Real Estate Scandal Tarnishes Egypt's Building Boom

Egypt has been seeing a boom in building over the recent past

, but a lawsuit involving one of its biggest-ever developments is sending foreign investors running for cover. Courts have upheld a ruling that would cancel the sale of a 33 million square meter tract of government land near Cairo to the countrys biggest developer, Talaat Moustafa Group Holding, on the grounds that the sale should have not have been awarded directly to Talaat Moustafa and should have been offered in public auction.

The government has rushed to counter the ruling by creating a committee dedicated to finding a legal remedy to the situation, allowing the deal to go forth. The countrys prime minister, Hamed Nazif, has denounced the medias criticism towards developers as economic suicide, although it is apparent that many Egyptians view the governments response as further evidence of corruption and neglect of the Egyptian publics interests. Foreign investors have been selling shares as many firms see the inconsistencies in policy as a threat to further investment in what had up until recently been considered a healthy,safe and booming real estate market.

Talaat Moustafa has announced that they will immediately appeal the decision and it seems likely that the government will endeavour to pave the way for the continuation of the project. The overall problem is unlikely to go away anytime soon, however, as a second lawsuit is in progress against Egypts second-largest developer, Palm Hills, concerning a proposed development in New Cairo. The lawsuit claims similar irregularities in the sale of the government-owned land.

Talaat Moustafas shares dropped over 16% in the weeks following the ruling but have recovered somewhat since the government announced its plans to intercede. Palm Hills shares dropped about 5% in the same period. Egypts economy grew over 5% in the last fiscal year as the economy recovers from the crisis. It remains to be seen what long-term damage these lawsuits will have on the building boom and whether or not the government can resolve the interests of both its people and its business sector.

Those who call Egypt home, but who work or travel abroad, can stay in touch with friends and family back home by making cheap calls to Egypt that are now being offered by a number of telecommunications firms. Stay abreast of the latest news by speaking firsthand to contacts and loved ones in Egypt for just pennies per minute.

by: Adrian Fisher

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