The expansion of Cairo to the east and west of the downtown area has been going on for decades, to varying degrees of success. This growth has long appealed to Egyptian government officials looking for ways to relieve some of the pressure placed on the densely populated city’s ageing infrastructure. According to the most recent data available from the UN, 56% of Egypt’s 92m citizens are concentrated in Greater Cairo and Alexandria.
New Cities
The latest in the growing list of suburban cities is the $45bn New Capital, announced by President Abdel Fattah El Sisi in March 2015, which is expected to sit to the east of Cairo, cover some 700 sq km and accommodate up to 7m people. However, the city – which began construction in April 2016 – is far from the only major master-planned development recently built or under construction.
Cairo has several other such developments on the outskirts of its centre, including 6th of October City, Cairo Festival City, Uptown Cairo, Eastown and 10th of Ramadan City. All of these areas were designed to target the upper-middle class and luxury residential segments. Other developers see potential beyond Greater Cairo. Amin Moftah, CEO of Travco Properties, told OBG, “There is a lot of opportunity for developments along the North Coast, but more so on the Red Sea coast, which is often ignored. The potential there is for building permanent communities while attracting year-round tourism.”
Land Availability
The outward spread is due in part to the lack of open land in the city’s more central areas, and even the outlying suburbs are seeing increases in prices. NematAllah Choucri, co-head of research and senior real estate analyst at regional investment bank HC Securities, told OBG that land to the east of Cairo is around 80% more expensive than plots to the west, since land is limited between the capital and the Suez Gulf. A recent auction, for example, saw 1 sq metre of land to the east offered at LE4365 (equivalent to $231 as of December 2016), compared to LE2361 ($125) to the west.
High-End
Many of the new communities in places like Madinet Nasr and 6th of October City target those at the higher end of the income spectrum, as do developments such as Eastown, Mountain View and Hyde Park. The bulk of these projects, however, are out of the price range for residents in the lower three brackets of the income scale (see overview).
Part of the continued appeal is the high level of planning control, which is a contrast to the historically informal nature of Cairo’s real estate and construction activity. “The reason it’s so attractive to Egyptians is because it is actually regulated,” Amany Sadek, senior research and business development executive at Business to Business for Investment & Real Estate Marketing (B2B), a local commercial and residential real estate firm, told OBG. “You can’t just buy a house and make it into a restaurant. If you live in an apartment building, you won’t look down and one day find a noisy supermarket below.”
An additional benefit of these planned communities is the perceived level of security, which remains a top priority for real estate investors in Egypt.
Financial Concerns
Prices have slipped a little as construction moves ahead, but generally remain on the rise as demand continues to outpace supply. This trend, combined with the devaluation of the Egyptian pound in March 2016 and the subsequent float of the currency in November 2016, has resulted in especially high prices as developers try to recoup building costs and generate a profit. For example, units in the Eastown development of New Cairo are selling for around LE12,000 ($636) per sq metre, while the price in Hyde Park is approximately LE10,000 ($530), according to Sadek.
“The devaluation has had a positive impact in terms of getting the market moving by increasing the clarity of costs and value, but the extent of the pick-up remains to be seen,” Mohamed Asser, CEO of Oriental Urban Development, told OBG.
As property demand increases, some in the industry are questioning whether a housing bubble is forming. Amin Serag, CEO at Hyde Park, told OBG, “Since the mortgage market is not developed and real estate developers have to sell off-plan, we need to be mindful that the bubble could burst if there is an economic slowdown and people fall behind on payments.” Stakeholders are closely watching market variables, though Ashraf Dowidar, CEO of Ardic Zizinia, takes another view on the situation. “People have been using the term bubble, but I am not sure this is the same kind of bubble that formed in Dubai in 2011. The bubble here is due to the increased prices of the land that the government is selling, together with the depreciation of the Egyptian pound against the dollar. In Dubai it was valuation and pricing of the property itself,” he told OBG.
Transportation
To accommodate the spread of the city, the government has started to improve Cairo’s three-line metro system. According to local press reports, in April 2016 the National Authority for Tunnels awarded a consortium a 67-month contract worth $1.1bn to work on the third phase extension of Line 3, which is expected to increase its capacity by 1.5m passengers per year once completed in 2022. The consortium is composed of VINCI Construction Grand Projets and Bouygues Travaux Publics of France, Egypt’s Orascom Construction and Arabco Construction of Dubai. The project could also help reduce air pollution. As indicated by the most recent data available from the World Health Organisation, out of 11 cities tested for air pollution, Cairo is the second most polluted after New Delhi, ranking ahead of Beijing and Calcutta.
In other improvement projects, there are ongoing efforts to develop the capital’s road network, such as expanding the Cairo Ring Road to include New Cairo, and further developing the Suez and Ain Sokhna roads. Sadek is confident that even if these efforts take time, the access points will ultimately be established. “I think it is the number one priority of developers. Before they sell the land, they secure an understanding of the transportation system, because it will increase the price a lot,” she told OBG.
Learning From The Past
Ramez Shafik, business development manager at global construction consulting firm Hill International, underscored the crucial role that transportation planning will have for any new cities outside the capital and for developers who wish to build there. “There are a lot of things that need to be considered before building. They need to make sure developments are going to be used. We don’t need to have another Sadat City that no one is using because it is far away without any means of transportation,” he told OBG.
Indeed, Sadat City can be viewed as a cautionary example as President El Sisi constructs the New Administrative Capital outside of Cairo. There were high hopes for Sadat City at its beginning in 1978, part of an urban planning programme launched in 1969 aiming to lighten population pressure on Cairo and capitalise on unused desert lands. Sadat City was one of four new satellite cities created in the desert by 1990; it was developed 94 km north-west of the capital, halfway between Cairo and Alexandria. The master plan of the city included extensive public housing programmes for safe and sanitary living, a wide range of housing options and locations, and opportunities for investment in private home ownership. However, for a variety of reasons, including a difficult-to-reach location not linked to the national railway, the city did not flourish as hoped. A review of the factors leading to the rise and decline of Sadat City, now home to approximately 150,000 people, will serve planners well as another round of Cairo-alternative development gets under way.
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