In 2011, after years of working as a real estate broker, Hammad formed a real estate marketing and investment company in Alexandria. He had noticed an increasing demand among his clients for real estate as a form of investment and a way of retaining value versus depositing cash in a savings account or investing in a risky small enterprise. His new company began entering into contracts with landowners and residential real estate developers to handle the marketing and selling of residential units in exchange for a commission on each sale.
Over the past nine years, Hammad’s company grew to become one the biggest real estate investment firms in Alexandria. He eventually expanded to marketing residential units “off plan” — selling units from a landowner or developer before the building is actually constructed.
He has sold an average of 120 apartments per year over the past three years. At least half of them were sold to Egyptian expatriates living in the Gulf, mostly in Saudi Arabia, who do not actually live in the apartments. “These clients just have reservations about bank interest, and they fear investing in projects that can make money or lose money,” Hammad says.
Then in May, the government banned any form of construction for six months, whether for new buildings or modifications to existing ones, in neighborhoods across Greater Cairo, Alexandria and provincial capitals. The move came as part of the government’s campaign to crack down on informal buildings by arresting violators of the 2008 unified building law and prosecuting them in military courts.
In a speech at the inauguration of the Bashayer al-Kheir (“Good Omens”) project in May, President Abdel Fattah al-Sisi said the government campaign to tackle informal housing in Egypt was 20 years overdue. After years of failing to contain informal urban sprawl authorities embarked on a massive campaign to abolish informal housing. Yet the move has sparked a confrontation between the government on one hand and real estate developers and residents in areas on the other.
According to the unified building law, before any construction can begin, landowners must submit a request to their local municipality to obtain a license determining that the land is eligible to be built on. Within a week, an engineer appointed by the municipality should inspect the land and decide whether it is eligible for construction. Landowners must then obtain a construction permit, a process that entails contracting an engineer to draw up the building specifications, which are attached to the permit request. If there is no response from authorities within 30 days, the construction permit is deemed approved and the landowner has the right to build. The engineer appointed by the municipality is responsible for monitoring construction and documenting any violations.
The law stipulates that buildings can be no taller than 1.5 times the width of the street. This means, for example, that a building overlooking a large thoroughfare with 12 lanes should not exceed about 10 floors.
The law also included articles that require the Housing Ministry to form “general strategic plans” for cities and towns within two years of the law’s issuance. These plans would determine the scope of development in cities, towns and villages as well as planning and building requirements, including regulating the width of streets and the number of floors to meet lighting, ventilation and utility needs. The plans also determine which lands are allocated to social services that serve the city or town. The law stipulates that departments for planning and urban development are expected to formulate detailed plans for cities and towns once the general strategic plan is in place.
Yet over the years, the Housing Ministry has not paid attention to construction projects within established residential neighborhoods and urban areas in governorates across the country, allowing investors and small scale contractors to exploit lapses in enforcement of the law and move ahead with construction.
Instead, the ministry busied itself with planning new urban communities, such as New Cairo and 6th of October City, and expanding them to accommodate rapid population growth. The ministry built residential communities on the outskirts of governorates in cooperation with large-scale real estate developers. There were few building violations in these new urban communities because they had detailed plans in place.
“The New Urban Communities Authority first formulated detailed plans for the new cities,” Moataz Mahmoud, chair of the House of Representatives Housing Committee. “Yet the Urban Planning Department either forgot or was too slow in formulating new plans for older districts.”
This resulted in numerous violations, including buildings being constructed at heights that violated construction permits, spaces designated for garages being transformed into retail stores, and historical buildings in Cairo and Alexandria being demolished to make way for new developments.
“The unified building law became the foundation of the problem of building violations, and the government is the basis of these violations,” Mahmoud says.
Over his years working in real estate marketing, Hammad noticed that contractors would regularly commit violations. For example, a contractor would obtain a construction permit for a six-story building but end up constructing an 18-story building — three times taller than the local municipality originally granted.
His company’s legal affairs unit, which is responsible for reviewing the chain of property ownership as well as construction permits, found contractors manipulate the law in a variety of ways to exceed the number of floors mandated by permits. Among the most notorious is the practice of submitting construction permit requests under someone else’s name — known in the real estate market as the kahol. The landowner typically chooses an employee to be the kahol, namely by registering the employee’s name on official papers as the owner of the land. To protect their rights to the land, the landowner also has a waiver issued that grants them back the land rights from the employee. The construction permit is then issued in the kahol’s name, allowing the real property owner to evade legal scrutiny if municipality engineers find any building violations during construction.
The term kahol has become so common, Hammad says, that “some of those interested in buying residential units, when they come to us, explicitly ask if they would be signing their contracts with the kahol or with the land’s real owner,” he told Mada Masr.
According to official estimates, there are some 2.8 million building violations nationwide. In Alexandria alone, the number of violations between 2011 and 2019 has topped 132,000.
In a press conference last week, Prime Minister Mostafa Madbuly said unplanned buildings have come to constitute about 50 percent of the urban areas in villages and cities across the country. Between 1981 and 2011, Egypt lost up to 400,000 feddans of agricultural land to illegal construction, and an additional 90,000 over the past nine years, Madoubly said. He added that the cost of reclaiming one feddan is between LE150,000 and LE200,000, and that the reclamation of 90,000 feddans will cost up to LE18 billion.
The government has tried to handle the crisis in a variety of ways, the most heavy handed of which has been to issue demolition orders for properties deemed illegal. In May, the governor of Alexandria, Major General Mohamed al-Sharif, said that 133,000 demolition orders were issued between 2011 and 2020 but that just 9,000 were executed, or 6 percent of the total.
The rate of demolitions is now being ramped up, sparking violent confrontations with angry residents. Earlier this month, the governor of Port Said, Major General Adel Ghadhban, said that 40 buildings had been demolished over two days in four neighborhoods in the city. Meanwhile, the governorate of Suez announced 28 buildings in one neighborhood had been demolished and the governor of Assiut, Major General Essam Saad, said that 63 buildings had been demolished in one district and that the violators had been referred to the military prosecution to be charged.
In April 2019, in an attempt to tackle the issue of urban sprawl and informal housing, Sisi ratified the building violation reconciliation law, which allows landowners to settle with the state over building violations that occurred before the law was enacted. There are a number of exceptions where reconciliation is not possible, including around safety standards and the structural integrity of the building. The law gave violators a six-month window to submit reconciliation requests.
Funds collected from settling violations are directed to the public treasury. According to the law, 25 percent of those treasury funds are allocated to the Housing Ministry’s social housing fund and developmental projects in the districts where the violations occurred, while 39 percent is allocated to local infrastructure, especially sanitation and drinking water projects.
The government initially predicted that opening the door for reconciliation could bring in as much as LE100 billion, but these estimates have fallen short. As of mid-September, 1.1 million property owners have submitted requests to reconcile and legalize their situation and the government has collected LE6.9 billion from reconciliation so far.
Yasser Amr, deputy of the House of Representatives Planning and Budget Committee, attributes the shortfall to the executive regulations of the law which created a complicated and cumbersome process for contractors and landowners to submit reconciliation requests. Applicants must first run through a bureaucratic maze to collect all the required documents, including documentation showing when the violation occurred and when utilities were installed, a satellite photo of the property, an engineer’s report on the violation, and a host of other documents and red tape.
After submitting all the documents and paying inspection fees of between LE500 to LE5,000, the technical committee’s secretariat reviews the applicant’s file and confirms within two weeks whether the documents are complete. If any documents are missing, the technical secretariat notifies the applicant within an additional two weeks to complete the necessary documentation. These were all steps needed to simply submit an application.
Following a public outcry, Madbuly last week vowed to introduce new measures to facilitate the process of reconciliation, including accepting applications that may have some documents missing. And in a move aimed at encouraging people to submit reconciliation requests, several governorates, including Cairo, Alexandria, Assiut and Damietta have announced a reduction in reconciliation fees for some building violations of between 20 and 50 percent.
Nevertheless, Local Development Minister Mahmoud Shaarawy says there is a shortage of engineers in most local municipalities and governorate administrations. According to Shaarawy, the ministry tried to make up for this shortage in recent years “by calling on employees who are not specialized in engineering and structural affairs. This created room for corruption, which some contractors exploited,” he said in comments during a meeting of the Local Government Committee last June. Newspapers regularly report on the hundreds of cases filed against local municipality employees on charges of corruption and profiting from the construction of illegal buildings.
These various factors contributed to an overall failure in the government campaign to reconcile building violations in informal construction across the country.
Aside from a cumbersome bureaucratic process and corruption, a broader crisis prevails: the absence of elected local councils. Local councils are responsible for implementing laws pertaining to organizing and dividing lands and properties, particularly overseeing whether building specifications are met, the issuing of licenses, construction and demolition permits, and monitoring road works.
Yet the last time Egypt held local council elections was in 2008. Following the 2011 revolution, the Supreme Council of Armed Forces dissolved all local councils following an administrative court ruling that called their integrity into question.
The 2014 Constitution (which was amended in 2019) organizes the process of electing local councils and lists candidate requirements, and outlines the jurisdictions and powers of the councils. It stipulates that local council elections should be held within two years of the constitution being passed. It left the issue of how the councils would be formed — by election or appointment — up to Parliament to decide by passing a local administration law. Yet six years after the new Constitution was put in place, no law has been issued outlining how local councils will be formed.
MP Khaled Abdel Aziz, a member of the Housing, Public Utilities and Reconstruction Committee in Parliament, says that the obstacles to reconciliation will inevitably persist in the absence of elected local councils, as members of Parliament are unable to effectively monitor municipal workers.
In May, Sisi spoke in no uncertain terms and called for informal buildings to be razed to the ground. He criticized any restrictions on the government in “implementing the reconciliation law on illegal buildings where contractors have already sold residential units” and attacked “the superficial handling” of violations. “It has become a culture among municipal employees charged with executing demolition orders to just destroy a couple of balconies in the building in order to obtain a signature that the decision has been executed on paper,” Sisi said.
Sisi then ordered governors to halt issuing construction permits for a period of six months using Article 44 of the Unified Building Law, which gives governors the right to do so for a national purpose.
The very next day, provincial authorities and the judicial apparatus sprang into action. The Minister of Local Development tasked governors with preventing construction for six months and halting work for those already granted permits. The public prosecution issued arrest warrants for building contractors who committed building violations and transferred them to military prosecution. The Interior Ministry released several statements reporting the arrests of contractors. The Minister of Local Development promised that a committee would be formed in every governorate to review construction permits. The committee would be chaired by the deputy governor and would include among its members the governorate’s ministry-affiliated housing director, as well as representatives from security and supervisory agencies, the Engineers Syndicate, and the Housing Ministry’s technical office.
The local development ministry also announced that committees would determine the financial sum required for reconciliation based on the market price of each area. Meanwhile, the Housing Ministry said that anyone seeking reconciliation would be required to pay at least 25 percent of the total amount and announced a ceiling based on various violations in cities and towns.
Urban researcher Yahia Shawkat says the government has taken proactive measures to prevent new building violations from occurring. He told Mada Masr that a wave of illegal construction was expected in the real estate sector once the coronavirus pandemic hit and the government began focusing its energies on trying to contain the outbreak. This was similar to an earlier wave of illegal construction following the 2011 revolution, when authorities had less control of the streets.
Since the unified building law was issued over a decade ago, the government has shown it does not have the capacity to effectively monitor the entire country. Therefore, Shawkat says, they decided to paralyze all construction in one broad stroke and to threaten violators with military prosecution.