Interview: Ayman Ismail
What is the biggest obstacle to overcome to ensure the new capital achieves its objectives?
AYMAN ISMAIL: In my view, there are many challenges associated with a development of this kind, but no true obstacles. This is largely due to government support, which ensures that we have the resources to respond accordingly and quickly when anything arises. Because the New Administrative Capital project is a priority, there is a high level of efficiency in the bureaucratic, regulatory and approval processes, meaning that we are able to avoid what are often the greatest challenges a large project faces. These are often the greatest challenges a large project faces. It is important to recognise that the project has this level of support because it is more than a new capital; we view it as a commitment to the future of this country. The New Administrative Capital will be an economic driver over the short and long term by relieving pressure on Cairo, drawing new investment and creating jobs.
Some of the other challenges Egypt faces – like demand for housing, the strain on infrastructure and the accommodation of huge population growth – can also be addressed by the project. The things we do face will be similar to challenges typical of this type of large-scale project, including attracting residents and ensuring affordability of housing, and having quality infrastructure and good public services. Perhaps the issue requiring the most attention will be cost volatility. Fuel and transportation costs have directly impacted the sector, while the exchange rate and tax reforms are not making things easier. However, I expect all these factors to settle and be sorted out by the end of 2017 and we are optimistic as we move forward.
Is there a risk for the project to run over budget and past the completion deadline?
ISMAIL: I believe both risks are rather low in our case. In terms of timing and deadlines, we are already ahead of schedule and executing at a fast pace. Our ability to move forward on schedule is helped by the efficiency of government processes and support. With regard to budget, a very important aspect of the New Administrative Capital is that it is completely self-financed. The financial model for the project is engineered to capitalise on partnerships with subdevelopers and investors, and to benefit from selling land plots to buyers of specific calibre. This greatly reduces the risk of budget overruns and financing needs that a government-funded, large-scale project might face. The Egyptian government is not involved in financing related to the New Administrative Capital, so none of the government’s budget is allocated to the project. This requires us to attract local and foreign investors, and they will first want to ensure the project’s feasibility. We already have investors from Egypt, the UAE and China suggesting we are on the right track, and have done the proper planning and due diligence.
Will the project’s residential focus expand housing supply for the lower-income market?
ISMAIL: Affordable housing is a problem in many countries, including Egypt. It is often associated with crowded, unpleasant, low-cost developments. We are working to change this in the New Administrative Capital. Two major issues in affordable housing projects are land costs and development financing. Typically, only governments are able to provide affordable housing due to zero land costs. At the new capital, we are aggressively reducing land costs for affordable housing through financing from the more profitable developments so that new capital caters to all segments of the population. Investors will receive additional benefits if they consider developing smaller, affordable housing projects. Also, contrary to widespread belief, tenants of affordable housing will pay for their homes, even if the amount is very small. This will help develop a sense of ownership, care and commitment, in addition to partially supporting maintenance and services.
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