur such cost.The problem on the long run will materialise in an exaggerated appreciation of real estate property that may surpass the buying power.This is a case of a priority of giving a gain to a few over the aggregate losses to the many.Although the minister of housing claims that this is a small area of land and that these prices will have no effect on the real estate market, how come he withdrew 1700 acre because the highest price obtained by bidders did not reach the set target price of EGP 700.The new prices have set a level below which the ministry cannot go down otherwise it will loose credibility and may affect the overall investment environment.It is worth mentioning that the average price of crude land of EGP 885 means that the selling price of housing land could be multiplied by three to four times i.e. a square meter will cost from EGP 2655 to EGP 3540.On the other hand this auction has suddenly made people rich because they held pieces of land they acquired in the past at low prices that suddenly was appreciated.  The question is what is the role of the government is it a regulator or a trader? is it a government for profit or a government for people? If the purpose is to generate income for the government,  it could have been achieved by offering a larger number of pieces at a lower price, as such the land price would have been kept down, specially that land is available and has no shortage, without such detrimental impact on 80 million Egyptians and their hopes for a house, and without privileging few people speculating on land.  Keeping land prices down, regulating the real estate market, would prevent investors from speculations with maximization of  their profits by increasing the price on land price. This would mean that the government plays its role as a regulator and not a business person  

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6 Responses to “On The Land Auction”


  1. 1 Basim Sultan May 25, 2007 at 11:29 pm

    You know what Dr. Rafik, I’m very very surprised and shocked of what they did, actually we benefited what happened (my family), because we have 2 villas in zayed and they appreciated about 100% now and may be they will reach 150% by the summer, but in general, that was a very bad and stupid move by the government. There was a very fantastic article by Farook Gowaida in Alahram newspaper today ( 25/5/2007 ) and he calculated what Nazeef government gained in the last year, the money from this auction, the third mobile operator license and many things, it reached about 80 BILLION EGP, where is that money ? He said in his article that they sold that land with 17 billion EGP, and it will cost the government about 15 billion EGP to deliver the infrastructure to it, which means foreign investors bought very large areas of OUR land almost for free ! And we as Egyptians didn’t gain any thing but dramatic raise in prices. He also mentioned that the government didn’t say it’s allowed to build up to 25 floors on this land sold in the auction, while the maximum in zayed is 4 to 5 floors, which means the land you can build 5 floors only on it appreciated, and now it’s equal to the land allowed for 25 floors!
    Where the hell are they taking us? I have no idea…

  2. 2 ]Dr. Ayman Makkawy May 26, 2007 at 7:55 am

    عزيزي رفيق
    هذا خراب مستعجل !!!!!!!

  3. 3 rafiknakhla May 26, 2007 at 11:58 am

    The cost of infrastructure is misleading because this only 20 Km2 of land (4 km by 5 km). I would agree that this number is required for a larger portion of land.
    What is wrong in this whole process is that it drove prices up, diminishing the hopes of many Egyptians for a decent house.
    The fact is that housing prices are going to go up almost every where.
    I encourage bringing in FDIs and petrol money to the country but not on the expenses of the majority. Desert Land ia abundant and selling more pieces would have kept prices down following the offer and demand relationship.
    One important question is where did this extra income go? what exactly did it finance.
    Lets not forget that Vodafone paid 3 Billions to acquire the 3G lisence. which adds up tothe total income generated.

  4. 4 Basim Sultan May 26, 2007 at 12:18 pm

    Let’s not forget the 16 billion EGP paid by itisalat for the their license,

  5. 5 rafiknakhla May 26, 2007 at 12:21 pm

    yes and 0.5 bill for omar effendi, I don’t know how much in taxes etc…

  6. 6 Basim Sultan May 26, 2007 at 12:22 pm

    Let’s not forget the 16 billion EGP paid by itisalat for the their license, 16 billion EGP for selling Alexandria Bank, 6 billiob EGP for El Alamain Land…..


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